Unlocking New Opportunities In African Oil & Gas Value Chain
By Ndubuisi Micheal Obineme
Despite the mounting pressure coming from the global energy transition agenda, oil and gas will continue to be a fast generating asset for African Continent in the next decades. African countries hold huge energy, oil, and gas potentials that remain untapped.
Coming out of the pandemic, Africa started the year 2022 on a positive outlook, with ongoing exploration activities in frontier basins across Africa, including Shell’s new oil and gas discovery in offshore Namibia and other latest updates such as the $10 billion Lake Albert Development in Uganda which has reached final investment decision (FID) by TotalEnergies and CNOOC plus other emerging opportunities that will be highlighted in this article.
According to GlobalData’s latest report on “Sub-Saharan Africa Upstream Development Outlook 2021–2025”, it indicated that a total of 52 key crude and natural gas projects are expected to start operations in 19 African countries. Among these, 16 represent the number of planned projects with identified development plans (post-FID) and 36 represent the number of early-stage announced projects that are undergoing conceptual studies and that are yet to be approved for development (pre-FID).
The report also revealed that Nigeria leads among countries with 5 projects, followed by Mozambique with 3 projects in terms of the number of planned oil and gas projects. In terms of announced projects, Nigeria leads with 16, followed by Angola with 5 projects. Shallow water terrain has the highest number of projects with 21, followed by onshore with 16, deepwater terrain with 8, and ultra-deepwater terrain with 6.
This article assesses the Energy Transition Agenda in Africa, Challenges and Growth Opportunities in the African oil and gas value chain, featuring stakeholders’ commentaries as well as strategies needed to be implemented in unlocking new opportunities in the African oil and gas industry.
In a statement made known to The Energy Republic, Dr. Omar Farouk Ibrahim, Secretary-General of the African Petroleum Producers Organization (APPO) disclosed that there are three main challenges facing the African oil and gas sector. These include; Infrastructure; Technology; Financing.
Farouk said the African government needs to put in place energy infrastructures that cut across the continent such as pipelines for oil and gas, refineries, and petrochemicals to serve sub-regions or a cluster of countries.
Speaking on technology, he said, “Our oil and gas industry is unarguably the most dependent on foreign technology. We have generally bought into the misleading belief of technology transfer, that the developed world will transfer technology to us. While it is possible to have technology transferred, it is always the archaic technology that is transferred while the latest is kept by those who developed it, until a better one is developed.
“Africa has some of the best scientists, technologists, and innovators in Europe and the United States.
They excel when they go there. But when they are here, they are unable to excel.
“The challenge is to create the enabling environment for these people to excel in Africa. We also need to create the enabling environment for Europeans and Americans to come and do their innovations here.
“The third challenge is the financing of energy projects. God has endowed us with natural resources and human resources. We need to create an enabling environment that will support the growth of knowledge, technology, and investment,” Farouk added.
Highlighting the challenges hindering the growth opportunities in Africa’s oil and gas industry, The Chairman of Petroleum Technology Association of Nigeria, Nicolas Odinuwe said that the issues of insecurity, political instability, aging, insufficient infrastructure, and know-how, declining international investment leading to a small number of new projects, and lack of final investment decision (FID), declining production, regulatory risks stands as a major challenge and contributes to lack of investor’s confidence in the region.
Odinuwe, stated that creating an enabling environment for the private sector is pivotal in unlocking new opportunities in the African oil and gas industry.
He called on governments across Africa, especially the African oil and gas producing countries to provide necessary incentives to attract private-sector investments across the entire value chain.
He said, “This will trigger a massive economic revolution, human capital development and deepen local content across Africa.
“The value chain in the oil, gas and energy industry is such that if properly harnessed, will transform the economy of the entire continent”.
Odinuwe pointed out that the key enabler is to create a collaborative ecosystem between the local industry stakeholders within the Sub-region alongside the Africa continental free trade Area (AfCFTA).
PETAN Chairman said that the full implementation of the AfCFTA will increase local content development, expand economic activities across Africa, and enhance cross-continental trade in a single market for people, goods, and services.
However, he noted that the African Continental Free Trade Area Agreement (AfCFTA) will boost Africa’s industrialization and productivity in manufacturing, capacity building.
He explained, “African market presents huge opportunities in a range of sectors, including the oil and gas and there are still several underutilized assets in West Africa.
