All posts tagged energy


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.


Coal Generated Electricity on the Rebound in Europe’s Power Supply Mix 

Coal is back on the rise! Norwegian consulting firm, RystadEnergy, says that coal-generated electricity increased in Europe in 2021 for the first time in almost a decade, rising 18% from 470 terawatt-hours (TWh) in 2020 to 579 TWh.

The company says that preliminary numbers from its Energy research suggest that Gas, hydro, and wind power generation dropped during the year, increasing the pressure on other energy sources, including coal, to bridge the gap.

Coal-fired electricity generation has been steadily declining in Europe since 2012, Rystad explains, “but affordability concerns surrounding gas, and availability concerns impacting nuclear, wind and hydro generation, could maintain coal’s momentum in 2022 and beyond”.

The Conflict May Help the Dirty Fuel Even More

“If, for instance, high gas prices persist or military conflict between Russia and Ukraine materializes, coal generation could jump by an additional 11% this year to 641 TWh – a return to 2018 levels – to ensure the lights stay on across the continent”, Rystad declares. 

The firm, which has ingratiated itself to the top of the global consultancy league in the last five years, reports that “Coal’s resurgence last year was triggered by other components of the continental power mix facing new challenges, including record-high gas prices and tensions between Russia and Ukraine, which has raised questions about the long-term security of gas imports through Russian-operated pipelines”.

Carlos Torres Diaz, head of gas and power markets research at Rystad Energy, is quoted as saying: “European countries have been gradually decommissioning coal infrastructure over recent years, as the power market moves towards a greener, less carbon-heavy future. However, as the regional energy crisis shows, coal remains a critical component of the power mix, especially when the reliability of other sources of energy is called into question, and that is unlikely to change in the immediate future”.

But there are enough reasons for Coal’s resurgence, Russian conflict or not

“While a military escalation in Eastern Europe would disrupt Russian gas flows – albeit the extent of which is uncertain – even without any supply disruption, record-high prices are forcing buyers to explore alternatives. Gas prices in December 2021 hit €182 ($207) per megawatt-hour (MWh), a record high and a staggering 900% year-over-year increase”, Rystad notes.

“Despite soaring prices, European gas demand from the power sector fell only marginally in 2021, by around 3Billion cubic meters (Bcm) to 144 Bcm, as other components of the power mix faced myriad challenges. The continued reliance on gas helped catalyze the widespread energy crisis and sent consumer electricity prices skyrocketing across the continent last year.

“Hydro and wind-generated power fell in 2021 for the first time, helping to support fossil fuel dependency on the back of low wind speeds and hydro dam levels in crucial producing countries. While wind generation is projected to increase marginally in 2022 – from 447 TWh to 469 TWh – hydro generation is expected to remain low”.

The Coal Resurgence May Continue Far into 2022

“If gas prices remain high or the Russia-Ukraine conflict results in a significant drop in gas-fired generation in 2022, Europe has options to make up the shortfall. Despite decommissioning infrastructure, coal power generation remains the most flexible option, with the possibility to increase supply by 63 TWh. Bioenergy plants and liquids, which currently make up a small portion of the total power generation, could add 77 TWh combined, while new wind and solar PV capacity that is expected to come online this year could contribute an extra 33 TWh”, the Rystad report explains further.

“A ray of hope in 2021 came in the form of nuclear generation, which rose by 6% compared with 2020, climbing to 884 TWh. Nuclear has been the largest contributor to electricity generation in Europe since 2014, but dark clouds may be on the horizon, highlighted by France’s EDF last week downgrading its expected nuclear output in 2022 and 2023.

“EDF dropped its output expectations for the second time in a month due to aging reactors, scheduled maintenance, and unexpected outages. France’s average nuclear power of 370 TWh will be slashed to between 295 TWh and 315 TWh in 2022 and between 300 TWh and 330 TWh in 2023. This is worrying news for the market, as a reduced nuclear generation will extend and exacerbate the European power crunch and continue to put pressure on the already tight supply situation for electricity on the continent.

