All posts tagged energy


Nuclear Power: A Green Option?

By Gerard Kreeft

The search for energy diversification has taken a more frantic pace since the Russian invasion of the Ukraine. Nuclear energy, not exactly in high repute in many countries, is now being mulled as a possible energy alternative. Even as a green alternative. The key for Africa is Small Modular Reactors(SMR), which can generate up to 300 MW, easily transported and installed. What previously was unthinkable may become realistic as the Russian-Ukraine conflict continues and the need for clean energy mounts.

A Global Overview

Internationally nuclear energy has established itself as a fuel of choice by various countries:

Canada

Historically Canada’s CANDU, unique heavy-water reactor run on natural uranium, dominated the export market to developing countries. The reactor’s smaller size, ranging from 100 MW to 700 MW, made it a better fit for smaller grids. Canada exported reactors to India, Pakistan, Taiwan, Argentina, South Korea, Romania, and China from the 1950s to the 1990s. The decline of the nuclear industry is attributed to dwindling sales and the introduction of newer designs by competing companies.

Four Canadian provinces—Saskatchewan, Ontario, New Brunswick and Alberta—are currently working together to begin developing SMRs.

United States

Nuclear power in the United States is provided by 93 commercial reactors. With a net capacity of 95.5 GW In 2019, they produced a total of 809.41 TWh of electricity, which accounted for 20% of the nation’s total electric energy generation. In 2018, nuclear comprised nearly 50 percent of U.S. emission free energy.

As of September 2017, there were two new reactors under construction with a gross electrical capacity of 2,500 MW, while 39 reactors have been permanently shut down. The United States is the world’s largest producer of commercial nuclear power and in 2013 generated 33% of the world’s nuclear electricity.

China

China ranks third in the world both in total nuclear power capacity installed and electricity generated, accounting for around one tenth of global nuclear power generated. Nuclear power contributed 4.9% of the total Chinese electricity production in 2019, with 348.1 TWh. As of June 2021, China had a total nuclear power generation capacity of 49.6 GW from 50 reactors, with additional 17.1 GW under construction.

Nuclear power has been looked into as an alternative to coal due to increasing concerns about air quality, climate change and fossil fuel shortages.  More long-term plans for future capacity are 120–150 GW by 2030.

France

In October 2021 France announced plans to construct six new nuclear reactors so that by 2050 the country can maintain its 50 GW capacity to produce low-carbon nuclear power. France will now delay its planned reduction in the share of nuclear power in its electricity mix to 50% from the current 2025 target to 2035. Nuclear accounts for almost 75% of France’s power production.

Japan

Prior to the Fukushima nuclear power plant accident of 2011, 54 nuclear reactors were in operation in Japan, supplying 30% of the country’s electric power. As of March 2021, 10 years after the Fukushima accident, only five plants with a total of nine reactors have gained the agreement of local residents to resume operations. The country’s electrical shortage has been primarily offset by LNG imports.

Russia

Nuclear power in the Russian Federation is a driver for the development of other industries, and nuclear electricity production accounts for 20.7% of the national electricity mix. Currently, the country operates 38 nuclear power reactors and is steadily moving ahead with plans to expand the role of nuclear energy, including the development of new reactor technologies, in addition to the export of nuclear services. It seeks to close the fuel cycle, and fast reactors are considered a key component of this strategy.

South Africa

South Africa has two nuclear reactors generating 5% of its electricity. The country’s first commercial nuclear power reactor began operating in 1984. Over the years various strategic and development plans have been introduced and died on the drawing board. In October 2019, South Africa outlined plans to build 1 GW of new nuclear capacity by 2030, and to extend the operating lifetime of its existing plant by 20 years.

 With its large debt, Eskom, South Africa’s dominant power player, is still the elephant in the room. Any definitive step to bolster the country’s nuclear capacity is highly dependent on the energy strategy that Eskom will decide on. In early 2022 Eskom stated that it was shutting down both units of its Koeberg nuclear power station for scheduled refuelling and maintenance, putting an already overburdened power system under additional strain.

 The case for Africa

One of the most compelling studies discoursing potential nuclear power in Sub-Sahara Africa is entitled ‘Atoms for Africa: Is there a Future for Civil Nuclear Energy in Sub-Saharan Africa?’. The authors–Abigail Sah, Omaro Maseli, and Aishwarya Saxena– are Breakthrough Generation Fellows and Jessica Lovering is the Director of Energy at the Breakthrough Institute located in Oakland, California, USA. The scholars explore the feasibility of commercial nuclear power in sub-Saharan Africa, especially in light of advanced nuclear technologies and their potential to overcome some of the challenges to deployment.

According to the study one of the most important issues to be addressed is the energy deficit of the continent. Most traditional nuclear power plants (NPP) follow the rule of thumb that no power plant in a country should have a capacity that exceeds 10% of that country’s grid capacity. Most traditional NPPs in western countries have a power capacity of 1000 MW or more.