Given the challenges, he said, innovative inventions and investments will help translate Africa’s abundant resources into shared wealth and sustain its economic development.
“Improved financial and ICT services will increase digitization, productivity, and ease of transacting business across wider markets, encouraging the integration of supply chains, business sustainability, and entrepreneurship.
“It’s a good time to invest in Africa, especially in our transition fuel, the natural gas, which reduces emissions and we need to be exploring strategic collaboration with local and international companies to help us achieve more desired results.
“We are glad about some of the discoveries made over the past decade in Africa and even more proud that Nigeria is leading in key oil and natural gas projects in the sub-region despite the challenges. There are similar scenarios in Mozambique, Equatorial Guinea, Mauritania, Tanzania.
“PETAN has positioned itself to lead Africa in local content development and explore opportunities under the African Continental Free Trade Area Agreement.”
According to him, “PETAN’s investment interest in Africa is in technical training and human capacity development.
“We are exploring strategic collaboration with local and international companies to help us achieve more desired results.
“We are made up of dedicated and patriotic entrepreneurs, who reside in a difficult business terrain though with the most potential, in the sub-Sahara African region,” he concluded.
African oil-producing countries have not fully benefited from the exploitation of their hydrocarbon resources. This is part of the reason why many of these African countries have adopted local content policies as a development strategy aimed at increasing the benefits from the oil and gas industry.
Nigeria is one of those African countries that is doing very well in terms of implementing local content development in its oil and gas industry. It was after the passage of the Nigerian Oil and Gas Industry Content Development (NOGICD) Act that the country built Africa’s first FPSO integration quay, built and installed six entire FPSO topside modules on TotalEnergies Egina FPSO.
Egina is TotalEnergies’ third deep offshore FPSO project in Nigeria after the successful delivery of the AKPO project (2009) and USAN project (2012). These projects have brought a progressive increase in levels of Nigerian Content, and Egina, being the first major project launched after the enactment of the Nigerian Oil & Gas Industry Content Development (NOGICD) Act of 2010, has so far the highest level of local content of any FPSO project in Nigeria.
As a matter of urgency, experts have said that African countries should learn from the Nigerian experience and open up the continent to free exchange of capacity and trade among member countries.
On his recommendations, The Executive Secretary of the Nigerian Content Monitory and Development Board (NCDMB), Engr. Simbi Wabote, said, “There is an urgent need
for the creation of African Local Content Fund to support the continent’s hydrocarbon projects as banks and financial institutions are shifting focus to funding renewable projects against fossil projects”
Wabote called on the African Export-Import Bank, African Development Bank (AfDB), and the African Union (AU) to deepen collaboration under the African Continental Free Trade Agreement (AfCFTA), to support hydrocarbon development on the continent.
“Let me use this opportunity to once again canvass for the creation of an African Local Content Fund that could be utilized to set up a large financial institution for the funding of the development of oil and gas projects in Africa.
This is especially important against the backdrop of the reluctant and outright declaration by some banks and financial institutions to stop funding hydrocarbon-related projects. I hope the AfreExim bank, the AfDB, or the AU, through the AfCFTA secretariat, need to institute a form of contribution no matter how little as a fund to support the continent’s needs in developing hydrocarbon,” he said.
Wabote identified legal framework as a key collaborative strategy to drive local content practice, adding that many oil producers in Africa have made efforts to put in place laws that are investor-friendly to guide their oil and gas industry.
“I have said it several times that an enabling legal framework backed with appropriate legislation is very fundamental in local content practice. I have lived it, I have seen it. A law or even a decree as the case may be, depending on the political arrangement in a country, sets the framework and boundaries for all local content practitioners.
“Many African oil producers have made efforts to put in place investor-friendly laws to guide activities in their oil and gas industry,” he said.
With the remarkable success that Nigeria has recorded in the implementation of local content law in its oil and gas industry, Wabote said that the country can serve as a model to other African countries.
The NCDMB boss also noted the need for collaboration in the area of building infrastructure. He defined infrastructure as fundamental facilities, services, and systems serving a country, city, or other geographical areas, for its economy to function effectively.
According to him, infrastructure such as hydrocarbon processing plants, power plants, pipelines, ports, jetties, terminals, among others, help to transform resources from their natural form into usable forms and deliver them where they are needed to meet the needs of people in the society.
“The African oil and gas landscape provides huge opportunities for cross-border infrastructure to unlock development for stranded assets, or bring energy closer to the people. Such infrastructure also leads to the lower unit of development cost in the long run,” he explained.
