All posts tagged energy


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.

 

 


Globeleq Commences Operations of 52MW Solar Plant in Kenya

Exporting of power into the Kenyan national grid has commenced from the 52MWp Malindi Solar photovoltaic (PV) plant, developed by the British firm Globeleq and its project partner, Africa Energy Development Corporation (AEDC).

The $69Million solar facility is located in Langobaya, Malindi District, Kilifi County, about 120 kms north-east of Mombasa and started construction in 2019.

Electricity is being sold through a 20-year agreement with the national distribution company, Kenya Power.  The project also includes the construction of a new 220 kV Weru substation which has already been handed over to Kenya Power and is now a part of the national grid infrastructure.

The plant is constituted of 157,000 photovoltaic panels. It is one of the first IPP owned utility scale solar plants in Kenya and the only renewable power plant located in the country’s coastal area (of Lamu and Mombasa).

“The Malindi Solar plant is our tenth operational solar PV plant in Africa”, declares Mike Scholey, CEO of Globeleq. “It cements our unique position as a leader in large scale solar generation”.

The company claims that the plant is delivering enough clean and renewable power to supply approximately 250,000 residential customers and will avoid 44,500 tons of CO2-equivalent emissions annually.

The Commonwealth Development Corporation (CDC), the UK’s development finance institution, was the lead arranger of financing for the project, which involved $52Million in debt financing including $20Million from DEG, the German development finance institution.


Botswana Withdraws Tender for Bids for Development of Six Solar Power Plants

Botswana Power Corporation (BPC) has written to withdraw its own statement calling for expressions of interest in the development, financing, construction and operation of six solar photovoltaic plants in the country.

The Corporation says it will “refund all bidders who have purchased the tender”.

The tender was scheduled to close on the 25th March 2022.

In a statement signed by Thatayaone Mothibi, BPC’s  Supply Chain Manager, which referred to the tender statement originally published on the website bpc.bw on January 6, 2022, the company said it was exercising its “right to Accept any and to Reject any or all Proposals’ of the Request for Proposal” and would like to withdraw the tender calling for expressions of interest in the development, financing, construction and operation of six solar photovoltaic plants in the country “which is floating on the BPC website”.

As a result of this withdrawal “the Corporation will refund all bidders who have purchased the tender. Bidders who have purchased the tender are required to submit bank confirmation letters through which the refund for the purchased tender will be forwarded”, Mothibi’s statement read.

“The Corporation extends its gratitude to all the bidders who have shown interest in participating in this tender and at the same time apologize for any inconvenience caused by this withdrawal”.

The implementation of the project, if it had happened, was to be in line with the Botswana government’s goal of increasing the country’s installed capacity to meet domestic demand and reduce electricity imports.

With an installed capacity of 450 MW, Botswana imports an additional 150 MW from South Africa. By some estimates, the national demand at 550 MW. The copuntry recently received a $1Million grant from the Sustainable Energy Fund for Africa (SEFA), a financing facility managed by the African Development Bank (AfDB).

The purpose of this support is to facilitate private investment in the renewable energy sector, including off-grid solutions that enable rural electrification.

 


A Lot Is on The Boil for 2022

We predicted that 2021 was unlikely to be a year in which the industry would reset itself, after the disruptions of 2020.

But we were mostly wrong. Things have returned faster than we imagined. A billion-barrel reserves discovery off Cote’D’Ivoire; the surge in Libyan output taking the war-ravaged country past Angola as the second highest producer on the continent; the record increase in output in Egypt’s natural gas, mostly for domestic consumption and a Final Investment Decision for new onshore natural gas development and accompanying power project in Mozambique, are notable highlights of the second year of the COVID-19 pandemic.

For all we know, 2022 may turn out to be the year of basin openings. Shell and TOTAL continue their probes of the orange basin off the contiguous coasts of Namibia-South Africa; ENI will test the Lamu basin off Kenya; ReconAfrica will drill the first seismically defined location in the Kavango Basin. The drilling campaign in Zimbabwe’s Cahora Bassa basin is close to start.

We expect Rig activity to increase as TOTALEnergies starts drilling for the gas in Mozambique; Ghana sees operating companies drilling obligatory wells they had not drilled for years; ENI commences appraisal of the massive Balline discovery in Cote ‘Divoire; Apache, bolstered by new, favourable agreement, increases its rig count onshore Egypt.

Downstream, Dangote rounds off construction of one of the world’s largest single train refineries; Ugandan government seeks investors to fund the state share of the Kabaale Refinery and Ghana’s state firms are open to private parties to construct a new gas processing plant as well as a large scale crude oil refinery.

That said, we invite you to become a paying subscriber of our monthly harvest and go through a number of operational events that will run through the year. Our theme is Who Is Doing What and Where in 2022?

The Africa Oil+Gas Report is the primer of the hydrocarbon industry on the continent. It is the market leader in local contextualizing of global developments and policy issues and is the go-to medium for decision makers, whether they be international corporations or local entrepreneurs, technical enterprises or financing institutions. Published by the Festac News Press Limited since 2001, AOGR is a paid subscription, monthly hard copy and e-copy publication delivered around the world. Its website remains www.africaoilgasreport.com, and the contact email address is info@africaoilgasreport.com. Contact telephone numbers in the West African regional headquarters in Lagos are +2348124374087, +2348130733523, +2347062420127, +2348036525979, +2348023902519.