The authors of the study argue that SMRs could become feasible in Africa and nominate the following countries as ideally suited:

Nigeria and South Africa  Development very likely

Ghana and Kenya                            Development possible with strong financing

Uganda                                             Development possible with stronger financing and infrastructure

Nuclear energy requires high capital costs, long lead times required to develop robust legal and regulatory frameworks and proliferation concerns of nuclear fuel serve as barriers to develop nuclear capacity on the continent.

Wood Mackenzie has aptly described Africa’s energy deficits:

“Nearly 800 Million people globally live without access to any electricity, three-quarters of them in Sub-Saharan Africa…the average Nigerian consumes less than a third of the electricity used every year by a moderately efficient American refrigerator… Sub-Saharan Africa has a persistent lack of electricity access in part due to massive underinvestment in electricity infrastructure. Most of its public electric utilities are loss-making, with limited ability to maintain existing assets or invest in new ones. This hampers top-down growth in power supply and improvements in the availability, reliability and affordability of power. Stalled or partially complete power-sector liberalisation efforts… have allowed investments in generation capacity to grow steadily but have left the transmission and distribution segments behind. This is a major bottleneck to further electrification and a constraint on off-taker bankability for future generation projects. In adversity lies opportunity.”

 Steps required to building a commercial nuclear industry

  1. Building of nuclear research reactors which can be used in a wide range of environmental, agricultural and medical fields. Presently the following countries have such facilities: Algeria, Democratic Republic of Congo, Egypt, Ghana, Libya, Morocco, Nigeria and South Africa.
  2. Establishment of Domestic Regulatory Framework. The International Atomic Energy Agency (IAEA) has created a framework for countries to follow.
  3. Signing of Nuclear Safety and Security Treaties. Almost all countries have signed the African Weapons Free Zone Treaty and a majority have ratified, which prohibits all activities related to nuclear weapons developed, transported and their use.

The road ahead

Traditional nuclear power plants are geared to providing power generation which can be over 1,000 MW, enough to power close to one million households in a typical Western country. Therefore, traditional large-scale plants may not be the best first-choice for newcomer African countries.

Instead, Small Modular Reactors (SMRs) which have capacities up to 300 MW, enough to power 300,000 homes. SMRs can be manufactured in a factory and easily transported to the power plant site are far more feasible for African countries. Various SMRs exist:

High-Temperature Gas Reactors (HTGR) Helium or carbon dioxide gas is used as the coolant for this technology, allowing it to operate at a much higher temperature of 1000oC, achieving greater thermal efficiency.

Floating Reactorsdesigns typically utilize the concept of a deep-water platform to host a nuclear reactor, usually a small modular light-water reactor.

Nuclear Batteries or Sealed Micro-Reactors Several companies are working on extremely small modular reactors, 10 MW or less, which can operate for up to ten years without refueling.

Currently, Russia and China dominate the nuclear export market.

Rosatom, a Russian state-owned company, has come to dominate nuclear exports to developing countries because of their generous financing and worker training. Rosatom is a forerunner in sub-Saharan Africa, having signed nuclear power agreements with Ghana, Kenya, Nigeria, and Uganda that cover a number of arrangements, including financing, skills development, and the actual development of nuclear power technology. Rosatom’s model of Build-Own-Operate and SMR technology has proven very popular.

China Nuclear Engineering Group and China’s State Nuclear Power Technology Corporation have signed partnerships with the Nuclear Energy Corporation of South Africa (NECSA). China General Nuclear owns and operates the world’s second largest uranium mine in Namibia and has also built research reactors in Algeria, Ghana, and Nigeria.

A key area to watch is whether China extends it Green Taxonomy policies to include the financing of nuclear plants in Africa, especially in support of its Belt and Road Initiative. According to a recent IEEFA(Institute for Energy Economics and Financial Analysis) report, authored by Norman Waite, the People’s Bank of China has been quietly greening its financial system.  A key measure is the introduction of a facility that would provide discounted central bank credit to banks lending to enterprises engaged in carbon emission reduction.

According to Waite, the People’s Bank of China has launched the Carbon Emissions Reduction Facility (CERF) which offers attractively priced funding to banks, conditional on loans extended to borrowers able to produce proven, audited, and consistent decarbonization results.

“By the end of 2021, within its first month of operation, the PBOC refinanced loans to 2,817 borrowers promising to cut 28.76M tons of annual carbon emissions. That is 0.8% of China’s annual carbon dioxide (CO2) emissions from coal power. If the PBOC keeps this pace every month for 2022, the CERF could add significant cuts to the country’s CO2 by year-end”.

The PBOC introduced the “five pillars” of green finance that it would build to support its climate efforts going forward. The pillars include green finance standardization, green financial information disclosure and supervision, green finance incentive mechanisms, green financial products and markets, and international green finance cooperation.

A final question is whether SMRs are financially feasible? Take the NuScale SMR being developed in Utah, USA. NuScale has optimistically targeted the cost of power from the new plant at $58 per megawatt-hour (MWh), although some estimates predict costs for the power from new SMRs could reach $200/MWh. According to a study by IEEFA the project is “too late, too expensive, too risky and too uncertain”.