The price of crude oil in recent weeks has been hovering above $90 per barrel. However, Wabote said that “This global trend in crude oil price presents opportunities and challenges to African oil producers, and its service providers in respect to field development, security of supply, affordability, revenue generation, energy transition, and cost of service.”
Production Decline: The African continent is home to five of the top 30 oil-producing countries in the world.
According to the report, the combined daily oil production of Africa was more than 7.9 million barrels per day in 2019, which is about 9.6% of world output. However, the coronavirus pandemic and recent OPEC production cuts have dramatically reduced daily outcomes from the Continent.
Africa’s production has been on the decline, representing a major challenge for the continent. West African crude oil production dropped to 3.71 million b/d in 2020 from 4.12 million b/d in 2019 and is set to decline further to 3.39 million b/d, according to the Rystad Energy report.
Nishant Bhushan, Rystad Energy’s Upstream Analyst said, “Oil production in West Africa was poised for more investment and activity. Last year’s low oil prices and the unstable market conditions have continually changed the outlook, as major operators opted for capital discipline and limited investment exposure in regions including West Africa.
“While we expect output to tick back up in 2022 and 2023 as jet fuel demand returns, production is set to fall below 3 million b/d already from 2025 unless heavyweights Nigeria and Angola can stage a strong comeback and shake off the dismal growth trends of the past decade,”
The region’s production decline in 2021 is driven by its two biggest oil producers, Nigeria and Angola, which together are estimated to have lost 440,000 b/d versus the pre-COVID-19 forecast. Crude oil production has dropped significantly in Congo, Gabon, and Equatorial Guinea, which together produced 250,000-300,000 b/d in 2010, according to Rystad. Equatorial Guinea has seen a 60% reduction in oil production and Gabon nearly 35% in the past 11 years.
Based on our findings, the production declines vary from each African country due to several issues and bottlenecks on operational excellence. Lack of investment & postponement of final investment decisions (FIDs) on projects, including a lack of investment in critical infrastructures which leads to frequent production shut-ins, a lack of drilling at mature fields, and civil unrest caused by militia groups has been identified by stakeholders as the main causes of oil production decline in Africa, while the COVID-19 pandemic has also added to these issues over the last couple of years – which has led to significant production delays and production shut-ins in some cases.
Financing: In an exclusive interview conducted by African Energy Chamber (AEC), Kola Karim, CEO and Managing Director of Shoreline Energy International and AEC Advisory Board Member, said that there is a financing gap for both local producers and IOCs looking to invest in new production.
In his words, “Banks are retreating from lending to Oil and Gas projects, and this creates an uphill task about the key cornerstone of any turnaround which is financing.
“We need to create additional financing to fix supply chains and allow manufacturing and maintenance inputs to be located nearer to production facilities on the continent.
“We need more investment in opening up additional reserves to close the production gap as consumption returns”.
Growth Opportunities (Frontier Exploration)
Following the global energy transition agenda, frontier exploration activity is reducing globally but, Sub-Saharan Africa seems to be different, as several high-impact frontier wells are being drilled today in frontier areas.
Africa leads on frontier drilling campaigns as independents and international oil companies (IOCs) are even planning to do more in frontier basins across the region. Sub-Saharan Africa’s rig market which is an important indicator of upstream activity is improving. According to Statista analyses, more than 60 oil and gas rigs are located in Africa. Of the total, 56 were land rigs, while nine were offshore.
For TotalEnergies, Africa is one of the company’s core areas of business activities, with a consistent track record of more than 80 years operational excellence in Africa. The company has been involved in exploration activities in Nigeria for almost 60 years. Nigeria is also crucial to the TotalEnergies Group, accounting for 12% of its equity production.
TotalEnergies has invested approximately $10 billion US dollars in the country to date. Through decades of executing development projects, the company’s activities have contributed to creating jobs and developing human capacity in Nigeria.
Despite the challenging environment, TotalEnergies remains committed to investing in Africa. Lake Albert Development is among the company’s huge investment focus in Africa. Having reached a deal with the governments of Uganda and Tanzania, TotalEnergies and the China National Offshore Oil Corporation (CNOOC) have taken the Final Investment Decision (FID) for the Lake Albert Development in Uganda. The Lake Albert Development FID marks a milestone in the development of a viable East African energy market. With total production estimated at 230,000 barrels per day for the Tilenga and Kingfisher projects, development is on track to start producing in 2025.
