All posts tagged energy


Africa’s Biggest Renewable Energy Developers

By Toyin Akinosho

The biggest developers of renewable energy projects in Africa are names that were rank unknowns 15 years ago.

But since 2011, companies like ACWA, Scatec,  Lekela Power, ENEL, Biotherm, ib vogt, ENGIE, and Siemens Gamesa have become associated with the continent’s largest wind farms, solar photovoltaic plants and concentrated solar power projects.

Africa is host to hundreds of off-grid renewable energy facility under construction, but this article will highlight only those companies involved in relatively large on-grid projects, in particular, those who have been involved in solar or wind projects in excess of 75MW capacity.

Scatec, a Norwegian company claims to have the largest solar energy capacity in Africa (400 MW in Egypt, over 300 MW in South Africa, 40 MW in Mozambique, 300 MW under construction in Tunisia).

But you have to consider the impressive resume of ACWA, the Saudi owned developer which came to international prominence in 2012, when it was announced in both Morocco and South Africa as preferred bidder in a key solar project in each country.

In Morocco, ACWA was granted the Build, Operate and Own (BOO) contract for the 160 MW NOORo I Concentrated Solar Power Plant, the first of several Independent Power Plants (IPP) projects planned by the Moroccan Agency for Solar Energy (MASEN) at the Ouarzazate Solar Complex. It was commissioned in 2016 and 73.1% owned by the company. In South Africa, ACWA won the bid to construct the 50MW Bokpoort CSP Independent Power Project, located in the Northern Cape Province.  In 2014, ACWA acquired a controlling stake in the Khalladi 120 MW Wind Farm in Morocco, an Independent Power Project IPP that had been developed by UPC Renewables. In 2018, ACWA completed the installation of the 200 MW NOORo II CSP Project, developed as the second project for MASEN in the series of planned developments at the Ouarzazate Solar Complex, a 500 MW solar park incorporating several utility-scale solar power plants using various solar technologies. ACWA has since completed NOORo III CSP , the 150 MW capacity third solar facility on the Quarzite complex.

Lekela Power, created by the British owned investor Actis, developed the 250MW West Bakr Wind Farm, a BOO project located in the Gulf of Suez in Egypt. The company also developed the 158MW Wind Farm, Taiba N’Diaye, Senegal’s first utility-scale wind farm. Commissioned on the last day of July 2020, the initial phase of the project is pumping 55 megawatts (MW) of renewable energy into the national grid. When fully completed this year, the Wind Farm will provide 158 MW of electricity to Senegal’s grid, or 15% of the country’s generation capacity. As an added bonus, Lekela plans to invest up to $20Million in community development efforts over the wind farm’s projected 20-year lifespan, which will be a big boost for those living near the project site. Lekela had earlier delivered the 140MW Loeriesfontein 2 in the Hantam Municipality in South Africa’s Northern Cape in 2015; commissioned the 80MW Noupoort Wind Farm in the same country in 2016 and completed the Khobab Wind Farm in December 2017, also in South Africa. These projects were contracted under the Renewable Energy Independent Power Producer Procurement Programme (REIPP). In the last three years, Lekela has also completed the 110 MW Perdekraal East Wind Farm in South Africa’s Western Cape and the 140MW Kangnas Wind Farm in the Nama Khoi Local Municipality in the country’s Northern Cape.

South Africa has proven to be both the breeding ground of startup renewable energy firms and the playground of large, multinational developers. The ENEL group, an outgrowth of the Italian energy utility, operates in the renewable energy space as ENEL GREEN POWER (EGP). The company says that the commencement, online, of the Nxuba Wind Farm, in December 2020, brought its total operational projects in South Africa to eight, with an overall installed capacity of more than 650 MW.

ENEL is developing the Karusa and Soetwater Wind Farms, each with an installed capacity of 140MW, in the Karoo Hoogland District, Northern Cape province, to be completed by the end of 2021. The company’s other completed projects include the 88 MW Nojoli Wind Power plant in the Eastern Cape province (2016) and the 111 MW Gibson Bay Wind Farm also in the Eastern Cape. ENEL has constructed the 82.5 MW Pulida solar power plant in the Free State, the 66 MW Tom Burke Solar Power plant in Limpopo, and the 82.5 MW Paleishuewel Solar Plant in the Western Cape. EGP has announced a joint-venture partnership with the Qatar Investment Authority (QIA) aimed at financing, building and operating renewable energy projects in sub-Saharan Africa. In a first phase, QIA will acquire 50% of EGP’s stake in 800MW of projects in operation and under construction in South Africa and Zambia. ENEL said the JV would combine its industrial expertise with QIA’s long-term investment strategy, in line with the two companies’ sustainability and decarbonisation targets.

ENGIE, formed 13 years ago through the merger of Gaz de France and Suez, is credited with construction and operation of Africa’s largest wind farm to date: the 300MW Tarfaya Wind Farm in Morocco. ENGIE commissioned the 100MW Kathu Concentrated Solar Power (CSP) project, in South Africa’s Northern Cape Province on January 30, 2019. The ENGIE /Toyota Tusho/Orascom partnership developed the 262.5 MW Ras Ghareb Wind Farm project near the Gulf of Suez in Egypt, in December 2019. It is the country’s first project in wind energy to operationalize the Build-Own-Operate (BOO) model.

In Tunisia in 2020, ENGIE and (local operator) Nareva were jointly awarded a 120MW solar independent power producer (IPP) project. The Gafsa plant, a solar PV facility, will supply power to more than 100,000 homes in that North African country. In Senegal, ENGIE is starting construction of two 30 MW solar PV projects. The company has also signed an agreement with the government of Djibouti to build a 30 MW solar PV project there in partnership with Électricité de Djibouti.

