Nigeria's foremost Online Energy News Platform

Practical Steps to Tackling Africa’s Energy Transition Challenges — Dr. Ibrahim

By Gideon Osaka

The success of Africans and African institutions in addressing the challenges that energy transition poses to the continent shall be more quickly achieved and also become more enduring if there is a second paradigm shift in the discourse on energy transition.

The first paradigm shift which has occurred already, namely, the global acceptance of the need for a transition from fossil to renewable energies, has thrown up four challenges for the African continent, especially countries that rely on fossil fuels for revenue.

These were some of the submissions of Dr. Omar Farouk Ibrahim, the Secretary-General of the African Petroleum Producers’ Organization, APPO, & Vice Chair, Africa the World Energy Council.

Dr. Ibrahim spoke in a keynote address at the 16th Nigerian Association for Energy Economics/International Association for Energy Economics held in Abuja on July 13. The NAEE comprises the largest assemblage of lawyers, engineers, economists, scientists, and other professionals working or interested in the broad area of energy economics in Nigeria.

Speaking on the theme: Energy Evolution, Transition and Reform: Prospects for African Economies, Dr. Ibrahim noted the contradictions around energy transition, calling for a second paradigm shift in the discourse on energy transition in Africa in order to decidedly address the challenges posed to the African oil and gas industry. 

Highlighting some of what he described as fallacies that have conditioned the thinking of African experts, and informed their analyses, Dr. Ibrahim posited that it is only when Africans have accepted that these are fallacies that the continent can start the journey to the second paradigm shift.

In his words: “The first fallacy is that international capital is country blind. But how factual is this assertion? Do Western investors, in particular, make investment decisions solely on rational calculation of profits? Can IOCs, service companies or any Western investor invest in any country of their choice that will give them the highest return on investment irrespective of the positions of their home governments in that country? Can Shell, Chevron, Mobil, Total, or any of these IOCs go and invest in any country where their rational assessment tells them they will make huge profits? The answer is NO. So capital is not country blind.

Following from this logic, it makes sense to argue that the imminent financing challenge for the oil and gas industry in Africa is not due to a lack of finance in the global financial system to fund oil and gas projects in Africa.

IOCs are wary of investing in Africa not because they do not believe that it makes economic sense to do so, or that they honestly believe that they owe humanity a duty to protect the planet earth, but rather because they are afraid of the consequences of their actions from their home governments, their shareholders and the powerful climate lobby.

If this argument is valid, then there is a limit to what African countries can do to attract investments from the West. Even if African governments bring down their royalties and petroleum taxes to the lowest possible level, investments will only be for the short to medium term, and cautiously too.” 

The second fallacy, according to him, is that capital can only be found from Western financial institutions or governments, noting that Africa needs to re-examine this fixated position.

The APPO scribe argued that Capital can be found in many other places, including in “our own so-called poor countries. It is a matter of prioritizing expenditure. If we agreed that oil and gas are currently the geese that lay the golden eggs for our member countries, and will continue to do so for some time to come because of the huge reserves we have and the monocultural economy that we operate, then we have a responsibility to grow that industry, to master its technology, to control its finances and develop its markets.”

“A third fallacy is the magnitude of capital needed for the industry. We are told that the magnitude of capital needed for industry projects are too high for African countries to raise. Agreed, the industry is capital-intensive. But what we are not told is that it will be less so if we work on addressing issues of corruption, of inefficiencies in production, non-digitization of processes, finance and administration etc in the industry. Put differently, we need so much capital because so much is wasted through corruption, mismanagement and inefficiencies.”

Dr. Ibrahim said a second paradigm shift requires Africa to jettison the fixated ideas received from years of biased socialization into believing that its salvation can only come from the West. That Africa is poor and therefore must look to the West for finance.

In APPO, “we believe that Africa’s salvation lies in the hands of Africans. We appeal to our economics and finance experts to begin to think outside the box as they search for solutions to the funding challenges posed to Africa by the energy transition.” 

APPO’s response to imminent challenges to Africa’s energy transition

The APPO chief opined that given the backdrop to the reform of APPO, one of the first decisions taken by the APPO Ministerial Council was to commission a major study on the Future of the Oil and Gas Industry in Africa in the Light of the Energy Transition. The study, which was completed in 2021 identified four imminent challenges that the energy transition poses to the oil and gas industry in Africa. These were: funding, technology, expertise/skills, and markets. Addressing these four challenges, according to him, has been the preoccupation of APPO since the reform.

Regarding the funding challenge, he said APPO has gone into partnership with Afreximbank to found the Africa Energy Bank (AEB). An MoU to this effect was signed in Luanda in May last year and negotiations on the Establishment Charter, and preparations of the Host Country Agreement as well as other founding documents have reached advanced stage.

The focus of the AEB, he said, include the provision of funds for oil and gas projects on the continent, in addition to other forms of energy. In addition to establishing the AEB to tackle the funding challenge, APPO is also taking other measures to cut operations cost in the industry across the continent working with the Forum of the CEOs of APPO NOCs.

On the technology and expertise challenges, APPO according to him, is working with Member Countries and their NOCs and Oil and Gas research, training and development institutions to establish regional centers of oil and gas excellence. Such centers will service the industry for the continent, instead of the current practice where each country strives to establish institutions but is unable to provide the required research, development, innovation and training facilities to meet the best in the industry.

On the challenge of markets for African oil and gas when those on whom we have for decades depended eventually abandon our oil and gas, APPO’s position he said is that, with over 1.4 billion people on the continent, over 600 million of whom have no access to electricity and 900 million have no access to any form of modern energy for cooking or domestic use like heating, the challenge is not absence of markets, but failure to develop a huge potential market.

“It is for this reason that APPO is partnering with CABEF for the Central Africa Pipeline System, CAPS, among other cross-border energy infrastructure projects. Once we focus on developing cross-border and regional energy infrastructure that will allow the movement of energy from areas of plenty to areas of need, and we empower the people to access the energy, we will come to see that we do not need any external markets for our energy. And of course, the provision of energy has multiplier effect of raising the level of productive economic activities, raising the living standards of the people and by extension moving Africa from a mere three percent of global GDP to a much higher figure.”

Push to abandon fossil fuels driven by the quest for energy security, not environmental concerns

Dr. Ibrahim explained that geopolitics, namely the shocking oil embargo placed on the USA and some European countries by some Middle East oil-producing countries in the wake of the Arab-Israeli war of 1973, more than any other, explains the timing and the speed of the latest push for energy transition.

In other words, today’s climate activism is driven more by the quest for energy security by developed countries than by concerns about the environment. A very good demonstration of this reality is the response of today’s champions of energy transition to the use of fossil fuels in the wake of the Russia-Ukraine war. According to him, “the very people that announced an end to funding oil and gas projects, especially in Africa, ostensibly because they are considered dirty fuels and dangerous to humanity, sent high-powered delegations to our countries offering to fund oil and gas projects that for decades were begging for investors. Of course, the condition was that the oil and gas should go to the investors. In other words, Africa is encouraged to produce oil and gas only if they are meant for export to developed countries to ameliorate their special circumstances due to the war, but the production of that same oil and gas is dangerous to humanity if it is meant to be burnt in Africa.”

Social
Enable Notifications OK No thanks