RALLYING FOR AFRICA’S ENERGY DEVELOPMENT
Stakeholders at the just-concluded African Refiners & Distribution Association (ARDA) conference canvass for concerted investment in African Downstream, clean fuels, energy poverty eradication. Correspondent writes.
Critical stakeholders in the African energy have resolved to mobilise for greater investment in the continent’s energy sector. Arising from the 2023 edition of the African Refiners & Distribution Association (ARDA) conference– which ended yesterday in Cape Town, South Africa, the participants called for increased investments to accelerate Africa’s deployment of downstream infrastructure, including pipelines, storage facilities and refineries, to enable the continent to address energy poverty and achieve energy independence and sustainability.
To this end, the African Finance Corporation (AFC), revealed that it has deployed about $800 million towards supporting Africa’s refinery sector with an additional $210 million in its near-term pipeline. Cumulatively, the AFC and the African Export Import Bank (Afreximbank) are investing about $16 billion in oil and gas projects across Africa.
The Global Head, Client Relations, Afreximbank, Rene Awembeng, said the company’s oil and gas portfolio exceeds $15 billion with a healthy pipeline across the entire continent. He noted that the continent is in a critical situation where demand for energy continues to rise on the backdrop of surging population.
At the conference, stakeholders also called for retention of funds within the continent to finance the over $190 billion yearly energy investment need of the continent. About $15 billion of the funds is being invested by Afreximbank while AFC already invested over $800 million with additional over $200 million expected to be finalised.
With the continent relying mainly on importation of petroleum products at a time when foreign exchange demand is hovering at $100 billion yearly and required energy investment annually stands at $190 billion, Awembeng said large infrastructure development, including, refineries that would meet demand on the continent must be prioritised and supported. He added that the creation of Africa Energy Bank remained sacrosanct to fund fossil fuel and Africa energy transition agenda.
Regretting that Africa remained an importer of all refined products, he said: “Africa has not invested in its refineries or refining capacity. We’ve not invested in our storage facilities. We’ve not invested in our pipelines sufficiently to meet the demand. So with the COVID crisis, and now the Ukraine crisis we are now in a very difficult position.
“A lot of the international banks and some of the banks that were financing oil and gas transactions have retreated from Africa for a number of reasons; leaving the burden on African financial institutions and some of the development financiers like the African Export Import Bank to look into the problem.
“The challenge now is that we have significant capacity to meet the demand of $190 billion every year to finance oil and gas requirements in Africa. Do we have capacity on the continent to support the $15 billion of rehabilitation of refining capacity required in North Africa, West Africa and East Africa; I don’t think we are.
So we are going into a crisis where if you look at also what is happening with food security in terms of fertilisers and grain, we have to import plus the high costs of importation of refined products. We are in a very challenging situation as a continent to be able to finance oil and gas,” Awembeng said.
In an opening statement, ARDA President, Marième Ndoye Decraene, emphasised the role improved collaboration between African downstream players and ARDA members plays in facilitating the full exploitation of Africa’s hydrocarbon resources to achieve a just and inclusive energy transition.
According to Decraene, with energy demand set to grow across the continent by 45 percent through 2050, “Our objective is to ensure Africa’s growing demand is met with cleaner fossil fuels. We must combine our efforts to develop a strong and effective platform to ensure the energy mix and environment are prioritised. We need to create a strong regulatory framework, ensure the transfer of technology, innovation and skills to maximise the downstream industry. Financing remains a problem and we need to make sure there is available funding and that projects are bankable while accelerating renewables penetration. Our aim is to make use of platforms such as ARDA Week to strengthen our current energy capabilities and come up with solutions on how Africa can address global factors hindering the industry.”
ARDA’s Executive Secretary, Anibor Kragha, called on Africa’s downstream players can play to ensure the continent balances achieving energy security and environmental sustainability.