BioTherm Energy developed the 117.2 MW Golden Valley Wind Farm, commissioned in June 2019, in the Amathole Municipality in South Africa’s Eastern Cape province. In January 2021, the company finished constructing 100MW Kipeto Wind Farm in Kenya. Biotherm Energy was established in 2003 and in 2008, was supported with $150Million by the private equity firm Denham Capital. At the time it was the largest renewable energy investment ever made in Africa. BioTherm has its sights on projects in 10 countries in Africa.

ib vogt and Infinity Solar inaugurated the first part of the 1,500MW Benban solar complex in Aswan Governorate, Egypt, on 13 March 2018. With an output of 64.1MWp, it is also the country’s first large-scale photovoltaic power plant. At the end of January 2019, ib vogt commenced construction of a portfolio of three additional solar power plants with a total capacity of 166.5MW. The 37 square kilometre  Benban Solar Park in Egypt’s Western Desert, was completed in 2019 and composed of 32 individual plants, each producing 20-50 MW, with financing provided by the European Bank for Reconstruction and Development (EBRD), the International Finance Corporation (IFC), and other international financial institutions.

African Infrastructure Investment Managers (AIIM) developed the 139MW Cookhouse Wind Farm in South Africa’s Eastern Cape Province. Commissioned in December 2014, it was the first project in the first round of the South Africa”s REIPP. AIIM thereafter acquired, in 2018, majority stakes in nine renewable energy projects that were proposed to contribute 800 MW to the national grid. Through its IDEAS Managed Fund, AIIM acquired a 50.1 percent stake in each of the following solar and wind projects:  Bokamoso – 67.9MW,  Waterloo – 75MW, Droogfontein II – 75MW, Zeerust – 75MW, Greefspan II – 55MW, De Wiltd – 50 MW, Roggeveld – 147MW, Perdekraal – 110MW,  Kangas – 140MW

Siemens Gamesa, currently constructing a 100MW Wind Farm in Ethiopia, is intent on expanding its leadership across Africa, and in turn help a growing transition to green energy across the continent, the company says. The German firm says it is extremely pleased to work in Ethiopia, collaborating with the Ethiopian Electric Power, the country’s power utility and “to promote their drive to install more renewables and meet transformational energy targets.” Siemens Gamesa did not construct the 110MW Perdekraal East and 140 MW Kangnas wind farms in South Africa, but it will run and maintain them.

Abengoa Solar International, a Spanish energy developer has, between 2015 and 2019, commissioned three 100MW solar power plants each on three locations in South Africa. The 100MW Kaxu Solar One (concentrated solar power (CSP)) Plant was commissioned in February 2015; the 100MW Khi Solar One was commissioned in March 2016 and the Xina Solar One was commissioned in August 2017. Although they are each jointly owned with other partners, they were all developed and constructed and now operated and maintained by Abengoa Solar International.

Mainstream Renewable doesn’t own any renewable plant in Africa. But it has constructed sizeable plants for “owners” like Lekela. The 110MW Perdekraal East and 140 MW Kangnas wind farms in South Africa were constructed for the Lekela consortium by Mainstream Renewable. Siemens Gamesa supplied the technology and it is running and maintaining the plants.

Solar Reserve commissioned a 75MW Jasper Solar Plant in South Africa’s Northern Cape province in 2014. Rainmaker Energy commissioned the 100MW Dorper Wind Farm in 2014. Acciona Energia commissioned the 138MW Gouda Wind Farm in the Western Cape Province of South Africa in 2015. The company operates and maintains the plant. Cennergi commissioned the 134MW Amakhala Emoyeni Wind Farm project in June 2016. The plant is 95% owned by Cennergi. Mulilo commissioned a 75MW Solar pl Plant in Copperton, South Africa’s Northern Cape Province in 2016. The Longyuan Mulilo consortium commissioned the 96.48 MW De Aar and the 138.96 MW De Aar 2 North wind projects in November 2017. Emvelo co-developed, with IDCSA the 100MW Karoshoek power plant, 30 km east of Upington. In the Northern Cape Province, commissioned in November 2018.

There you have it, the lead developers of renewable energy projects on the continent.

This article was originally published in the March 2021 edition of Africa Oil+Gas Report.

 


Construction Starts on Mozambique’s Cuamba Solar-Battery Project

United Kingdom-based Globeleq has commenced construction on the 19MWp/15MWac Cuamba Solar PV plant with 2MW/7MWh battery storage in the Tetereane district of Cuamba, Niassa province, Mozambique.

Source Capital, the private equity firm is involved in the $32Million project. So is the Electricidade de Moçambique (EdM). The project is aimed at bolstering the country’s northern grid, including upgrading the existing Cuamba substation.

Cuamba will be the first independent power producer in Mozambique to use energy storage. 

Power will be sold through a 25-year power purchase agreement signed with EdM in September 2020. 

The project is being strongly backed by the Private Infrastructure Development Group (PIDG)’s Emerging Africa Infrastructure Fund, which is looking to provide $19Million debt and the project will also receive a $7Million viability gap funding grant from PIDG and a $1Million grant from CDC Plus to reduce the tariff and finance the storage system.

Spain’s TSK is the engineering, procurement and construction contractor. Globeleq will oversee construction and operations of the plant.


A Hybrid Solar and Battery Plant to go up on the Sukari Gold Mine

PARTNER CONTENT

Centamin has awarded juwi and Giza Systems the contract to construct the world’s largest solar hybrid project at an off-grid mine for the Sukari Gold Mine in Egypt.

The 36 MW solar farm and a 7.5 MW battery-energy storage system will tangibly reduce CO2 emissions of existing diesel power station. It will also reduce the cost of power, juwi says in a release. 

The total project Capital Expense is $37Million but it will lead to between $9-13Million annual savings in diesel cost, Centamin says in a briefing.

juwi is a German renewables energy developer. Giza systems is an Egyptian civil works contractor. 

The solar system designed by juwi will maximise generation with bifacial solar PV modules and a single axis tracking system, taking advantage of the high irradiance at site, the developer explains. Juwi Hybrid IQ micro-grid technology will enable the integration of the solar and battery system into the existing off-grid network and support the operation of the existing power station.

The benefits of the hybrid power solution at Sukari include:

• Reducing diesel consumption by an estimated 22Millionlitres-e per year;

• Lowering carbon emissions by an estimated 60,000 tCO2-e per every year;

• Reduction of all in sustaining costs;

• Reduced exposure to fuel price volatility;

• Increased reliability of the power system.