The TotalEnergies operated Tilenga project; the CNOOC operated Kingfisher project; and the construction of the East African Crude Oil Pipeline – owned by TotalEnergies (62%), the Uganda National Oil Company (15%), the Tanzania Petroleum Development Corporation (15%) and CNOOC (8%).
Speaking further on the growth opportunities in Africa, the Deputy Managing Director, Deep Water District of TotalEnergies E&P Nigeria, Mr. Victor Bandele said that the time has come to expand Nigerian Content to the rest of Africa through Intra-African Trade.
Bandele pointed out that the African Continental Free Trade Area is the largest free trade area in the world – measured by the number of participating countries.
The AfCFTA was intended to connect 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion. The agreement was also intended to promote the movement of capital and people from one place to another.
Bandele advocated for the oil and gas industry to take advantage of AfCFTA in fostering intra-African trade and expand the frontiers of Nigerian content.
He explained, “Operators need to explore the possibilities through collaboration with relevant government agencies of which the NCDMB has a critical role.
“TotalEnergies remains proudly committed to Nigerian Content and we will continue to act in ways that promote these ideals.
“But it is now time to venture beyond Nigeria and foster intra-Africa business relations to consolidate on the gains of Nigerian Content. Nigeria can earn foreign exchange through the exportation of local content capacities, infrastructure, and competencies within the continent of Africa”.
In another report, the World Economic Forum (WEF) describes AfCFTA as a “global game-changer”, adding that AfCFTA will boost regional income by 7% or $450 billion, speed up wage growth for women, and lift 30 million people out of extreme poverty by 2035.
WEF disclosed that it is estimated that the AfCFTA will increase Africa’s exports by $560 billion, mostly in manufacturing. Intra-continental exports would also increase by 81%, while the increase to non-African countries would be 19%.
According to the WEF forecast, AFCFTA is an opportunity to promote good governance both globally and across Africa, through the concept of “Trade Integrity” to ensure the legitimacy of the global trading system.
Furthermore, the United Nations Economic Commission for Africa (UNECA) estimates that AfCFTA will boost intra-African trade by 52.3% once import duties and non-tariff barriers are eliminated. It will diversify intra-African trade as it would encourage more industrial goods as opposed to extractive goods and natural resources. More than 75% of African exports outside of the continent consisted of extractive commodities whereas only 40% of intra-African trade were extractive.
UNECA report reveals that the elimination of import duties will open up trading activities to small businesses in the regional markets and boost industrialization. The AfCFTA is expected to foster competitive manufacturing, which means Africa’s manufacturing sector will have the potential to double in size from $500 billion in 2015 to $1 trillion in 2025, creating 14 million stable jobs.
Going forward, IHS Markit has published a list of eight high-impact wells that are being drilled and expected to continue drilling campaigns in 2022, which are listed below:
Eni’s Baleine 1 discovery in Cote d’Ivoire, in the Cote d’Ivoire Basin
TotalEnergies’ Ondjaba-1 well in Angola, in the Congo Fan
Petronas’s Jove Marine-1 well in Gabon (geologically, an extension of the Lower Congo Basin deep-water pre-salt play last tested by Petronas with the Boudji 1 well)
Shell’s Graff-1 well in Namibia, in the frontier Orange sub-basin
TotalEnergies’s Venus-1 well in South Africa, in the frontier Orange sub-basin
AziNam’s Gazania-1 in South Africa, in the frontier Orange sub-basin
Galp/Shell’s Jaca 1 in Sao Tome Principe, in the Gabon-Douala Deep-Sea Basin
Eni and Exxon testing in Mozambique, in the deepwater Zambezi Delta
Namibia has been positioned as Southern Africa’s new exploration frontier following Shell’s discovery of oil and gas at the Graff-1 well offshore Namibia. The country aims to fast-track the development of its first oilfield to commence production by 2026. Shell holds a 45% stake in the offshore Petroleum Exploration License (PEL 39) with a 45% interest held by Qatar Petroleum and a 10% held by the National Petroleum Corporation of Namibia (NAMCOR).
Interestingly, TotalEnergies has made a significant discovery of light oil with associated gas on the Venus prospect, located in block 2913B in the Orange Basin, offshore southern Namibia.