“Energy security is the short term need we have. We are not the biggest polluter in the world, hence we are focusing on uninterrupted, secure and affordable supply of energy and not what other global parties and markets are focusing on which is decarbonisation. Storage and distribution needs should be a focus, however reducing emissions from the fuels industry should also be prioritised. By 2030, we need cleaner transport, clean cooking and power solutions.”
The Group CEO of the Nigerian National Petroleum Company Limited (NNPC), Mele Kyari who was represented by the Executive VP Downstream for NNPC Limited, Yemi Adetunji, reiterated the role Nigeria’s gas resources will play in ending energy poverty across the West African country.
“Nigeria is a gas nation. There is a need to ensure a more gradual approach to the energy transition. Nigeria will require gas to transition fairly. Africa should focus on resources which are accessible and affordable while enhancing operational efficiency and giving players competitive edge. The NNPC is committed to the country’s energy sector strategy which includes the optimal development of all resources. The gas sector creates investment opportunities for the country to be able to invest in new energies including electric vehicles and solar. A just transition for Africa will require huge investments; hence Nigeria and Africa will need global partners to harness existing resources. We will continue to assess cleaner energy for the benefit of Nigeria while we will build new refineries and distribution networks to ensure energy reliability today and tomorrow,” he said.
Similarly, the Executive Director, Sahara Group, Wale Ajibade, said with 43 per cent of Africa’s total population living without access to electricity, rural to urban migration increasing and energy demand spiking, investments in energy will need to double to $195 billion per annum if the continent is to achieve its energy security targets.
Ajibade, in his presentation at the conference, insisted that in order to meet rising demand, the supply of refined products within the continent needs to be optimised. He noted that the projected growth trends in Africa indicate an increase in energy demand over the next few decades, with demand expected to be driven by industrialisation and urbanisation and is expected to coincide with the global energy transition.
He also said the rise in demand is projected to accelerate Africa’s deployment of downstream infrastructure to enable the continent’s energy independent and sustainability while serving to address energy poverty.
According to Ajibade, Africa faces five challenges across the downstream sector and lamented over-reliance on product importation, supply chain issues, oil theft and vandalism, fuel subsidy, and the energy transition.
He added that there are clear solutions to these challenges, which include, “investing in the construction of new refineries and the modernisation and expansion of existing infrastructure; the creation of enabling environments for investment in infrastructure; leveraging technology to address pipeline theft and vandalism – such as drones and the internet of things –; regulating fuel subsidies; and pushing for gas to be used more predominantly including liquefied natural gas (LNG), liquefied petroleum gas (LPG) and compressed natural gas for power, energy and transportation while adapting existing refineries to the changing landscape.”
Giving an insight into the viable solutions for the future of Africa’s energy sector, and drawing attention to natural gas while identifying the role solar, wind and hydro will also play, Ajibade stated that with about 13 per ecent of global natural gas reserves based in Africa, the continent is expected to embrace gas in the coming years.
He explained that while fossil fuels will continue to remain the major source of Africa’s energy demand, particularly through oil, it is expected that there will be a major shift towards a cleaner and more sustainable energy mix through the use of gas.
In this scenario, natural gas will begin to play the role of bridging between more polluting fossil fuels and zero-carbon technologies, such as wind and solar. With factors such as a growing population, increased urbanisation and economic expansion, as well as growth across the industry, commerce, manufacturing and agricultural sectors, Africa is projected to rely more and more on gas.
“However, challenges associated with a lack of investment, limited infrastructure, foreign exchange issues and limited knowledge on gas technologies continue to hinder resource maximisation in some gas-rich countries such as Nigeria – which has put in place its Decade of Gas initiative to monetise resources,” he said.
Ajibade said over the past two decades, global investment in renewable energy has grown rapidly, stressing that the continent Africa receives less than three percent of this investment. Therefore, to attract more investment and create enabling environments, a series of financial options that can be implemented included blended finance, green bonds, risk mitigation instruments, innovation and carbon markets.
According to him, the creation of carbon markets in Africa could help countries develop mitigation projects while receiving climate-related investment, and with 24 countries already conveying an interest in this area, opportunities for trading carbon credit across several exchanges is in sight.