“The mining industry accounts for 10% of the global energy consumption and many minerals play a vital role for the energy transition. We are glad to support the resource industry on their de-carbonisation pathway with our dependable solar, wind and battery solutions”, juwi adds,


The First Storage Project for A Renewable Energy Farm in West Africa.

By Femi Adeniyi Taylor

Lekela Power, the independent power producer (IPP), has selected DNV to carry out the feasibility study for its electricity storage project at the Taiba N’Diaye wind farm in Senegal. 

DNV has six months to deliver on the study, as Lekela plans to start construction of the electricity storage system in 2022. The Taiba N’Diaye wind farm, which was also developed by Lekela, started feeding electricity into the Senelec grid in 2020. The facility consists of 46 wind turbines capable of delivering 158.7 MW of power. The wind farm contributes 15% of the electricity produced in Senegal. 

Lekela is a joint venture between UK investment fund Actis and Mainstream Renewable Power. DNV, a Norwegian firm, will also provide risk management and insurance expertise, supported by a grant from the US Trade and Development Agency (USTDA). DNV will “help develop the technical specifications of the battery storage system to ensure a successful technical solution that will provide services to the grid during its operational life of up to 20 years”, Lekela says in a statement. DNV will also be involved in negotiating the power purchase agreement (PPA) for the storage system between the Senegalese national electricity company (Senelec) and Lekela. This will be the first PPA for storage in Senegal, and potentially in West Africa.

Pending the results of the study, Lekela plans to build a system capable of storing 40 MW of power. The batteries will be housed in 45 40-foot (21 m) shipping containers. These containers will be stored next to the wind farm. The storage system will provide 175 MWh of electricity, enough to stabilisethe national grid.


Oil Majors Won’t Lead Africa’s Transition into Renewables

By Toyin Akinosho

The oil industry’s major companies are playing a key role in new energy investment around the world.

Anglo Dutch Shell, United States’ Exxon Mobil and Chevron, the UK’s BP, France’s TOTALEnergies,

Italy’s ENI and Norway’s Equinor are all prioritizing their investments in various technologies in the energy mix, even as they reel from the results of hydrocarbon demand destruction wrought by the COVID-19 pandemic.

The majors will construct huge wind farms offshore Europe, install thousands of solar powered turbines in Asia and the Middle east and establish more Biofuel refineries in the Americas, but they won’t do more than a little of these in Africa.

The neglect of investments in renewables in Africa has as much to do with the unwillingness of these large, transnational corporations to get into non-extractive projects whose deliverables are purchased in local currency at the retail-level, as it is to do with the low expectations, minuscule ambitions and little mindedness of the ruling elite on the continent.

The notion that a company like TOTAL, now renamed TOTALEnergies, which is leading in new investments in fossil fuels development in Africa, will also turbocharge its investment in Africa’s Energy Transition, is way over extended.

True, TOTALEnergies is the only oil major which has competed, albeit in an indirect way, in a bid round for renewable energy projects anywhere in Africa. In 2013, its affiliate, the NASDAQ listed SunPower, was selected as the preferred bidder for an 75Megawatt-peak (MWp) ground-mounted solar power project by South Africa’s Department of Energy (DoE). TOTALEnergies owns 27% of the project, along with five partners, while SunPower waschosen to provide Engineering, Procurement, Construction (EPC) services and long-term Operation and Maintenance for the plant, located in Prieska, in the province of Northern Cape. SunPower has also installed two photovoltaic power plants, totaling 33MW, near Douglas, also in the Northern Cape. TOTALEnergies itself is a partner in decentralized rural electrification programmes through Kukhanya Energy Services (KES) in the KwaZulu Natal province. Impressive as they sound, these projects are far shy of 150MW in total capacity and TOTAL’s equity in them is even far less. Plus: SunPower is not exactly a subsidiary of TOTALEnergies. However, SunPower’s contribution in South Africa is significant: it runs a solar manufacturing plant in the country, producing up to 160 megawatts solar panels per year.

As European majors go, ENI compares with TOTALEnergies as a keen explorer and producer of hydrocarbon in Africa’s frontier, but it is hardly excited about investing in future energy in this region.

In January 2021, ENI launched, with fanfare, the installation of a 14 KW solar system in some medical facility in Angola, with the company saying that it “aims to promote renewable energies”. Two months later it inaugurated construction work on a 50 MW photovoltaic plant in the South of Kazakhstan.  ENI produces around 100,000BOPD (net) in Angola and its output is trending upwards, as it makes new discoveries; in Kazakhstan, it delivers 111,000BOPD.

ENI’s Egyptian production trounces its Kazakhstan output, but the Italian player has not featured in Egypt’s relatively aggressive Renewable Energy plan.

Meanwhile, the 50MW Solar plant in Kazakhstan is an add-on to a 48MW windfarm the company has constructed elsewhere in that country.

BP IS WRAPPING UP FROM SUB-SAHARAN AFRICA: it is looking to divest from Angola, from which it has extracted over a Billion barrels of oil in the last 20 years. BP operates around 140,000Barrels of Oil Per Day production on Blocks 18 and 31, where it holds 50% and 26.6% equity respectively. It also has stakes in the TOTALEnergies operated Block 17, and ExxonMobil operated Block 15, the two largest crude oil producers in Angola. The company is leaving Angola because it does not fit into its immediate fossil fuel future, which is focused on natural gas. The British major, however, expects to build its home country’s largest Clean Hydrogen Facility: a 1,000MW ‘blue’ hydrogen project. Its investment in low-carbon projects will jump to $3Billion by 2025 and $5Billion by 2030, with major investments planned in bioenergy, hydrogen and carbon capture and storage. BP excludes Africa from all its renewable energy plans, including the proposal to start ‘advising cities on ‘power packages’ with renewables, back-up batteries and financing’ and increase electric vehicle recharging stations by almost tenfold at its retail gas stations from current level of 7,500 to 70,000.