“Reservoir levels in hydroelectric dams across the continent are at worryingly low levels, meaning an increase in hydro-generated power in 2022 is unlikely. As a result of these limitations of other sources of power generation, gas is expected to remain the marginal supplier that can make up for any shortfalls. If gas prices remain high – which looks likely – consumers may have to battle with soaring energy prices for some time to come”.


When is Green…Green: the Greening of LNG and Natural Gas?

By Gerard Kreeft

The colour green, it would seem, is without controversy.

In the eyes of the beholder green is simply green. Now that natural gas and Liquified Natural Gas (LNG) are receiving more recognition as being green, the controversy has mounted. Europe’s mounting attention to source LNG to substitute for Russian natural gas has heightened the discussion around whether natural gas and LNG are indeed green. This is especially awkward since the European Union prides itself on its precedent-setting green initiatives. This has wide-ranging implications for Africa, which supplies Europe both natural gas via a series of pipelines and LNG and possible new project options.  If the Russian-Ukraine crisis persists, LNG and natural gas could very quickly be declared very very green and Africa’s natural gas and LNG could possibly replace Russian imports.

Understanding Green Taxonomy

Christina Ng, Research & Stakeholder Engagement Leader, Debt Markets, described in a recent IEEFA(Institute for Energy Economics and Financial Analysis) how green has become so controversial. IEEFA is a Cleveland, Ohio based independent think tank which examines issues related to global energy, markets, trends and policies.

The key question, according to Ng, is “how do we ensure that green-branded businesses and products are true to label and deserving of green energy finance?” According to her, green taxonomies play an important role.

“A taxonomy is a system for categorizing things based on their scientific characteristics. A green taxonomy specifies business activities that are low-emitting and environmentally sustainable, and therefore eligible for green finance.

In the energy space, this typically refers to renewables like solar, wind and geothermal. It also specifies the environmental criteria, such as emissions thresholds, that the activity must satisfy to qualify for the green label.”

She continues: “For banks and investors, a taxonomy provides the parameters for what they can and should invest in if they want to call it a green investment. Wanting certainty that they are investing in clean and sustainable technologies, they rely on taxonomies to guide them.

Therefore, a key role of green taxonomies is to efficiently channel and unlock new pools of capital towards proven, environmentally clean and sustainable assets, to address the global climate crisis.”

Ms. Ng argues that both Europe and China have developed a common ground taxonomy: a comparison exercise of their respective taxonomies to identify commonalities and differences. The European and Chinese approach is a counter measure to taxonomies tailored to national or regional contexts which in terms of methodology, metrics and technical criteria can differ significantly from market to market, leading to comparability issues for capital providers.

Within this debate, natural gas has become a key issue.   According to Ng in October 2021 the South Korean government added LNG to its near-final green taxonomy. Likewise, in November 2021, the European Commission signaled that the EU is 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.

China’s Green Taxonomy

Yet China, according to Ng, has indicated that its long-term policies exclude fossil fuel electricity projects, sending the right signals to the market. The precedent was set in 2015 when China’s first green taxonomy categorized “clean coal” as a green project as compared to low-quality thermal coal which would not have been “clean coal” inferring it would have been classified as dirty coal.  Accordingly, clean coal qualified for the issuance of green bonds.  This drew widespread criticism. No doubt the 2015 incident sent China a signal to take green more seriously.

In the short-term China has chosen natural gas as the fuel of choice. In 2020 China created PipeChina, an over-arching national gas pipeline company to rationalize and distribute natural gas on a country-wide basis. PipeChina is the most visible sign that China sees natural gas in the short term as a fuel of choice if it is to achieve its goal of CO2 neutrality by 2060 or earlier.