It may be to early to judge how other SMR projects will cost but no doubt SMRs will have to be competitive with renewables.

 Some final thoughts

With the continued fallout of the Russian-Ukraine conflict and a rush to exit Russian natural gas exports nuclear power has gained a new and promising legitimacy. No doubt this impact will bring new questions. Nuclear safety, a fear of a new Fukushima, Chernobyl or Three Mile Island and how to manage nuclear wastes are key concerns. A fear that is global in scope.

Yet the global community and Africa can ill-afford to let fear drive its decision whether nuclear energy can be a game changer in the energy transition? Strategic decision-making and courage are needed to take bold steps to ensure that SMRs can be developed globally, especially in Africa.

 Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe.  Kreeft has Dutch and Canadian citizenship and resides in the Netherlands.  He writes on a regular basis for Africa Oil + Gas Report, and contributes to IEEFA.

 

 


Mozambique Commissions a 41MW Solar Power Plant, its Largest, in Gas Rich Province

Mozambique has inaugurated a solar power plant, the largest of its kind in the country, at Metoro, in the northern province of Cabo Delgado

Cabo Delgado is the region with the Rovuma Basin off its coast. The basin holds over 100Trillion cubic feet of gas (proven).

“The Metoro Solar Plant Project is part of the Government’s plan to increase production capacity and diversify energy sources in the country, in general, and in the northern region, in particular, with the aim of ensuring quality energy in Cabo Delgado province,” a government statement reads.

Work began in 2020 on building the plant, which consists of 125,000 panels manufactured in China. It has a capacity of 41 Megawatts and is to inject 69 gigawatt hours per year into the grid managed by state electricity company Electricidade de Moçambique (EDM).

The project has a budget equivalent to €47.3Million and is the result of a partnership between EDM, with a 25% stake, and France’s Neon, with 75%.

The project was financed by the French Development Agency (AFD), with a loan of $40Million (€34 Million), with the remainder coming from Mozambique’s government. After 25 years of operation, the infrastructure will pass into the hands of EDM.

 


What’s Africa’s Agenda Against Energy Poverty, Now and The Future?

Our March 2022 Issue Focuses on the Transition

Agendas lay out opportunities, especially when they are presented by governments. Africa’s leaders at several levels have lamented the developed world’s declaration against fossil fuels. But what are they proposing?

Too many rural African women are dying from health challenges thrown up by charcoal fume inhalation, the leaders argue. But where is the master plan for LPG deployment? Gas is still required to fire our power plants, African governments exclaim. But how many of them have clear directions for monetisation of these molecules in power plants?

African leaders struggle with visions to deliver energy for all. They talk about banning energy poverty in the press. But privately, they moan: ‘where is the market’? This is largely the reason why most hydrocarbon development projects on the continent are for export.

Having said that, what is the state of play of the renewable energy market on the continent? Are South Africa and Egypt still leading? Or has the race track become very crowded? In this second annual issue of our AFRICA in The GLOBAL ENERGY TRANSITION, who are the leading developers of renewable energy on the continent? Who are the companies to watch? Where is the space for investment?

The Africa Oil+Gas Report is the primer of the hydrocarbon industry on the continent. It is the market leader in local contextualizing of global developments and policy issues and is the go-to medium for international corporations, local entrepreneurs, technical enterprises or financing institutions, for useful analyses of Africa’s oil and gas industry. It has been published by the Festac News Press Limited since November 2001, and continues to be released as a monthly digital (pdf) copy, delivered to paying subscribers around the world. Its website remains www.africaoilgasreport.com and the contact email address is info@africaoilgasreport.com. Contact telephone numbers in our West African regional headquarters in Lagos are  +2347062420127, +2348036525979, +2348023902519.

 


Sonangol Works with Germans on Production of Green Hydrogen

Angola’s state hydrocarbon firm, Sonangol, is working to develop a strategy to produce green hydrogen.

The company says it has been conducting conceptual and engineering studies, through its Research and Development Centre, to identify a site for the installation of a plant to produce green hydrogen and its derivatives for domestic and foreign consumption, “The initiative is part of the company’s energy transition strategy, in the search for renewable energy resources developed in partnership with the German companies Conjuncta GmbH and Gauff GmbH & Co. Engineering Kg, which signed an agreement to implement a factory to produce green hydrogen in Angola”, the company says in a release.

“Due to its geographic characteristics, hipsometric and abundant water resources, Angola stands out as a country with high potential in renewable energy sources”, Sonangol notes, adding that the project, reaffirms, once again, its “commitment to energy transition through the implementation of local solutions to produce alternative energy sources that preserve the environment”.