Equinor extracts 120,000Barrels of oil equivalent every day from the Atlantic Ocean on the edge of Angola, down from a peak of over 240,000BOEPD ten years ago. When asked if the country would be part of the company’s renewables portfolio, Nina Koch, Equinor’s CEO in Angola, recently said it all depends on the available concessions.  “Whether there is a market for wind, solar and so on we have yet to see. If the government is putting forward concessions for offshore wind farms, for instance, we would definitely be interested in looking into that”. And then the clarity, she allowed: “For the time being, we don’t have any concrete plans for renewables in Angola”. 

We have to cut Equinor some slack here. It holds 15% of the total shares of Scatec, a leading Renewable Energy provider in Africa.

Chevron’s focus is not so much about investing in stand alone renewable energy projects, but in increasing renewable power in support of its business to lower its carbon intensity. 

The Norwegian energy research company Rystad, told the investment community, in September 2020, that oil and gas majors are actively pruning their oil and gas assets, stating: “The world’s largest oil and gas firms could sell or swap oil and gas assets of more than $100Billion in order to adjust and transform to cleaner sources of energy”.

I can vouch that over 10% of that $100Billion will be cashed out of African portfolios. Shell, for one, will likely take over $7.5Billion out of Nigeria between 2021 and 2025. Shell has funded some offgrid projects through solar power developers in Nigeria, a country that almost represents the sum of all of Shell’s presence in Africa. But the scale of these renewable power interventions is minuscule. To put it in context, Nigeria itself does not have up to 50MW of solar and wind power capacity.

Oil majors are funding clean energy from the balance sheet of dirty fuel. As I was concluding this article, TOTALEnergies tweeted on April 9, 2021: “We’re using oil production to help finance the #energytransition and achieve our ambition to reach carbon neutrality by 2050, a point stressed by our Chairman & CEO @PPouyanne”. Around 30% of TOTAL Energies’ production is in Africa, but less than 0.5% of its new energy investment will directly benefit the continent. And yet, from all analysis, TOTALEnergies is the best African renewable energy investor out of the six oil majors. 

This article was initially published in the April 2021 edition of the Africa Oil+Gas Report.


How David Slew Goliath

By Gerard Kreeft

How David the small shepherd boy killed the giant Goliath is an apt metaphor to explain how Africa can muster its position in the global energy transition. The giants of the energy transition-China, Europe, USA-are ready, willing and eager to explain how Africa must act and what Africa should do. Africa is more timid.

In our narrative, the symbolic David is best represented by Carlos Amaral, General Manager of ACREP, a small independent Angolan oil producer. Amaral, no stranger to controversy, has been at ACREP’s helm for 17 years, steering it through the various boom and bust periods. 

ACREP has to date carried out 17 exploration wells, costing $150Million, and discovered 7 fields but has only put one in production.  By 2024 the company will produce around 7 000 Barrels of Oil Per Day (BOPD).

Recently  he talked at length to The Energy Year about how the industry in Angola and possibly how Africa can evolve. In the next 5-6 years Amaral predicts oil production in Angola will plateau at around 1.2 -1.3MMBOPD. Given that a field’s production will decline about 10-12% per year, you would require an additional production of 120 000BOPD to maintain the  current status.

Because of low oil prices, the economy and a low level of international oil consumption, no one is going to do any exploration and new production is not expected before 2025. Amaral is in favour of maintaining a lower level of production- 900, 000BOPD -1MMBOPD- to try and take advantage of the oil price and not emptying the reservoir.

According to Amaral “There is no better deal than coming into Angola, investing in a small player like ACREP and making good money. It is good, clean money based on low risk and solid management.”

The voice of Amaral’s ACREP is not an exception and many Davids are present throughout Africa. Many are active in the oil and gas sector. Yet will their voices be heard in the energy transition? Will their voices be seen as a prelude to proclaiming  their oil and gas resources as stranded assets? Which help if any can they anticipate?

Oil and Gas in Terminal Decline

The terminal decline of the oil and gas sector was officially recently announced on 18 May 2021 by the  International Energy Agency (IEA). Its net zero emissions goal for 2050 means no new oil and gas fields beyond 2050. Simply put, more fossil fuels are entirely inconsistent with reduced emissions. It can be argued that the IEA’s mandate is to monitor and report on energy transition issues, not to initiate and be the lead on such issues. But the die has been cast and the verdict has been declared. 

The IEA may have been voicing publicly what was being discussed in the corporate boardrooms of Asia, Europe and the USA and the international agencies such as the International Energy Agency(IEA), World Bank, IMF, and the regional development banks. Yet was the voice of Africa listened to? After all emission levels in Sub-Sahara’s two major petro-economies- Nigeria with .73% and Angola with.25% – are negligible when compared to China’s 28% and the USA’s 15%. 

Of course Africa is not indifferent or unaware of the Paris Agreement and its consequences. How well is Africa prepared to be CO2 free by

2050? What contribution can be anticipated from Africa’s oil and gas sector? Should Africa be given dispensation and consequently more time to rid itself of CO2 emissions beyond 2050? Would awarding CO2 dispensation to Africa- in short delegating this to Sub-Sahara Africa’s two major national oil companies- Nigerian National Petroleum Corporation(NNPC) and Sonangol, Angola- be an award for legitimizing incompetence?

NNPC’s operating subsidiary, NPDC(Nigerian Petroleum Development Corporation) has in Africa Oil + Gas Report been referred to as “a massive, incompetent wrecking ball”. NPDC is seen as a bright star within the NNPC’s portfolio. Why? Only because the degree of its performance is in direct proportion with the help it gets from its partnership with private entities.

Sonangol Angola’s state oil company is now only a shadow of what it once was. It has now been stripped of its two key roles: as concessionaire which was a highly judicious key role giving it monopoly power and legitimacy it had achieved and as state oil company with its monopoly responsibilities for exploration and development of oil and gas resources. 

In the Angola of today power has become diffused: Sonangol has been stripped of its concessionaire role and is loaded with a mountain of debt; and the IOCs have the freedom to explore and market their natural gas. Developing green energy is certainly beyond the core competence of Sonangol.

If NNPC and Sonangol are perceived of not having their own house(s) in order how can they be expected to be leaders in the Energy Transition? Does it make any sense to give the  same driver, who drove the initial bus off the cliff, keys to drive the new bus?

