AFRICA’S ENERGY FIELDS NEEDS EUROPE’S HELP

MAKE no mistake, we are going to Glasgow and will be proudly supporting the African energy sector and demand a just transition. We just got our winter jackets and gloves.

Despite all signs pointing to a warming planet, Europeans are bracing for the crushing effect a colder-than-normal winter could have on their pocketbooks. This year, they have faced one natural gas price shock after another, with continental gas prices reaching multi-level highs and futures trading at €73.150 (about R1 250) per megawatt-hour near the end of September.

If the winter months bring anything but the mildest of temperatures, Europeans are likely to be struggling to pay their bills or left shivering in the dark.

There’s no single reason for the substantial increase in natural gas prices. Instead, the upswing reflects the confluence of climate change consciousness, reduced investment in fossil fuels, and mankind’s inability to control the weather.

As Europe is discovering, a funny thing can happen on the way to well-intentioned plans for net-zero emissions. When an unseasonably cold winter depletes already tight gas supplies and is followed by a summer when there isn’t much wind to convert to electricity, the only choice is to reconsider using coal.

Yes, this is what a rushed transition to renewables can bring – a return to the world’s most carbon-intensive fuel.

Yet the prospect of burning coal this winter hasn’t stopped Europe from trying to force its climate change agenda on to Africa. Somehow, Europe expects Africa, which produces the tiniest fraction of the world’s greenhouse gas emissions, to accept an equal burden in eliminating them, even though that means abandoning the economic potential of its vast hydrocarbon resources.

Oh, and they want Africa to get on the renewables bandwagon now.

At the same time, Europe itself takes a giant leap backward.

What Europe forgets is that for the energy transition to be just, Africa has to first overcome significant hurdles, including those the African Energy Chamber outlines in its 2022 Africa Energy Outlook (“The State of African Energy 2022”) to be released this month and available at the African Energy Week in Cape Town.

Here are some of the issues the report includes.

The effect of Covid-19 on African-energy development: Africa is still reeling from the economic hardships brought on by Covid-19. While the rest of the world’s GDP has largely returned to pre-pandemic levels, sub-Saharan Africa’s recovery is expected to take until 2023. The difference may lie in how hard the effects of the pandemic hit Africa’s oil-exporting countries. That could best be described as delivering a one-two punch.

Together, the continent’s top four oil exporters – Nigeria, Libya, Angola, and Algeria – produce more than 4.5 million barrels of oil per day, with much of it imported by the EU and Asia. (Yes, the irony that Europe is trying to cut off its own energy source is wasted on no one.)

As energy demand dropped and prices bottomed out amid lockdowns, oil revenues dropped precipitously, making it more difficult for oil-producing nations to keep government-funded programmes going and even to respond to the pandemic. Nigeria and Angola cut production by as much as 30% compared to 2019.

As the 2022 African Energy Chamber Outlook notes, Covid-19 did what years of civil war in Angola could not, bringing offshore drilling to a standstill and reducing the overall number of wells drilled to half what it was in 2014.

At the same time, low prices forced international E&P companies operating in Africa to slash their development budgets and delay final investment and project sanctioning decisions. That alone is estimated to have eliminated as much as $150 billion of exploration and development expenditure in Africa between 2020 and 2025, according to the 2022 Energy Outlook.

So, there you have it. A rush to transition to renewables at Africa’s own expense, with pressure to leave valuable oil and gas in the ground and less financial support to the companies that would extract it.