 


Diversifying Europe’s Gas Supply: Never let a good crisis go to waste

By Gerard Kreeft

The deepening Russian-Ukraine crisis has sent energy markets scrambling. At stake is the European-Russian gas links that have existed since the early 1960s. The crisis is leading to shifting alliances which could very quickly have positive affects both for Africa and the USA as Europe continues to seek a greater diversity of gas supplies and draw down on Russian imports.

The Present Situation

In 2020 Europe consumed 379.9Billion cubic meters (Bcm) of gas, down from 469.6Bcm in 2019. Gazprom supplied Europe with 174.9Bcm in 2020, approximately 46% of Europe’s gas imports.

Prior the Russian-Ukraine crisis, natural gas, and therefore LNG, was gaining a new legitimacy as a green intermediate fuel. In November 2021, the European Commission signaled that the EU was considering a role for natural gas as part of its green taxonomy.  Other Asian markets have indicated similar intentions, meaning gas or LNG would qualify for green bonds and loans under these taxonomies. In October 2021, the South Korean government added LNG to its near-final green taxonomy.

The German government will push the construction of what would be the country’s first two liquefied natural gas (LNG) import terminals as part of its efforts to secure energy supply in light of Russia’s war against Ukraine, said Chancellor Olaf Scholz. “We made the decision to quickly build two liquefied natural gas terminals, LNG terminals, in Brunsbüttel and Wilhelmshaven,”

In the meantime, the majors-including BP, Shell and Equinor, ExxonMobil, TOTALEnergies-have announced plans to abort their Russian assets or stop new investments.

BP’s stake in Rosneft was 19.75% stake, accounting for about half its booked reserves and a third of its overall oil and gas production.

Shell announced its intention to exit its joint ventures with Gazprom and related entities, including its 27.5% stake in the Sakhalin-II liquefied natural gas facility, its 50% stake in the Salym Petroleum Development and the Gydan energy venture. Shell also intends to end its involvement in the Nord Stream 2 pipeline project.

Equinor has decided to stop new investments into Russia, and to start the process of exiting Equinor’s Russian Joint Ventures.

ExxonMobil has stated that it will opt out of its Sakhalin-1 project and will not make new investments in Russia. Its Russian investments are valued at more than $4Billion.

TOTALEnergies has indicated that it will remain in Russia but make no new investments.

While most of these disinvestments are in the upstream sectors, little has been said of the mid-stream activities- natural gas storage and transport- the backbone of Europe’s gas delivery systems. Gazprom’s commercial and technical activities are interwoven with those of European gas  companies, ensuring gas delivery to Europe. Gazprom owns and has access to a number of these natural gas storages to ensure gas delivery to Europe. How the future relationship between Gazprom and its European partners will develop remains difficult to predict.

Europe’s LNG Future

An important question: from where is the European Union sourcing its LNG? In 2021, according to CEDIGAZ almost 70% of Europe’s liquefied natural gas (LNG) originated in the United States, Qatar, and Russia. The United States became Europe’s largest source of LNG in 2021, accounting for 26% of all LNG imported by European Union member countries (EU-27) and the United Kingdom (UK), followed by Qatar with 24%, and Russia with 20%. In January 2022, the United States supplied more than half of all LNG imports into Europe for the month.

According to Wood Mackenzie, new US LNG projects with a total capacity of about 160Million tons per year (MMTPA) have permits for construction and export sales. This is more than the total US export capacity currently in operation and under construction, which totals about 110MMTPA.

The likelihood of new US LNG imports to Europe is based on bringing new LNG projects to final investment status in record time, according to Wood Mackenzie. Venture Global is cited as an example.  Alex Munton, Wood Mackenzie’s principal analyst for Americas LNG says: “They (Venture Global) have used modular construction, which means a lot of the work can be done off-site, in factory conditions. And their contracting strategy, doing their own procurement, has helped hold costs down.” FID (final investment decision) was done in August 2019 and first LNG cargo is expected any day now. A record time of 30 months from FID to first cargo.

Wood Mackenzie also reports that there are six new US LNG projects that have all the permits required to start construction. An additional six more have approval from the US Department of Energy.

The African Connection

Africa’s gas imports to Europe include:

  • The Maghreb-Europe Gas Pipeline (MEG)–linking the Hassi R’mel field in Algeria through Morocco with Spain.
  • The Medgaz pipeline, directly linking Algeria to Spain and providing 10.5Bcm of natural gas per year.
  • The Greenstream pipeline runs from Libya to Italy and transports 11bcm per year.
  • Nigeria is planning the development of a trans-Sahara Gas Pipeline. The pipeline will link Nigeria with Algeria, connecting existing pipelines with Europe.
  • Current African LNG exports are in part are exported to Europe. In 2020 exports of LNG to overseas markets were Nigeria 27.6Bcm, Angola 6.39bBcm, Equatorial Guinea 3.32Bcm, and Cameroon 1.63Bcm.

Future LNG projects to Europe could include Mozambique’s Rovuma and MozambiqueLNG projects, Senegal’s Greater Tortue Ahmeyim project; and Tanzania’s planned LNG project. Can these projects compete in terms of price and compete with US LNG projects which are being brought onstream in record time?