Another piece of the puzzle is international financial participation. Ng indicated that Yi Gang, the governor of the People’s Bank of China, …”stressed that government funding alone would not be sufficient for China to meet its net zero goals – forecast to require an estimated $22Trillion from 2021 to 2060 – and therefore, market participants must be encouraged to step in and fill the gap”.

In other words, multi-lateral funding will become a necessity. The Chinese approach is based on two premises:

(1) In the short-term natural gas as its fuel of choice; and

(2) In the long-term China is prepared to move towards cleaner, low carbon fuels including wind, solar and geothermal in order to achieve green financing.

The green debate continues worldwide over two key issues:

(1)  Should the global consumption of natural gas should be seen as sustainable?

(2) If gas has a role in decarbonizing the economy, should it be seen as a green investment?

Ng concludes: “If gas-fired power is recognized as green, ESG-focused investors may find themselves inadvertently backing the high methane and carbon fuel and risk being accused of greenwashing. This in turn risks undermining investors’ trust and the purpose of green taxonomies.”

Two powerful groups have opposed the inclusion of natural gas in any taxonomy system:

(1.) The UN-backed Net-zero Asset Owner Alliance, which represents about $12Trillion of investment; and

(2.) The European Sustainable Investment Forum (EUROSIF), a pan-European sustainable and responsible investment association.

Natural gas and LNG: Semi-legitimate green?

That natural gas and LNG will enjoy a semi-legitimate green future can be seen from the deepening Russian-Ukraine crisis. In 2020 Europe consumed 379.9Bcm (Billion cubic meters) of gas, down from 469.6Bcm in 2019. Gazprom supplied Europe with 174.9Bcm in 2020, approximately 46% of Europe’s gas imports.

 

Historically Europe has always had a strong dependency on natural gas provided by Russia.  Will LNG shipments be a substitute for what the Russians cannot or will not deliver? Will LNG shipments from other global sources such as the Middle East provide the safe fuel alternative that Europe is requiring for the long- term?

The relationship between Russia and Europe dates back to the early 1960s. An important part of Europe’s energy crisis which is rarely discussed is the fact that Europe is financing Russia’s two-tiered gas system.  Europe is indirectly subsidizing the Russian consumer and paying for Gazprom’s investment costs needed to finance Gazprom’s investment programmes. Yulia Grama, Department of Diplomacy, National Chengchi University, Taiwan has estimated that Gazprom requires some $560-590Billion up to 2030 to invest in the Yamal Peninsula and other fields.  According to a recent Reuter’s report almost 70% of Gazprom’s gas revenue comes from Europe.

Three major fields—Yamburg, Urengoy and Medvezhye—make up 45% of Gazprom’s gas reserves. These fields are mature and have been in operation since the late 1960s and early 1970s. These fields need further development since there is a strong need to ensure a strong gas reserve base. Perhaps a more immediate question is whether these fields have seen their apex and are on final decline? If so the urgency for Europe to look elsewhere for natural gas sources is critical.

The price of oil has ramped up to over $90.00 per barrel as the world worries about energy shortages.  The Russia – China energy relationship is becoming very important.  Gazprom exports 38Bcm yearly to China.  However, with China’s voracious and ever-increasing need for gas, Gazprom recently announced that the exports to China will be increased by almost 30% to 48Bcm per year.  As Russia’s oil and gas fields mature, industry analysts are questioning how long Russia can keep providing Europe and China with huge amounts of gas.  When will the decline begin?

In the short-term what is evident is that in spite of the green bluster from the European Union, natural gas will be considered green regardless from where it is sourced.

 Taxonomy in Africa

Taxonomy also has an important African chapter. Europe will in the future come to rely on African countries to help them secure a greater diversity of gas and LNG supplies. This includes:

  • 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 6.39Bcm, Equatorial Guinea 3.32Bcm, and Cameroon 1.63Bcm.
  • Future LNG projects could include Mozambique’s Rovuma and MozambiqueLNG projects, Senegal’s Greater Tortue Ahmeyim project; and Tanzania’s planned LNG project.
  • More futuristic are studies for large-scale production and transportation of hydrogen from North Africa to Europe: converting solar energy to gaseous form and transporting it through existing gas pipelines or new hydrogen pipelines.