Juggling and Counterbalancing the Assets

In the current low carbon environment, the IOCs (international oil companies) are constantly juggling their portfolios in order to maintain profitability and low carbon emissions. They have no hesitation in abandoning assets which do not meet investor grade. Leaving their national oil company partners scrambling.

Back in September 2020  Rystad, the Norwegian energy research  company reminded the investment community that the oil and gas majors are actively pruning their oil and gas assets stating: “The world’s largest oil and gas firms could sell or swap oil and gas assets of more than $100 billion in order to adjust and transform to cleaner sources of energy”. 

The Rystad Energy Study, covers a wide geographical spread  and includes ExxonMobil, BP, Shell, TOTAL, ENI, Chevron, ConocoPhillips, and Equinor. The eight companies may need to divest combined resources of up to 68 billion boe, with an estimated value of $111 billion and spending commitments in 2021 totalling $20 billion.

The key criteria for determining whether a major oil company would benefit from staying in a country are the company’s cash flow over the next five years, the potential growth in its current portfolio, and its presence in key E&P growth countries towards 2030. Based on this, Rystad claims that majors may seek to exit about 203 varied country positions and, as a result, reduce their number of country positions from 293 to 90.

The latest sign of things to come is a possible merger of activities between BP and ENI in Angola and possibly other regions. A precedent for the BP and Eni merger talks in Angola finds its  roots in Norway. In 2018 Vår Energi was created through a merger between HitecVision’s Point Resources and ENI Norge. 

With a hurried exit and downsizing of the oil majors in Africa,  private  and state African oil and gas companies should look to  investment vehicles such as HitecVision which can help fill the  impending vaccum. 

The need for more outside players is very apparent. With the vacated space left by the majors there is room for innovative and  indigenous players who can put together deals. Much like what has happened in the North Sea. The majors- including BP and Shell- selling key assets that were bought up by smaller companies who saw new investment opportunities.

Do not expect only oil and gas deals. More likely  oil and gas deals with green strings attached which international investors are demanding. And why not? If the international community expects Africa to become green, Africa should leverage its economic muscle: act as an economic bloc and put together an energy roadmap demanding appropriate financial packages.

An energy roadmap must Involve both the private and public sectors. In particular helping the Davids  of Africa to expand their businesses and create new opportunities. Certainly this is an avenue that would be welcomed by the IOCs. Private sector financing could prove to help the Davids of the private sectorand be a positive counterbalance to the national oil companies.

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.


Net Zero? Not Yet. Africa Must Fight Energy Poverty with Oil and Gas Development

By NJ Ayuk, President, African Energy Chamber

On May 18, 2021, the International Energy Agency (IEA) released “Net Zero by 2050: A Roadmap for the Global Energy Sector,” which outlines plans for the global energy sector to reach “net zero” greenhouse gas emissions by 2050.

Achieving net zero emissions means the amount of greenhouse gases being emitted into the atmosphere would equal the amount being removed. Achieving this balance, the IEA maintains, would require more than aggressive carbon-capture measures: It would call for a swift and immediate shift from petroleum energy sources to energy provided through naturally replenished sources like wind, water, and solar power. 

From an environmental standpoint, this is a great concept. 

But we live in reality. And today, in real-world Africa, this goal is not feasible. Nor is it advisable. While I agree with their data on many topics, the IEA’s conclusion is flat-out wrong on this issue. Africa needs oil and gas.

Unreasonable Objectives

Some of the critical steps in IEA’s roadmap include:• No new investment in new fossil fuel supply (including oil and gas) after 2021• No new sales of fossil fuel boilers after 2025• No new internal combustion engine (ICE) car sales after 2035 globally• 60% of car sales are electric by 2030, and 50% of heavy truck sales are electric from 2035.

These steps assume a lot about the state of the world — assumptions that are faulty, especially for Africa. For one, it will require universal energy access by 2030, meaning that everyone has access to electricity and clean cooking. And with approximately 592 Million Africans currently without this access, we’re going to be hard-pressed to flip that switch in less than 10 years.

The IEA’s roadmap to net zero also relies on unprecedented investments in renewables — a substantial boost in clean energy investments from the $1Trillion made over the last five years all the way up to $5Trillion annually by 2030 — and cooperation from policymakers who are unified in their efforts. In this idyllic partnership, our Western counterparts talk a good game. But the fact is, to date, these same Western countries have invested little to no funding into Africa’s renewables space. To our dismay even the International Oil Companies that have tried to accept the IEA’s publicity stunt have little or no renewable projects in Africa.

“For many developing countries, the pathway to net zero without international assistance is not clear,” OPEC wrote in response to IEA’s roadmap release, issuing a “critical assessment” on the very same day. “Technical and financial support is needed to ensure deployment of key technologies and infrastructure. Without greater international co‐operation, global CO2 emissions will not fall to net zero by 2050.”

As I have stated in the past, demonizing energy companies is not a constructive way forward, and ignoring the role that carbon-based fuels have played in driving human progress distorts the public debate. We cannot expect African nations, which together emitted seven times less CO2 than China last year and four times less than the US, according to the Global Carbon Atlas, to undermine their best opportunities for economic development by simply aligning with the Western view of how to tackle carbon emissions.

Creating New Problems

China, meanwhile, appears willing to continue investing in fossil fuel projects in Africa. This means that to keep their nations energized, African governments will have little choice but to partner with China — whose performance is notoriously poor when it comes to environmental protection, despite having signed the Paris climate accord. In this scenario, China will become the most influential entity in the African oil and gas industry. And giving China (or any foreign entity) such a monopoly is a dangerous play.

For the IEA plan to work, no new oil and natural gas fields would be developed. The potential energy security risk here is twofold: Concentrated production means that demand will exceed the supply of traditional fuels, while new energy security issues emerge related to the new technologies such as cybersecurity and a dwindling supply of rare earth and critical minerals. And energy insecurity brings economic insecurity and geopolitical instability.

At the same time, a ban on fossil fuel production would bring about the collapse of many carbon-dependent governments. The oil industry is the primary source of income for many African nations. Without the continuation of petroleum production — or time and opportunities to cultivate new revenue sources — their economies will suffer — along with their citizens.