The company used Maersk Drilling’s Maersk Voyager drillship in water depths of 3,000 meters, which will potentially revolutionize the energy industry of the southern African country. Block 2913B is operated by TotalEnergies (40%), Impact Oil & Gas (20%), Qatari state-owned petroleum company, Qatar Energy (30%), and Namibian state oil company, Namcor (10%).
Mrs. Maggy Shino, Petroleum Commissioner of Namibia’s Ministry of Mines and Energy commented, “Namibia is a frontier nation and hasn’t yet entered into an oil and gas production, adding that the country is focused on exploration activities.
“It is quite an exciting time for us in Namibia as we are happy to discover these resources. The basin is quite large and it covers almost the entire country from the Eastern side to the Western side.
“While we are drilling the wells, we will be able to see the commercial viability of the discoveries that we have made.
“We will be unlocking the full potential of the Kavango Basin and generate economic benefits that will propel the Namibian economy going forward.
“After we have assessed the commercial viability of the wells, we will be able to enter into production.
“Namibia is a very large country that is underexplored. The country has about six basins with two onshore basins, which are the Kavango Basin and Namibe basin.
“In offshore, we have four more basins which are the Luderitz, Owambo, Walvis basin and Orange basin.
“We only have 32 wells which have been drilled in total and 15 of it are exploration wells. 10 of the wells are undergoing deepsea programs which are just for technical studies and the 7 wells are part of the wells that are within our discovery in the Orange basin.
“In total, we have onshore and some number of wells that have been drilled while others are stratigraphic wells.
“We have several legislative instruments for the petroleum industry. We are running an open licensing regime”.
In 2022, wells to watch include Reconnaissance Energy Africa’s (ReconAfrica) shift to testing its Kavango Basin theory, offshore Namibia. ReconAfrica completed the initial analysis of its first stratigraphic well and found clear evidence of a working conventional petroleum system in the Kavango Basin. The company has drilled stratigraphic wells and reported hydrocarbon shows, but the next phase will incorporate results from the 2D seismic. Drilling is due to begin in the second half of next year.
ReconAfrica CEO, Scott Evans said the company is seeking a partner for its Namibian project in the first quarter of 2022.
Another well in the area is Azinam’s Gazania plan, over the border in South Africa. This well is a follow-up to a non-commercial discovery and is in shallow water. A discovery of 50 million barrels would be commercial, according to Tobias Tonsing, Africa Energy’s Principal Geophysicist.
There is an ongoing drilling activities in Gambia, including FAR’s Bamboo-1X oil field located offshore Gambia. FAR Limited, an independent, African oil and gas exploration, and development company have said that its targeting three key prospects there: Soloo, Bambo, and Soloo Deep. Resources are estimated at a maximum of 1.118 billion barrels and chances of success range between 7% to 37%. Drilling is executed by Stena Drillmax Ice.
In case of a discovery, FAR has indicated that 90m barrels would be the set minimum economic field size. Its successful case planning relies on the development of 150m barrels of oil via a 48,000 barrels of oil per day (bopd) floating, production, storage, and offloading (FPSO) vessel. Three wells would then support production, gas, and water injection operations. FAR is the operator with a 50% working interest in the A2 and A5 permits with its joint venture partner, PC Gambia Ltd (50%), a subsidiary of Petroleum Nasional Berhad (PETRONAS).
Petronas has announced that it spudded the Jove Marine-1X well in block F13 offshore Gabon in early November 2021. The Malaysian national oil company hopes to replicate its 2018 success with its nearby Boudji discovery. Drilling is executed by the Maersk Viking.
Jove-1X is testing a four-way dip closure in the pre-salt Gamba and Dentale formations in the distal portion of the Lower Congo Basin. A discovery there would be welcomed news for Gabon after disappointing results from BW Energy’s exploration campaign earlier this year in the same area.
In October 2021, exploration activities commenced at TotalEnergies’ Ondjaba prospect in Block 48 offshore Angola. The well was drilled by the Maersk Voyager, which has since then moved to Namibia where it is currently drilling the Venus prospect. The Ondjaba-1 exploratory well was expected to reach 3,628m, setting a new world record. Block 48 is operated by TotalEnergies (40%) along with Angola’s national oil company SONANGOL (30%) and Qatar’s national oil company Qatar Petroleum (30%).
Seplat Energy is targeting the 78m barrels Sibiri prospect on OML 40 in Nigeria.
