The Energy Transition will continue to be dominated by two extremes: the continued growth of renewables-wind and solar-and a continued pushback by the oil and gas sector to maintain more than just a foothold in the energy landscape.
Not so much an energy transition, but an exchange of political power, disguised as an energy transition. Such a transition of energy power is fast finding its mark in Africa. A fast-moving continent which will see new players, both national and international. Both the oil and gas and renewable sectors could become a hotbed of consolidations, acquisitions and mergers.
In Africa the oil majors are for the most part playing a retreating role; instead, new players, who for the most part are not well known, will become dominant players. Some of these new players are involved in the oil and gas sector and others in the renewables sector.
Exiting but with some exceptions
In Africa the oil majors will continue divesting assets no longer deemed to have shareholder value. Shell has for all intents and purposes exited Nigeria, and BP and Equinor are not pledging new funding to oil and gas prospects in Angola.
ENI and BP have indicated that they will merge their upstream activities in Angola. Will this be a precedent for merging their additional assets in Africa? If this is to happen other companies will join the frenzy in order to merge and consolidate assets.
If not exiting immediately, the name of the game is to extend the life cycle of a project to ensure that all of the project’s economic value is harvested. In most cases not developing new fields but adding satellite fields and oil recovery projects to maintain low project costs.
The sole exception is high value, low-cost projects such as Mozambique’s two major LNG projects: Rovuma being developed by ExxonMobil and Mozambique LNG being developed by TOTALEnergies. Yet both projects could possibly suffer delay again, or require additional partners to further mitigate the financial risks.
Nonetheless deepwater exploration, not a task for the faint-of-heart, will continue. TOTALEnergies is continuing to attract attention with its exploration campaign off the southern coast of South Africa. Its Luiperd and Brulpadda discoveries have given a further stimulus for continued exploration.
Opportunities for new oil and gas entrants
Less headline grabbing is the unfolding of new entrants seeing new business opportunities. Some examples:
Reconnaissance Energy Africa, also known as ReconAfrica, has started an eye-catching drilling campaign in the Kavango Basin in the Kalahari Desert of North Eastern Namibia. Drilling of their 6-2 well commenced in early January 2021. Well 6-2 is the first of three wells to be drilled in the totally undrilled Kavango Basin, viewed as a classic high risk/ high reward type of oil and gas play.
Savannah Energy has taken over key assets from ExxonMobil in Chad and Cameroon: in Chad the Doba Oil Field and in Cameroon the Chad-Cameroon Oil Pipeline.
Recently Perenco has strengthened its Gabon base. TOTALEnergies has divested interests in seven mature oilfields operated by Perenco.
Angola’s recent onshore licensing round for the nine oil and gas blocks in the Lower Congo and Kwanza basins received 45 proposals from 15 different companies with a proposed investment sum of over $1Billion. At first glance, this looks like a positive response to help kickstart an oil economy.
Angola’s National Oil, Gas, and Biofuels Agency (ANPG) stated that the bid round was designated to attract foreign companies not normally present in country and Angolan companies to boost the national potential both in terms of business and workforce. Could the Nigerian example, where today 25 indigenous companies produce nearly 400,000BOPD, also work in Angola?
Professor Jason Bordoff, Co-Founding Dean of the Columbia Climate School, Founding Director of the Center on Global Energy Policy, and Professor of Professional Practice in International and Public Relations at Columbia University SIPA, recently indicated that private equity companies are turning their attention to assets being aborted by the oil majors. Private equity now accounts for 10% of all North Sea production, up from virtually zero in 2014. Bordoff concludes that Chinese banks have also shown an ability to fill these investment slots. Could Sub-Sahara Africa become part of this scenario?
Africa’s new green energy players
An important part of the equation could well be Africa’s power sector, normally seen as a distinct and separate category and not associated with the oil and gas industry. Their story has in many cases not been properly told. In a period of great transition, we can anticipate movement from the power sector. Companies, large internationals and others regional in scope, who already have a proven track record. Some key players to watch:
ACWA is Saudi owned, has 42GW generating power with a value of $66billion, spread over 13 countries. In Morocco the company has developed three solar parks totalling 500MW for the Moroccan Agency for Solar Energy (MASEN).