Interestingly, the very announcement of this roadmap features an admission by IEA Executive Director Fatih Birol that net zero will unhinge socioeconomic structures. 

“This gap between rhetoric and action needs to close if we are to have a fighting chance of reaching net zero by 2050 and limiting the rise in global temperatures to 1.5 °C. Doing so requires nothing short of a total transformation of the energy systems that underpin our economies,” Birol wrote.

And many of the world’s economies cannot bear this.

Excellent Points from Australia

Energy officials from Australia, for example — incidentally, one of the IEA member countries —  had plenty to say in response.

“There are many ways to get to net zero, and the IEA just looked at one narrow formula,” said Australian Petroleum Production and Exploration Association chief Andrew McConville. “The IEA report doesn’t take into account future negative emission technologies and offsets from outside the energy sector — two things that are likely to happen and will allow vital and necessary future development of oil and gas fields.”

In urging policymakers to maintain a degree of skepticism about the wisdom of the IEA roadmap, McConville isn’t alone.

“We are bringing emissions down,” stated Angus Taylor, Australia’s Minister for Energy and Emissions Reduction, “but we’re going to do it in a way that ensures we’ve got that affordable power that Australians need.” 

Rather than being dictated to by entities abroad, Taylor argued that Australia must proceed at a pace that makes sense locally. And part of these local considerations includes ensuring that people have energy and jobs. The IEA’s call to cease investment in fossil fuels will impede both of these metrics.

“Global gas demand is forecast to grow by 1.5% on average per year out to 2025, providing incentive to ensure our large gas fields … are developed as soon as possible,” said Keith Pitt, Minister for Resources. “Large upcoming offshore developments … will create thousands of new high-wage jobs.”

Africa’s Realities

The same holds true for African countries.

While environmental causes are a major focus in the West, lawmakers in Africa’s developing countries are more concerned with living wages and supplying basic necessities to the continent’s growing population.

The IEA plan amounts to austerity measures that would see Africans leaving petroleum resources in the ground. It would essentially brand poor African criminals — or at the very least enemies of the environment — for using fossil fuels.

This is folly. Let’s keep in mind the critical role that natural gas is playing in the global transition to clean energy: It’s an affordable and reliable bridge to renewables. And natural gas is particularly important to Africa. As I’ve written in the past, the African Energy Chamber’s 2021 Africa Energy Outlook report projects that African gas production and consumption are going to rise in the 2020s. As a result, Africa’s natural gas sector will soon be responsible for large-scale job creation, increased opportunities for monetization and economic diversification, and critical gas-to-power initiatives that will bring reliable electricity to more Africans. These significant benefits should not be dismissed in the name of achieving net zero emissions on deadline. To tell African countries with gas potential like Mozambique, Tanzania, Equatorial Guinea, Nigeria, Senegal, Libya, Algeria, South Africa, Angola and many others that they can’t monetize their gas and rather wait for foreign aid and handouts from their western counterparts makes no sense.

What’s more, we can’t overlook the fact that renewable energy solutions are still young technologies —they are less reliable -and achieving net zero by 2050 would require widespread adoption of technologies that are not even available yet.

Don’t get me wrong: I understand the importance of working toward renewables. I believe they are the future of the energy industry. But the global energy transition must be inclusive, equitable, and just. Unfortunately, the roadmap laid out by the IEA is none of these.

The IEA is a respected institution whose opinions help shape the rhetoric of the global energy market. So instead of mandating these strict guidelines from abroad, the IEA should try working with African countries to find solutions that we can actually abide. At the very least, I encourage the IEA to consider partnerships with African Private sector and financial institutions, whose collaboration with indigenous and international energy stakeholders provides invaluable insight from all sides across the energy industry. The IEA should use its voice to push for what I have always believe Africa needs the most at this time,  free markets, personal responsibility, less regulation, low taxes, limited government, individual liberties, and economic empowerment will boost African energy markets and economies.

Africa deserves the chance to capitalize on its own oil and gas to strengthen itself, rather than being bullied onto a path determined by Western institutions that don’t face the same obstacles. We must be able to improve our energy sector by exploring our continent’s full potential in a way that benefits our people.


Why the Big Oil Class of 2021 Flunked Energy Transition 101

By Gerard Kreeft

 

 

 

 

 

 

With the  end of the school year  students are eager to hear the results of how they fared. Unfortunately, I have only bad and worse news for my Big Oil Energy Transition Class 101.No one passed. Everyone failed. And in some cases failed  miserably. How did this happen?

Energy Transition Class 101 has a very straight forward goal.  It is focused on the two energy scenarios developed by the International Energy Agency (IEA): • Stated Policies Scenario(SPS) is geared for the short to medium term; and • Sustainable Development Scenario(SDS) for medium to long term.  

The SDS scenario,  the “Well Below 2 °C “is the benchmark that determines whether course participants pass or fail. 

Unfortunately no one passed. Some will get a positive mention to encourage their green activities, others will be reprimanded in private, but given the disastrous results, a public rebuke is necessary.

In The Energy Transition Class 101 SDS scenario,  the “Well Below 2 °C”   benchmark was key for energy company participants to help understand the steps required to ensure an orderly, low-carbon,energy transition.

The Energy Transition Class 101 went a step further and took on board the Wood Mackenzie’s Accelerated Energy Transition scenario (AET-2),which assumes the world is on course for near 3 °C warming because of renewed energy demands and the challenge of reducing CO2 emissions.

According to Wood Mackenzie: “The AET-2 scenario is based on the Intergovernmental Panel on Climate Change carbon budget allocation for the next eight decades, to 2100. It sets out our view of how the world can limit the average rise in global temperatures to 2 °C, compared with pre-industrial times, examining potential policy drivers, cost reductions and technological innovations. Electrification and low-carbon fuels are central to meeting the 2 °C limit. We estimate that electricity meets 47% of total final energy consumption globally in 2050, compared with 20% today. Three key assumptions underlie our AET-2 scenario:

• rapid electrification in all sectors; • the decarbonisation of the power sector through the penetration of  renewables and storage and coal-to-gas switching ;

• the large-scale development of carbon capture and storage (CCS) and carbon capture, utilisation and storage (CCUS) – 5Billion tonnes (Bt) by 2050 – and low-carbon hydrogen – 380Million tonnes (Mt) by 2050 – in hard-to-decarbonise sectors.”