The Sibiri exploratory well (previously known as Amobe) is one of the few exploration prospects being drilled in the country and is expected to help further increase the resource base on OML 40 where the wells on the Gbetiokun field are currently producing a peak of 12,000 barrels of oil per day (bopd).
Preparatory activities for drilling of the high-impact prospect have been ongoing for a while. According to Seplat Energy, Sibiri carries a risked best estimate gross prospective oil resource of 78m barrels. The operator has already evaluated several options to accelerate the development of the discovery and achieve first oil in the event of exploration success.
OML 40 is operated by the Nigerian Petroleum Development Company (NPDC, 55%) along with its partner Elcrest Exploration and Production Company Limited (Elcrest, 45%). Elcrest is itself a Joint Venture between Eland Oil and Gas (Nigeria) Limited (45%) and Starcrest Nigeria Energy Limited (55%). Seplat Energy acquired Eland Oil and Gas in 2019.
Cairn Energy expects to complete its entry into Egypt’s Western Desert and will begin drilling.
The company’s Eric Hathon said there was a 10-well exploration programme planned, with partner Cheiron spudding the first of these in the fourth quarter of this year.
Cairn has also recently signed up a block offshore Mauritania. While the company does not yet have a firm date for a well, it has begun a baseline environmental survey for the Dauphin prospect.
Australia’s Invictus Energy also plans to drill in 2022, testing a major gas prospect onshore in Zimbabwe.
GUINEA BISSAU AND SENEGAL
Impact, and CNOOC International, will also test their AGC Profond block in the third or fourth quarter of 2022. This lies in the shared zone between Guinea Bissau and Senegal.
GHANA AND COTE D’IVOIRE
While Eni has continued exploratory efforts with three discoveries in Angola (Cuica), Ghana (Eban), and Côte d’Ivoire (Baleine), additional operators have now taken the lead in hopes of announcing new oil and gas discoveries soon.
Exploration drilling campaigns are part of Africa’s growth opportunities in the oil and gas sector, while some of the upcoming high-impact explorations are in frontier basins. The results from the current drilling activities will constitute an important signpost as to whether the trend of drilling frontier wells will continue in Africa. It also shows that Africa is a continent that remains heavily untapped and the region still has the potential for more discoveries.
In its report, IHS Markit said, “Africa hosts many frontier basins with a significant number of large untested prospects. And large discoveries tend to result in the production of barrels with lower costs per barrel and lower carbon intensity per barrel.
“Also, since frontier basins are often found in countries with limited or no upstream industry, they tend to have fiscal terms that are more attractive to investors — as the government aims to build an upstream sector—than in countries with a mature upstream industry.
“Such terms ultimately lower the economic threshold investors must deliver to their shareholders for a discovery, a benefit which a large discovery only amplifies”.
Africa’s Evolution on Gas Development
Africa is blessed with abundant energy resources and Gas will play a pivotal role in the Continent’s energy mix.
According to the African Energy Chamber report, Algeria, Egypt, and Nigeria round off the top three natural gas producers in 2022 contributing to just over 80% of the overall natural gas flow from Africa. Both gas demand and gas production has consistently grown over the last decade, representing a trend that is expected to continue going forward as global decarbonization efforts intensify.
NJ Auk, Executive Chairman of African Energy Chamber, said Africa can build a better economy with Gas.
“I have always said if we are going to discover oil and gas resources again, I would prefer Africa discover Gas. What we have seen in the oil economy hasn’t worked in Africa. If we had focused on Gas development, we could have done more in terms of industrialization and monetization.
“Gas is really important now as we have climate change issues. Gas is the transition fuel because it is cleaner.
“African countries who have an abundance of these resources should monetize their gas resources.
“25 years ago, Africa saw Gas as a disaster. Today, it is a bonanza. We are seeing discoveries of Gas in countries like Gabon, Congo. These explorers are going right back to drilling because the Gas market is huge.
“The market forces will determine how Gas is going to be important to drive more investment to the sector.
“But, we need to be very careful as we are in an era where we are seeing a shift in investment in fossil fuels which affects Gas. If we don’t have the right kind of investment and financing framework to develop the abundant Gas resources in Africa, we are going to see this Africa potential bonanza as a miss which we cannot allow such thing to happen to Africa”.