 Renewables: The Joker in the Deck

Competition could also be provided from renewables in Africa. For example, what has been described as futuristic-studies for large production and transportation of hydrogen to Europe-may well be seen as practical and necessary.

For example, the Hyphen Hydrogen Project in Namibia will invest $9.4 billion over a period of 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. Hyphen Hydrogen Energy has been chosen by the Namibian government to develop the country’s first large-scale green hydrogen manufacturing project.

Hyphen is a Windhoek-based joint venture between British Virgin Islands-registered investment holding company Nicholas Holdings and German renewables developer Enertrag. 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”.

“The first phase, which is expected to enter production in 2026, will see the creation of 2GW of renewable electricity generation capacity to produce green hydrogen for conversion into green ammonia, at an estimated capital cost of $4.4Billion,” said Hyphen CEO Marco Raffinetti.

“Further expansion phases in the late 2020s will push combined renewable generation capacity to 5GW and 3GW of electrolyser capacity, increasing the combined total investment to $9.4Billion.

“The Tsau Khaeb national park is among the top five locations in the world for low-cost hydrogen production, benefiting from a combination of co-located onshore wind and solar resources near the sea and land export routes to market.”

Germany signed the €40Million partnership deal with Namibia as part of a bid to secure supplies of green hydrogen, which it believes will be cheaper to import than produce itself, particularly due to the lack of space in Germany to build the giga-scale projects required to reach the necessary scale of green hydrogen production.

To date a Letter of Intent has been signed between the Governments of the Netherlands and Namibia to collaborate in the field of energy, in particular related to green hydrogen. The goal is to stimulate the development of export-import hydrogen supply chains between both countries.

Morocco-UK Power Project

A second project which has received much media attention is the Morocco-UK Power Project which will produce 10.5 GW of power. The solar and wind farm will be built in Morocco’s Guelmim-Oued Noun region, and it will supply the UK with clean energy via subsea cables. The twin 1.8 GW high voltage direct current (HVDC) subsea cables will be the world’s longest.

The Xlinks Morocco-UK Power Project will cover an area of around 1,500 square kilometres in Morocco and will be connected exclusively to the UK via 2,361 miles (3,800 km) of HVDC subsea cables.

The project will cost $21.9Billion. Xlinks will construct 7 GW of solar and 3.5 GW of wind, along with onsite 20GWh/5GW battery storage, in Morocco. The transmission cable will consist of four cables. The first cable will be active in early 2027, and the other three are slated to launch in 2029.

The Morocco-UK Power Project will be capable of powering a whopping 7 million UK homes by 2030. Once complete, the project will be capable of supplying 8% of Britain’s electricity needs.

While this energy divergence for Europe will be welcomed it sends a double message to Africa. Providing Europe with potential renewable energy is only part of the equation; it is  also important that Africa’s energy transition is geared for its own domestic use.

Tony Attah, former CEO of NLNG (Nigerian Liquified Natural Gas) reflected in a significant speech at the recent SAIPEC ( Sub-Saharan International Petroleum Exhibition and Conference) on how Africa should position itself in the energy transition.

He stated “We need to promote Africa to become an energy market of its own by deploying the resources in Africa especially gas for the use of Africa essentially, creating dedicated gas hubs, storage and markets to take advantage of the opportunity to use oil and gas locally to develop and support domestic economic activities like  gas to power, feedstock for petrochemicals, feedstock for fertilizer, gas to transport and as a catalyst for industrialization with LPG as a substitute for biomass.”

“While fossil fuels will continue to be relevant in the global energy mix renewables will achieve greater growth with gas as the transition fuel for a  very long time. That said I personally believe that energy transition is a given and the global energy mix will change whether Africa is ready or not.”

Some Final Thoughts

Europe’s search for more natural gas divergence could in the short-term lead to energy disruptions, depending on how the armed conflict between Russia and the Ukraine develops.

In Europe’s search for energy diversification the use of King Coal and nuclear energy, in the short-term, cannot be ruled out.

Look for a sharp increase in US LNG imports to Europe. While the US Senate and Congress were quick to condemn the building of the Nordstream 2 Pipeline, connecting Russia to Germany, commercial interests also played an important role. The US will become Europe’s chief source of LNG!

Russian upstream assets which have been sold as distressed assets no doubt will be picked up by bargain hunters who could become the next generation of new oligarchs.

In mid-stream-gas storage and transport-the muddle will continue. Relationships that have developed for over 60 years of gas storage and transport have led to over-arching relationships between Gazprom and Europe’s gas companies.

While Africa will play a key role in helping Europe diversify its energy sources-both in terms of LNG and renewables-Europe should be conscious of ensuring that Africa also has a need to develop its own energy transition roadmap.

Africa should follow an independent ‘Energy for Africa strategy’ to ensure it can overcome energy poverty.

Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was founder and owner of EnergyWise.  He has managed and implemented energy conferences, seminars and university master classes in Alaska, Angola, Brazil, Canada, India, Libya, Kazakhstan, Russia and throughout Europe.  Kreeft has Dutch and Canadian citizenship and resides in the Netherlands.  He writes on a regular basis for Africa Oil + Gas Report, and contributes to IEEFA.

 

 


Africa Can Focus on Opportunities, than Wallow in Denial of Energy Transition

By Tony Attah

The transition will happen; but the more valid question is, “Are we ready? Will Africa be ready?

Energy has always been in transition from very early days when the predominant sources were mainly animal fats, paraffin, peat, Coal and more recently Oil and Gas. Energy transition has seen changes from wood to coal, coal to oil, oil to gas and the emergence of nuclear fusion and hydro to enrich the energy mix. However, we seem to have taken the evolution of energy for granted because fossil fuels have remained dominant over the last 100 years; but with the advancement of technology and improvements in science, we now have a greater consciousness on the impact of fossil fuels on our planet through climate change effects. The effects of climate change is driving the acceleration of the ongoing energy transition and changing energy mix from fossils to cleaner sources.

That said, our world is also changing, with the global population set to increase by an additional Two Billion people by the year 2040 with urbanisation and the overall fortunes of society improving. The world will need more energy to meet the forecasted demand growth of 30% by 2040. While the world surely needs more energy, we are also faced with the dilemma of climate change and the clarion call to save our planet by managing the 20C challenge through decarbonisation. Essentially, the world needs more energy but no longer at all cost.

The world wants it cleaner and cheaper with assurance on the security of supply in a sustainable manner. As a result, energy transition is underpinned by changing energy mix with technology being by far the greatest disruption. Today we see a major shift, especially in the western world, with the IOCs and major investors coming under immense pressure to decarbonize and push their ambition for Net Zero operations to reduce CO2 and other emissions in line with global ESG mandates. This is actively driving the preferential efforts to move away from more conventional sources of energy in preference for cleaner and renewable sources like WIND, SOLAR, HYDRO and more recently Hydrogen if you discount the comments credited to Elon Musk on the role of Hydrogen in the new energy mix.

Irrespective of some of the conspiratorial theories and perceptions on climate change, energy transition is happening, no matter what we think. In fact the only scope for debate will be around the pace and speed of transitioning. Three scenarios are currently being explored (Accelerated case, Base case and a Slower Case). The Slower Case assumes energy will transition normally over time while the ACCELERATED Scenario predicts that things can move very quickly and global demand for oil could peak before 2030, thus shrinking the overall relevance of Oil and Gas in the energy mix. The Accelerated scenario has by far the sharpest implication for the energy mix and its attendant consequences on Africa.

The gradual shift away from fossil fuels by the western world will lead to a massive reduction in availability of funds and some key players have already put a stick in the ground not to fund any oil and gas development projects as seen in the announcements by the World Bank and some major pension funds around the world including the World’s biggest sovereign wealth fund. More and more investors are focusing on ESG and climate change, thus defining a new agenda for the global energy mix. Some countries like the UK, Netherland, Denmark, Sweden have taken positions with respect to fossil fuels for transportation, to the extent that they have proposed an end to the sale of diesel and petrol vehicles by 2030. This alone will lead to a significant reduction in oil demand.

In the Accelerated transition case, it is forecasted that global oil demand could peak at about 30Million barrels per day compared to the current 100Million barrels by 2035 and the revenue of most African producers will dwindle by over 70% in the same period. In this scenario, about 70% of African production will become uncompetitive by 2040, with next to no new field developments across all countries, overlaid with high production decline rates due to inability to finance and develop new oil and gas projects. Over 50% of new projects will be at risk of not being delivered in the accelerated scenario, unless at very high oil prices.

Depending on which side of the divide you sit, you can pick your choice of energy transition scenario and bet on how fast the transition will happen; but one thing remains for sure “it will happen” and hence the more valid question is, “Are we ready? and will Africa be ready?

KGG Gas Hub on Ebendo Field-Africa needs to become an energy market of its own by creating dedicated gas hubs, storage, etc for its own consumption

With the onset of energy transition now piling pressure on conventional sources of funding for oil and gas development, leading to increased cost of capital, coinciding with the global lack of appetite for fossil fuels, it is important to really dimension Africa and the potential implications. Africa is very rich in natural resources but it is unfortunately very poor in availability of energy; to the extent that about 50% of Africans; approximately 600Million people out of the over 1.2Billion have no direct access to electricity and most of Africa remains in darkness. It is also true that Africa has other problems including a weak infrastructure base, low access to affordable health care systems and insecurity in some places but by far the biggest opportunity will come from being able to crack the energy poverty challenge or at least not to make it worse due to energy transition.

Biomass and Fossil fuels will remain the dominant sources of fuel in the African energy mix in the short to medium term, underpinned by the increased consumption of wood and charcoal with its attendant implications of deforestation, desertification and other knock-on effects of social issues including crisis due to migration and fault line crossings as experienced in some countries recently.