AET-2 has massive implications for oil and gas demand in 2050: 70% lower than today. From 2023 onward oil demand drops with year-on-year fall of around 2Million barrels per day (2MMBOPD). Total oil demand by 2050 is down to 35MMBOPD. 

Natural gas demands, in contrast, remains resilient to about 2050. Large scale CCS in the industrial and power sectors will support gas while the deployment of blue hydrogen (135Mt by 2050) is a growth sector. Growth will come primarily from Asia, especially China and India.

Under AET-2, the assumption is that as many as 80% of new vehicles sold are electric, either battery-driven or hybrid. Heavy transport- ships and trains- are electric or hydrogen driven. Non-combustion liquid petrochemical demand for plastics is damped by higher rates of recycling. 

Wood Mackenzie’s AET-2’s scenario draws the following conclusions:• World needs no new supply of oil…”core function is to maintain current commercial production by going into full harvest mode”…• Market power slips  from OPEC to giant gas producers such as USA, Russia and Qatar.• Downstream suffers death by a thousand cuts. By 2050 the refining sector will have withered to 1/3 of its current capacity with less than 150 of the current sites in operation.• Era of carbon-neutral gas is born. AET-2 would require $300Billion to support Liquified Natural Gas growth globally and $700Billion to support dry gas development in North America. Blue hydrogen and ammonia emerge as new market products.• Currently no International Oil Company nor National Oil Company is prepared for the scale of decline envisaged in this scenario.

To protect the guilty and more vulnerable my analysis of The Energy Transition Class 101 will be limited to two candidates- Shell and TOTAL-  who have at least shown some potential  green promise.

Shell

According to The Australasian Centre for Corporate Responsibility(ACCR),  Shell states in general terms that it is aligned to meet CO2 neutrality by 2050, but has no defined number for the medium term in 2030. This is a 30% increase (pre-abatement) or a decrease of 30%. A difference in absolute terms compared tothe equivalent of Germany’s carbon footprint.

Shell has committed, by 2030, to decrease the intensity of its emissions by 20% (energy business only) and reposition its business away from oil, towards gas and chemicals,  renewables and marketing.

Gas production will be expanded by 20% by 2025 as well as increases in renewable electricity and Electrical Vehicles(EV) infrastructure, biofuels and hydrogen(blue and green).

ACCR states that Shell plans to use 120 Mt nature based solutions per year by 2030 and 25 Mt CCS per year by 2035. This amount of nature based solution is greater than the size of voluntary offset traded in 2019 (104 Mt) and equals to a non-conifer forest the size of Washington state(needed to be mature by 2030).

Shell’s CCS ambitions are similarly difficult. Today there is 40 Mt of operational CCS globally and only 15% geologically, mostly attributed to Shell’s Gorgon JV, which is currently not working.

If Shell had implemented its CCS and nature based solutions in 2019 it could have provided 50% reduction of Shell’s required CO2 emissions. According to ACCR “Shell will not reach the carbon intensity under Transitions Pathways Initiative 2°C for oil and gas missing the 2030 target by 32%”.

TOTAL

TOTAL is now pledging to reduce the average carbon intensity of energy products – Scope 1, Scope2 and Scope3 – used by its customers worldwide, by 20% in2030, an increase from 15%. This indicator would have to fall by 75% to be consistent with a 2°C target, and by 90% for a target of less than 2°C.

Scope 1 – All Direct Emissions from the activities of an organisation or under their control. Including fuel combustion on site such as gas boilers, fleet vehicles and air-conditioning leaks.

Scope 2 – Indirect Emissions from electricity purchased and used by the organisation. Emissions are created during the production of the energy and eventually used by the organisation.

Scope 3 – All Other Indirect Emissions from activities of the organisation, occuring from sources that they do not own or control. These are usually the greatest share of the carbon footprint, covering emissions associated with business travel, procurement, waste and water.

TOTAL will by 2030 only cut in Scope 3 Emissions in Europe to 30% and by 2050 to zero. The fly in the ointment is that TOTAL is simply exporting its remaining Scope 3 Emissions to  the rest of the world, including Africa, thus creating a two-tiered emissions system.

TOTAL states that it plans to increase its energy production from 3 to 4MMBOEPD by 2030, with half of that growth coming from gas, and oil likely to remain close to its current level. That means that gas production could increase by 30% by 2030. 

These plans are  at odds with Carbon Tracker’s Index (CTI) finding that Total must achieve a minimum 35% reduction in fossil fuel production by 2040 compared to 2019 levels, in order to stay within the IEA’s “Beyond 2 Degrees Scenario” (B2DS). 

Yet in spite of the predicted increase in oil and gas production, another important change was taking place. In the summer of 2020, TOTAL wrote off a $7Billion impairment charge for two Canadian oil sands projects. This might have seemed like an innocuous move, merely an acknowledgement that the projects hadn’t worked out as planned.

It opened a Pandora’s box that is changing the way the industry thinks about its core business model—and point the way towards a new path to financial success in the energy sector.

While it wrote off some weak assets, it did something else: Total began to sketch a blueprint for how to transition an oil company into an energy company. For the first time a major oil company translated its renewable energy portfolio into barrels of oil equivalent. Patrick Pouyanné, Total’s chairman and chief executive, now says that by 2030 the company “will grow by one-third, roughly from 3MMBOEPD (Barrels of Oil Equivalent per Day) to 4MMBOEPD, half from LNG, half from electricity, mainly from renewables.” 

At the same time that the company has slashed “proved” oil and gas from its books, it has added renewable power as a new form of reserves. Proved reserves long stood as the Holy-of-Holies for the oil industry’s finances—the key indicator of whether a company was prepared for the future. For decades, investors equated proved reserves with wealth and a harbinger of long-term profits. 

Because reserves were so important, the Reserve Replacement Ratio, or RRR—the share of a company’s production that it replaced each year with new reserves—became a bellwether for oil company performance. The RRR metric was adopted by both the Society of Petroleum Engineers and the USSecurities and Exchange Commission. An annual RRR of 100% became the norm. Adding reserves doesn’t necessarily mean adding value.