More so, LNG-to-Power has been identified as new opportunity to unlock energy access for power generation and other economic developments. LNG is available for power generation almost everywhere with access to the sea or a receiving LNG terminal system. Compared to liquid fuel, LNG to power solutions provide 20 % lower CO2 emissions, 90 % lower NOx emissions, 97 % lower particle emissions, and a 100 % reduction in SOx emissions.
According to NJ Ayuk, LNG-to-Power is going to be another new opportunity for Africa. It requires infrastructural development, and it creates a different kinds of multiplier effects around the value chain.
“LNG-to-Power projects are needed right now in Africa. The Tema LNG project in Ghana, the first offshore LNG receiving terminal in sub-Saharan Africa stands as a case study for Africa.
“We need to extend it to Nigeria, Angola, Mozambique including South Africa. There is going to be massive LNG development in Africa but we need to develop the right kind of infrastructure because it is cleaner, better, competitive when it comes to pricing and it will become a long-term power infrastructure that will power up industries as well as improve the lives of people,” Ayuk said.
Small Scale LNG: Experts have said that the advancement of Small Scale LNG will become another growth opportunity in Africa in bringing energy access and fueling the local industries in the region where it is needed.
Because LNG burns more cleanly than other fossil fuels such as petroleum and coal, Small Scale LNG is likely to gain further traction as market and regulatory pressures to transition to lower-carbon energy intensify. As companies approach the Smal Scale LNG market, Africa should be prepared to act quickly.
Small-scale liquefaction plants are usually developed to serve specific markets and have a production capacity of less than 500,000 tons per year (by contrast, a large industrial-scale LNG plant like the Gorgon facility has an export capacity of approximately 16 million tons per year).
In his words, NJ Ayuk explained that Small Scale LNG will play a major role in unlocking energy access in Africa.
He added, “In Africa, we always talk about local content and opening opportunities for indigenous companies who cannot raise the big-ticket items in funding projects. With Small Scale LNG, these companies would be able to run LNG programs in badges.
“You don’t need something big. With badges, you can move it from regions where there are LNG terminals. For example, Equatorial Guinea, Nigeria, Mozambique, Angola, and other African countries would become part of the business.
“Our industries will not work when we don’t have the Small Scale LNG players all around. Small Scale LNG will become a game-changer for the African Gas sector.
“Gas is our future and monetizing LNG is going to be our path to prosperity in Africa.
“Africa should start adopting new technologies to further explore these opportunities. This is the time for Africa to take responsibility for regional collaboration in energy, gas, LNG development.
“African countries and businesses are already benefiting from LNG projects in the continent. African natural gas is plentiful, and also low-cost to develop if bureaucrats just do their job and cut red tape and provide the incentives needed.
“African natural gas has an abundant cheap supply that could easily displace coal and higher intensity fossil fuels and provide uplift for African countries and our global partners.
“We have a chance to push greener and cheaper energy both in Africa and globally,
assuming we build the needed infrastructure line pipelines and show the wherewithal to do it. small scale LNG can be a game changer as we push to manufacturing, create jobs and defeat energy poverty.
“I have traveled around Africa such as Senegal, Mozambique, Congo, Equatorial Guinea, Nigeria, Ghana, SouthAfrica, Namibia, Gabon, Algeria and Tanzania, our energy Industry has learned it needs a new approach that balances people, planet and profits,”
African Energy Bank
Environmental organizations, financial institutions, and governments across Europe and North America have insisted that developing nations, including those in Africa, must immediately transition from fossil fuel production and usage to renewable energy sources like solar, wind, and hydrogen.
Africa has approximately 130 billion barrels of proven crude oil reserves and over 15 trillion standard cubic meters of natural gas which hasn’t been fully utilized.
Meanwhile, some prominent industry leaders have said that it would be a mistake for Africans to abandon their abundant petroleum resources, to pursue expensive, unreliable renewable energy sources.
The African Energy Chamber has made a strong case to challenge this energy transition agenda, noting that Africa still needs its oil and gas resources to meet the Continent’s pressing needs and alleviate energy poverty.
Addressing energy poverty in Africa is an urgent matter that must take priority over abandoning oil and gas. The energy poverty numbers for Africa are stark, while Africa produces less than 4% of greenhouse gas. To be factual, Africa isn’t the problem of greenhouse gases, but they are the victims. Though African countries are embracing renewable energy sources; but, the problem comes when the continent is forced into giving up its fossil fuels and transitioning to renewable energies.
In response to this ongoing energy transition agenda, NJ Ayuk has said developing African energy banks is a way to protect the continent and harness its oil and gas resources for social and economic transformation.