Some final remarks

If Africa is to provide Europe an increased diversity of supply the continent must also guarantee a high security of supply.

The West African Gas Pipeline Company Limited (WAPCo) is a natural gas pipeline which supplies gas from Nigeria’s Escravos region in the Niger Delta to industrial and residential gas consumers in Benin, Togo and Ghana.  This pipeline has had a somewhat spotty record in terms of being able to deliver natural gas.

If Africa does develop closer energy links with Europe, the Europeans will have some explaining to do so that Africa can hopefully understand the rules of engagement concerning Europe’s taxonomy policies. The longer the Russian-Ukraine energy crisis persists the more chance that African natural gas and LNG will be seen as green.

The Chinese, in turn, can take heart and be assured that in the short-term their natural gas and LNG imports will be given a green stamp. And be further assured that they have a favorite position staked out to develop a future low-carbon world.

Certainly, the last word has not been spoken over green taxonomy, and the scope and strategy that will follow. Green taxonomy could perhaps usher in an era of green surprises. Certainly the world is currently scrambling for gas and LNG due to supply deficits and the Russia – Ukraine crisis. This is resulting that green has become intimately associated with LNG and natural gas.

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 the International Institute for Economics and Financial Analysis.

 


Solar Thermal Collector Production Plant to Be Installed in Egypt

The Egyptian Ministry of Electricity and Renewable Energy has signed an agreement with Creative Power Solutions (CPS) to set up a 600 MWe solar thermal power plant in the province of Asyut on the western bank of the Nile River in the south of the country.

The solar collector production plant is also expected to supply equipment for other projects, with a target of 53,000 MWe. And this technology can provide solar energy to several sectors, including seawater desalination, food processing and the textile industry.

CPS is able to deliver on this because it has a partnership deal with Absolicon, a manufacturer of solar thermal power generation equipment

The recently signed framework agreement aims at setting up a production line for solar thermal collectors in Egypt. The total value of sales covered by the agreement is estimated to be between 4 and 5Million euros, plus a monthly license fee of about 30 euros per collector sold, the partners say.

So far, Egypt is investing heavily in solar photovoltaic energy with an iconic project successfully completed by Independent Power Producers (IPP) in Benban, Aswan governorate, with a capacity for generating 1,650MW at peak (1650 MWp).

 


Mozambique’s Graphite for Tesla’s EV Car Batteries

By Sully Manope, in Windhoek

Graphite mined from Mozambique’s Balama will be part of the supplies to Tesla’s Electric Vehicles Assembly plants from 2025.

But the US based electric car maker will not be purchasing the commodity directly from the East African country.

Tesla will, instead, buy the material from Syrah Resources’ processing plant in Vidalia, Louisiana, which sources graphite from its mine in Balama, Mozambique. Tesla plans to buy up 80% of what the plant produces — 8,000 tons of graphite per year.

Graphite, a higher form of coal (crystalline form), is a key resource in the making of lithium-ion batteries, which are themselves key components in electric vehicles.

Graphite stores lithium inside a battery until it’s needed to generate electricity by splitting into charged ions and electrons.

The Balama mine is described, by some sources, as the world’s largest high-grade graphite deposit. It is located on a 106km² mining concession within the Cabo Delgado province in the district of Namuno.

China is the major market for both graphite and lithium ion batteries. The deal with Syrah means Tesla is moving beyond China.

The deal is also part of Tesla’s plan to ramp up its capacity to make its own batteries so it can reduce its dependence on China, and is an indirect part of the United States’ strategy to have American companies build enough capacity domestically to be able to build (lithium-ion batteries) within the USA.

Graphite stores lithium inside a battery until it’s needed to generate electricity by splitting into charged ions and electrons.

 

 

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