But TOTAL’s write-off showed that even “proved” reserves are no sure thing, and that adding reserves doesn’t necessarily mean adding value. The implications are devastating, upending the oil industry’s entire reserve classification system, as well as decades of financial analysis.

How did TOTAL reach the conclusion that “proved” reserves had no economic value? Simply put, reserves are only reserves if they’re profitable. The prices paid by customers must exceed the cost of production. Given current forecasts that prices would remain lower for longer, TOTAL’s financial team decided those resources could never be developed at a profit.

A similar scenario could play out with TOTAL’s remaining oil and gas projects. If driven by shareholder activism, more projects could become earmarked as stranded assets. Which could act as a catalyst to accelerate Total’s renewables portfolio. The planned expansion to 35 GW by 2025, and 100 GW by 2030 could become the start of a robust campaign to embrace renewables at an even quicker pace.

This has huge ramifications for Africa which has long been a rich source of cash flow for the company. In 2019 the continent generated around $10Billion of TOTAL’s $26Billion cash flow from operations, and 30% of its oil and gas production (900,000 barrels of oil equivalent per day).

If TOTAL, through increased shareholder activism, takes on more renewable energy, this could have a profound effect on Africa’s  renewable energy journey.

Conclusions

Perhaps in 2050 the Energy Transition Class 101will look back with nostalgia and smile about the challenges that the Class of 2021 faced. Will the more  than 2°C challenge have been met?  Perhaps the basis of fairy tales  told to youngsters as bedtime stories by their grandfathers. Perhaps Grampa was a Member of the Class of 2021 that flunked. 

Note: My thanks to Carbon Tracker, The Australasian Centre for Corporate Responsibility(ACCR),  Institute for Energy Economics and Financial Analysis (IEEFA),Reclaim Finance, and Wood Mackenzie.

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.

 


Chinese Company to Manufacture 1,000MW Capacity Solar Plant in South Africa

By Sully Manope, in Windhoek

Shangai based LONGi Solar, is partnering with ARTsolar, a South African manufacturer based in Durban, to launch a new, state-of-the-art, 500 MW per year, solar PV panel assembly facility.

The plant is expected to commence assembly and stockpiling of panels in August 2021, for delivery starting in the first quarter of 2022.

A second 500 MW capacity assembly line is planned to follow shortly after the first commences operation, bringing ARTsolar’s new capacity to 1,000MW (1 GW) per year.

ARTsolar, an 11-year-old, 100% South African-owned company, currently runs a PV panel production line designed for a capacity of 300 MW a year. But the plant has struggled in the last five years, operating significantly below this level, largely due to the halt of the country’s renewable energy bid programme between 2015 and 2019.

The partnership between LONGi Solar and ArtSolar is, however, enabled by the return of the South African government to the renewable energy space. On March 19 2021, Gwede Mantashe, Minister of Energy, announced preferred bidders for the Risk Mitigation IPP Procurement (RMIPPP) programme, which alone will require some 2,2Million solar PV panels with a total capacity of about 1300 MW for delivery of power into the grid by the end of August 2022. To achieve this ambitious target, the projects must reach financial closure by the end of July 2021.

Two more procurement rounds of green energy from solar PV projects, each with a capacity of 1000 MW, are expected to commence in 2021, facilitated by the IPP Office of the Department of Mineral Resources and Energy for South Africa’s Renewable Energy IPP Procurement (REIPPP) programme in terms of the national Integrated Resource Plan for electricity, IRP 2019.

LONGi, a Tier 1 solar PV manufacturer listed on the Shanghai stock exchange, supplies more than 30 GW of high-efficiency solar wafers and PV panels worldwide annually, which comprises about a quarter of global market demand.

LONGi and ARTsolar have ambitions to be the major supplier of locally made solar PV panels for the RMIPPP and REIPPP programmes, and for subsequent procurements of solar power in South Africa and the region, for mainly utility-scale PV power plants.

 


Egypt’s 200MW Solar Plant Gets $114Million Financing Package

A consortium of financiers have signed a $ 114Million financing package with a Saudi energy developer for the construction of the largest private solar plant in Egypt.

The European Bank for Reconstruction and Development (EBRD), the OPEC Fund), the African Development Bank (AfDB), the Green Climate Fund (GCF) and Arab Bank on April 22, 2021 signed the funding package with ACWA Power, owned by Saudi businessmen and focused on solar projects in North Africa and the Middle East.

EBRD will provide the largest chunk of the financing, with up to $36Million in contribution. $ 23.8Million is expected from the GCF; the OPEC Fund contributes $18Million; $18Million from Arab Bank and the AfDB $ 17.8Million. Equity bridge loans of up to $14Million are coming from fEBRD with $ 33.5Million of similar facility from Arab Petroleum Investments Corporation.

The development of the Kom Ombo solar plant will add 200 MW of energy capacity, increasing the share of renewable energy in Egypt’s energy mix and further promoting private-sector participation in the Egyptian power sector.

The new Kom Ombo plant will be located less than 20 km from Africa’s biggest solar park, the 1.8 GW Benban complex. Once operational, the new utility-scale plant will serve 130,000 households.

ACWA Power submitted the lowest tariff in what was the first solar photovoltaic (PV) tender in Egypt. The provision of solar energy through a public tendering process aims to achieve a competitive tariff and promote the growth of solar energy as an affordable alternative to conventional energy sources.

Private-sector participation in the Kom Ombo project is the result of successful policy dialogue with the Ministry of Electricity and Renewable Energy and the Egyptian Electricity Transmission Company (EETC), as well as a $3.6Million technical assistance programme, co-funded by the EBRD and the GCF, to support the EETC in administering competitive renewable energy tenders. In addition, the project has also benefitted from broader energy-sector reforms supported by the AfDB in recent years to scale up the involvement of the private sector.

The Kom Ombo plant will contribute to the Egyptian government’s target to generate 42 per cent of the country’s electricity from renewable energy sources by 2035 while delivering one of the lowest generation tariffs on the continent.

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