Reduction of global demand for oil and the massive shrinkage of funding could portend very high risks exacerbating the existential challenges for countries like Nigeria, Libya and Angola whose economies depend largely on hydrocarbons for survival, especially if they are not quick to work out the details of alternative sources of funding cum guaranteed revenues outside of Europe and creating new markets for development within Africa.

That said, while the global demand for energy is forecasted to grow by 30% in 2040, Africa’s energy demand is expected to double by 2050; which could be both an opportunity and a challenge.

Please permit me to focus on the opportunities, hoping that the challenges are not lost on us as Africans. While most of the oil produced in Africa is exported we know that only 50% of the gas produced is consumed in Africa! Gas is available in abundance in Africa with about 460TCF of 2P proven and probable reserve and a reserves to production ratio of over 50 years. Gas is globally acceptable as a transition fuel, hence the key opportunity for Africa to focus inwards on growing the energy market on the back of gas to bridge the energy gap and improve access to the remaining 50% of Africans who have no access to electricity today.

Unfortunately, the combination of high cost of production linked with inadequate infrastructure and massive under-funding of the oil and gas industry could portend the biggest danger that Africa will face in the energy transition unless of course we are able to get our acts together as an integrated continent to co-create solutions that are clearly African and focus on our collective strengths rather than on our weaknesses as individual nations.

Most IOCs and other investors will continue to lay emphasis on renewables in response to the ESG pressures and recent COP26 commitments made on emission scope 1, 2 and 3, leading to many, opting to scale down their upstream portfolios in divestments as a result. Many have even rebranded in a bid to send the signal on how seriously they take the issue of energy transition by themselves transitioning into integrated energy companies with increased funding for renewables and changing their names to confirm this. We have seen TOTAL became TOTALEnergies, Gas Natural became Naturgy, STATOIL became Equinor and locally in Nigeria SEPLAT Petroleum Development company has become SEPLAT Energies just to mention a few.

So, what must Africa do to be ready to reposition ahead of the imminent potential shocks due to energy transition and changing energy mix?

  • Africa needs to come to terms with this reality by reorganising itself differently to work towards total integration rather than attempting to deal with the impact of the rest of the world transitioning away from fossil fuels in the energy transition on an individual country by country basis which will not deliver the much-needed leapfrogging to catch up with the rest of the world.
  • We need to establish a united Political front through the African Union and APPO (whose objective is to serve as a platform for cooperation and collaboration) in partnership with OPEC and some of the major IOCs using the instruments of the recently ratified AfCFTA agreement as a catalyst and pathway to deal with energy poverty as a solution to economic growth of Africa.
  • We need to make deliberate efforts to decarbonize existing operations in order to preserve access to capital and to create the much-needed enabling environment by improving the Fiscals and driving down costs thus making Africa more investor friendly.
  • Focus on the transition of Biomass and Coal to Gas and ultimately to renewables for which Africa also has a huge potential. Morocco recently signed a £15Billion pounds Zero Carbon Electricity project to produce about 10.5GW (twice Nigeria’s current electricity delivery level) capacity of Solar and wind power to supply Britain via a 3800km HVDC submarine cable representing almost 8% of demand when completed.
  • We need to promote Africa to become an energy market of its own by deploying the resources in Africa especially gas for the use of Africa essentially, creating dedicated gas hubs, storage and markets to take advantage of the opportunity to use oil and gas locally to develop and support domestic economic activities like gas to power, feedstock for Petrochemicals, feedstock for fertilizer, gas to transport and as a catalyst for industrialisation with LPG as a substitute for Biomass.

While fossil fuels will continue to be relevant in the global energy mix, renewables will achieve greater growth with gas as the transition fuel for a very long time. That said, I personally believe that energy transition is a given and the global energy mix will change whether Africa is ready or not.

The main conversation therefore should be about the respective starting points of different regions in Africa and which of the three energy transition scenarios will play out. A lot will also depend on the African leadership and its political will to forge a common energy agenda and galvanize around the common purpose of saving our planet by dealing with climate change and the 20C challenge for which we do not have a choice, as we do not have another planet, we can call our own.

Hence, we must find a way to balance the growing Energy demand, Reduce Costs, and improve efficiencies of available energy sources and to grow renewables with time in order to find the best energy mix that will propel Africa to the desired industrialisation level.

Whatever be the case, Africa cannot afford to be left behind!

It is time for Africa!!

Being a keynote address delivered at the SubSahara Africa International Petroleum Exhibition and Conference (SAIPEC), IN Lagos, Nigeria. Attah was formerly the Chief Executive Officer of the Nigeria Liquefied Natural Gas (NLNG) Ltd.


Niger Republic Agrees with German Firm To develop Green Hydrogen in the Country 

The government of the Republic of Niger has signed an agreement with Emerging Energy Corporation (EEC), a German energy firm, to work together to explore and develop commercial green hydrogen projects in Niger.