Antonio Cammisecra, CEO of Enel Green Power symbolizes Enel in Africa. “We’re Africa’s top privately-owned renewable energy operator. This is something we can definitely feel proud about but still, it’s a drop in the bucket if we consider the sheer size of Africa’s untapped potential and the huge amount of energy it needs.”
The company claims to be Africa’s largest independent renewable energy player in terms of installed capacity. According to Enel’s 2019-2021 strategic plan the Enel Group is investing around €700Million in the continent, building 900 MW of wind and solar capacity.
Gillian-Alexandre Huart, CEO of ENGIE Energy Access, is Engie’s man in Africa. Its Access to Energy business in Africa, is tasked with providing millions of households and businesses across the continent with clean and affordable energy.
Engie’s Energy Access is now one of the leading off-grid, Pay-As-You-Go (PAYGo) solar and mini-grid solutions providers in Africa, serving over one million customers and impacting more than five million lives in nine countries – Uganda, Zambia, Kenya, Tanzania, Rwanda, Nigeria, Benin, Côte d’Ivoire, and Mozambique. Engie Africa counts nearly 4,000 employees, and has 3.15GW of power generation capacity.
EDF (Électricité de France)
EDF partners with innovative start-ups to provide energy and services to a rural clientele in South Africa, Côte d’Ivoire, Ghana, Senegal, Kenya and Togo.
Such services enable more than 1 million people to light and power their low-consumption household appliances or also to be equipped by solar powered water pumps, thereby significantly improving their crop yields.
The company plans an extensive expansion of its solar and wind activities throughout Africa in the coming years.
LeKela’s current portfolio includes more than 1.3GW of power involving projects in Egypt, Ghana, Senegal and South Africa.
The company’s focus is utility-scale projects which supply much-needed clean energy to communities across Africa. The focus is on taking projects from mid-or late-stage development into long-term operation.
Scatec is a Norwegian, renewable power producer, developing, building, owning and operating solar, wind and hydro power plants and storage solutions. Scatec has more than 3.5 GW in operation and under construction on four continents. The company is targeting 15 GW capacity by the end of 2025. In Africa the company has projects in Egypt, Mozambique, Rwanda, South Africa and Uganda.
Some final considerations
- Recently IRENA (International Renewable Energy Agency) and AfDB (African Development Bank) have jointly announced support of low carbon projects to enhance the energy transition. IRENA states in its Global Renewable Outlook that sub-Sahara Africa could generate as much as 67% of its power from indigenous and clean renewable sources by 2030. In the energy transition this would increase welfare and stimulate the creation of up to 2Million green jobs by 2050.
- Certainly public-private partnerships should be part of this mix. Governments to ensure a broad basis of support and energy companies who have the know-how and project management skills. A key bonus for oil/energy companies is knowing that renewables can be added to their reserve count.
- Developing Africa’s Green Deal should be the key theme for a new partnership among oil and gas companies, national oil and gas companies and electrical and transmission companies. Such collaboration should work closely with The Clean Energy Corridor which aims to support integration of cost-effective renewable power options to national systems, promote its cross-border trade and support creation of regional markets for renewable energy.
- The Clean Energy Corridor initiative has two African components: (1.) African Clean Energy Corridor (ACEC) for the member countries of Eastern and Southern African power pools. (2.) West African Clean Energy Corridor (WACEC) within the Economic Community of West African States.
- Africa could well become a major hydrogen producer. For example, the Hyphen Hydrogen Project in Namibia will invest $9.4Billion over a period of nine (9) years. The project sponsors aim to produce 5GW of power by 2030, and 3GW of electrolysis capacity. A production of 300,000 metric tons of green hydrogen per year is anticipated once the project ramps up. According to the Government of Namibia a large focus would be on exporting hydrogen to Europe and to sell some of the output to neighbouring countries to “take advantage of the vision that our leaders have for the African Continental Free Trade Area”.
- According to Professor Jason Bordoff wealthy nations in 2009 pledged to provide $100billion annually in climate finance to low income countries. That has not happened. Now roughly $1Trillion-$2Trillion is required annually in clean energy investments in developing and emerging markets to achieve net-zero in 2050. In 2020 clean energy investments in these nations was only $150Billion.
Whats the latest on the Gazania-1 well offshore South Africa?
Seems to me Azinam has failed to secure a rig and therefore will lose its 50% operator ownership on Block 2B.
Have you heard something?