Ayuk stated that China might be a credible partner to Africa in building these unique financial infrastructures.
In his words, “African governments can set aside a percentage of their oil and gas revenues for new project funding. In our report, Africa Energy Outlook 2021, the African Energy Chamber projected that African governments’ earnings from royalties, profit oil, and other taxes in 2021 would reach USD 100 billion. Even 5% of that amount would produce $5 billion that could be leveraged for exploration, development, or infrastructure.
“We can also raise capital by investing African pension funds in African energy
According to Capetown-based investment firm RisCura, local pension funds collectively manage around USD 350 billion of assets in sub-Saharan Africa, and they are actively looking for new places to invest. Why not encourage them to add oil, gas, and renewables projects to their list? Investing pensions in the energy sector is hardly a new practice. Some of America’s largest pension funds are invested in fossil fuel producers and pension funds around the globe are investing in green energy projects. This would not be a giveaway: Investing in fossil fuels, especially gas projects and developing marginal fields, provides a large return on investment. And millions of Africans would be participating in our growth and our future”.
Other options for raising capital, according to him, including seeking support from wealthy Africans who want to invest in a better African future. As of December 2020, total private wealth in Africa totaled approximately USD 2 trillion. That’s not even including the African diaspora.
“Imagine what can be done if we just unite. Not only do we have pathways for raising capital, but we also have an example of the kind of bank(s) Africa needs to finance its energy projects, one that goes back decades. I’m talking about the African Export-Import Bank (Afrieximbank). In 1993, African governments worked with public and private investors to create a bank that would finance, promote, and expand intra-African and extra-African trade. They succeeded. In 2020, Afrieximbank
received the Africa-America Institute’s (AAI’s) Institutional Institution of Excellence Award for its commitment to the creation and implementation of the African Continental Free Trade Agreement (AfCFTA) and its ongoing dedication to investing in education. AAI noted that between 2015 and 2019 alone, Afrieximbank disbursed more than $30 billion in support of African trade, including more than $15 billion for the financing and promotion of intra-Africa trade.
“Afrieximbank, by the way, recognizes the importance of protecting Africa’s oil and gas industry.
“The way we see it at the bank. I say, let’s build on Afrieximbank’s model. And not only that, let’s cultivate a pool of investors who understand and appreciate the importance of oil and gas to Africa.
“Capital from foreign countries and companies will always be welcome — as long as it isn’t predicated on phasing out fossil fuels on their timeline. If they’re pushing a rush to renewables, they’re not going to be part of our solution.
“With the support of one or more African energy banks, local oil and gas companies will have the finances necessary to acquire assets. They’ll have the financing to build crude and gas pipelines across Africa and to facilitate the use of natural gas (including liquid natural gas) to power Africa, minimizing energy poverty and driving industrialization.
“And African states and entrepreneurs will be able to finance the development of renewable energy operations, particularly blue, green, and grey hydrogen operations that create additional opportunities for Africans. Africa already has emerging green hydrogen operations in Mali, Namibia, Gambia, Senegal, Mauritania, Niger, and South Africa, and with the proper funding, could become a major green hydrogen exporter.
“The African Energy Chamber will support the energy bank initiative and work to bring potential participants together.
“Creating our institutions to finance energy projects will send a clear signal to the marketplace that Africans are seeking to become leaders in scaling up private capital.
“It will show that we are advancing natural gas development and infrastructure while supporting low-carbon investments.
“With the financing in place, not only will African companies be able to produce oil and gas, but they also will support local community development, develop green energy markets, and create jobs.
“The financing also will allow African companies to upgrade their refineries, an urgent need addressed by Anibor Kragha the Executive Secretary of African Refiners and Distributors Association during African Energy Week, so they can produce cleaner fuels.
“For many African countries, the oil and gas industry represents our best shot at giving millions of Africans the kind of jobs, living standards, and stability
that developed countries have enjoyed for well over a century.
We must hold fast to those goals and do what it takes to achieve them,” Ayuk concluded.
In conclusion, Africa still has an opportunity to further entrench the Continent’s position as the world’s most attractive investment destination, which can be achieved through deliberate actions such as developing a roadmap to drive more investmment and boost local content development in the supply chain of its oil and gas industry going forward..
The transition to clean energy will mean less dependence on fossil fuels. Africa’s share of global oil consumption is estimated at roughly 9%.