EEC says it will also invest in various projects to decarbonize Oil field operations and refineries in Niger with Carbon Capture technologies. Green hydrogen will be produced in Niger by electrolysis, using renewable power.  This low-carbon solution will decarbonize emission-intensive industries in Niger, Africa, Europe, and other countries that depend a lot on fossil fuels.

“Both parties will find opportunities to enable demand for the product and prepare Niger to become a hub for green hydrogen production in the region”, a statement by EEC says. “Green hydrogen produced in the Niger Republic is an important driver to accelerate industrial decarbonization and contribute to the electrification of processes, since it is obtained from renewable sources, besides generating more competitive and decentralized dynamics by joining the different market segments”.


Keen Contest for Actis’ Stake in Lekela Power 

Financial Services group, Old Mutual, is no longer guaranteed an easy ride to win the 60% stake held by Actis in Lekela Power. The South African giant now contends with keen competition from the mining firm Exxaro and Chinese state fund CNI, who are among the final bidders in the contest for the stake. Old Mutual threw its hat in the ring through its subsidiary African Infrastructure Investment Managers.

Lekela, created in 2015 by the British investor Actis, as part of a strategy of aggregating energy assets into scalable regional platforms, is part-owned by Mainstream Energy(40%) and Actis(60%). 

Lekela has, in that space of time, become one of the 15 top renewable energy developers in Africa, with credits for developing the 250MW West Bakr Wind Farm, a BOO project located in the Gulf of Suez in Egypt; the 158MW Wind Farm, Taiba N’Diaye, Senegal’s first utility-scale wind farm, the 140MW Loeriesfontein 2 in the Hantam Municipality in South Africa’s Northern Cape; the 80MW Noupoort Wind Farm in the same country and the KhobabWind Farm, also in South Africa.

Lekela has been valued at more than $2Billion, by some estimates.


Cape Town Launches Tender for 300 MW of Renewable Energy 

The Cape Town municipality in South Africa is launching a call for expressions of interest for independent power producers (IPPs) to acquire 300 MW of clean energy. 

The municipality is announcing pre-qualifications for the construction of clean energy plants that could inject 300 MW into the city’s grid. Cape Town plans to sign power purchase agreements (PPAs) with independent power producers (IPPs).

Projects targeted in the first tender are those of between 5 and 20 MW. These renewable energy plants will take over from Eskom during peak load shedding hours.

Following that is expected a second tender for power generation projects of more than 20 MW. 

The City wants to become less reliant on Eskom, the struggling Eskom, the state-owned behemoth, especially during peak times.

“We must work to become the first loadshedding-free City in South Africa over time”, says Geordin Hill-Lewis, Cape Town’s 35-year-old Mayor. 

Hill-Lewis says that Gwede Mantashe, South Africa’s Minister of Energy, has assured him that ‘his department ‘would not stand in the way of Cape Town’ if the municipality moved to generate its own electricity.

“It is essential for the city that we are not only able to keep the lights on during off-peak hours, but also to provide electricity to households and businesses when demand is highest,” the Mayor explains.


AfDB Approves Close to $400Million ‘Desert to Power’ Financing Facility for the Sahel Region

The Board of Directors of the African Development Bank Group has approved the Desert to Power G5 Sahel Financing Facility, covering Burkina Faso, Chad, Mali, Mauritania, and Niger. The Bank envisages committing up to $379.6Million in financing and technical assistance for the facility over the next seven years.

“The innovative blended finance approach of the Desert to Power G5 Sahel Facility will de-risk, and therefore catalyze, private sector investment in solar power generation in the region”, says Kevin Kariuki, AfDB’s Vice President for Power, Energy, Climate Change, and Green Growth. “This will lead to transformational energy generation and bridge the energy access deficit in some of Africa’s most fragile countries.”

The Desert to Power G5 Financing Facility aims to assist the G5Sahel countries to adopt a low-emission power generation pathway by making use of the region’s abundant solar potential. The facility will focus on utility-scale solar generation through independent power producers and energy storage solutions. These investments will be backed by a technical assistance component to enhance implementation capacity, strengthen the enabling environment for private sector investments, and ensure gender and climate mainstreaming.

The facility is expected to result in 500 MW of additional solar generation capacity and facilitate electricity access to some 695,000 households. Over the lifespan of the project, it is expected to reduce carbon emissions by over 14.4 million tons of carbon dioxide equivalent.

The Board of the Green Climate Fund approved $150Million in concessional resources in October 2021 for the facility, which is expected to leverage around $437Million in additional financing from other development finance institutions, commercial banks, and private sector developers. The Global Centre on Adaptation is providing technical assistance to strengthen adaptation and resilience measures undertaken in the facility as part of the Africa Adaptation Program in partnership with the African Development Bank.

The facility will be implemented as part of the broader Desert to Power initiative, a flagship program led by the African Development Bank. The objective is to light up and power the Sahel region by adding 10 GW of solar generation capacity and providing electricity to around 250 million people in the 11 Sahelian countries by 2030.

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