Editor


European Bank to Invest in Scatec’s $340Million Green Bond in Egypt

The European Bank for Reconstruction and Development EBRD will invest in a green bond issuance of up to $340Million. The Bank’s participation will consist of up to $100Million in the form of a direct subscription in the Bond, and the provision of up to $30Million stand-by liquidity facility for the benefit of the participating private institutional investors. The Bond will obtain the verified certification from the Climate Bond Initiative (CBI) and will be the first private green renewables-backed bond issued in Egypt.

The Bond’s proceeds will support a portfolio of six operational solar power plants located in Benban, Egypt.

These projects “are ultimately owned 51% by Scatec ASA, 25% by Africa 50 and 24% Norfund”, the EBRD explains. Scatec ASA is a leading renewable power producer, headquartered in Oslo, Norway and listed on the Oslo Stock Exchange. The firm develops, builds, owns and operates solar, wind and hydro power plants and storage solutions, and has more than 3.5 GW in operation and under construction on four continents.

Africa 50 is an investment vehicle established to help bridge Africa’s infrastructure funding gap by facilitating project development, mobilizing public and private sector finance, and investing in infrastructure on the continent.

EBRD says that the impact of the transaction “arises from the Green and Inclusive qualities”. In the first instance, the investment is in an independently certified Green Bond; in the second, the “Sponsor will participate in the inclusion programme aimed at increasing access to skills and economic opportunities for young people of the rural areas near Benban in Egypt by introducing a certified training programme for agribusiness entrepreneurs. In addition it will promote workforce diversity by enhancing the role of women in the traditionally male-dominated local economy.

“The Bank’s additionality is mainly derived from: (i) the Bank is offering financing on reasonable terms and conditions, that is expected to close the funding gap and allows carrying out a successful fund-raising process, (ii) supporting the project’s access to the international capital markets in the context of uncertain market conditions by offering an innovative financing structure and providing comfort to international investors, and (iii) the conditionalities obtained by the Bank to enhance inclusion and environmental standards”.

 


Carbon Capture and Storage (CCS): the Silver Bullet of the Energy Transition?

By Gerard Kreeft

Harry Houdini, the famous 19th century illusionist, created a sensation when he made an elephant disappear. The Government of the Netherlands in 2017 continued this tradition. It promised to make one-third of CO2 emission reductions, scheduled for 2030, disappear by storing them offshore.

Houdini’s illusion caught the fancy of the world. The illusion of the Netherlands is that the promise of carbon capture and storage of CO2 is still not fully comprehended, understood or simply forgotten. Then, thanks to offshore carbon storage, the Netherlands was to become a leader of the green transition.

There is no doubt that the previous government was overzealous in promising how offshore carbon capture and storage (CCS) could benefit the energy transition. The new Dutch coalition, scheduled to be officially installed early 2022, has been rather mute about offshore CCS and the role it will play in any energy transition.

Lessons Learned

To date the only CCS project in the Netherlands is the Porthos Project, a joint venture by a consortium of companies which will capture a combined 2.5Million tonnes CO2 annually.  A final investment decision is anticipated in the spring of this year.

Can CCS offer the Energy Transition a silver bullet?  For Africa? This is highly relevant given the importance that is being placed on CCS by various oil and gas companies.

 

The basic aspects and experiences to date about CCS have been vividly described in a study authored by Clark Butler, on behalf of IEEFA(Institute for Energy Economics and Financial Analysis, July 2020). CCS basically encompasses the following steps.

  1. Capture: The separation of CO2 from other gases produced at large industrial process facilities such as coal and natural-gas-fired power plants, steel mills, cement plants and refineries.
  2. Transport: Once separated, the CO2 is compressed and transported via pipelines, trucks, ships or other methods to a suitable site for geological storage.
  3. Storage: CO2 is injected into deep underground rock formations, usually at depths of one kilometre or more, depleted oil or gas fields, deep saline aquifer formations or other forms of underground caverns, though it could apply to any form of storage.

CCS was first employed to supply CO2 for enhanced oil recovery (EOR) operations for several natural-gas processing plants in the Val Verde area of Texas in the early 1970s.

Butler’s conclusions about CCS are uncompromising:

  • CCS is prohibitively expensive compared to other greenhouse gas emissions mitigation options, such as renewable energy and energy storage technologies.
  • CCS offers no financial return for investors.
  • CCS has a dubious track-record. Even the Global CCS Institute – a booster organisation for CCS – acknowledges in its 2019 Global Status of CCS report that CCS is at best a minor contributor to decarbonisation, addressing up to 9% of greenhouse gas (GHG) emissions by 2050.
  • There isn’t one example of a CCS project anywhere in the world that offers a financial justification for investing in CCS.
  • In the absence of a carbon price, CCS will never provide a return on investment.

What have been the experiences to date by the majors? Clark maintains that

“European oil companies—in particular, Equinor, Shell and Total—are investing in CCS, notwithstanding the lack of return, because it is an important part of their decarbonisation narrative and supports their aims to be seen as ‘responsible’ energy companies”.

Shell

Shell is involved in two CCS projects: Quest in Alberta, Canada, funded by the Alberta and Federal Canadian governments and operated by Shell; and Gorgon in Western Australia, a project in which the project principals (Shell and Chevron) are financially motivated not to operate the CCS plant.

The Quest project near Edmonton, Alberta captures and stores CO2 emitted at a large oil sands upgrader complex.  The cost is $1Billion.  Although Shell as operator gains a lot of positive publicity for running this operation which adds to its “green credentials”, in actual fact 65% of the funding came from the Government of Alberta’s Carbon Capture and Storage Fund and the Government of Canada’s Clean Energy Fund.  Had government funding not been provided, this project would never have happened.

“The Gorgon plant has failed to meet its targets every year, notwithstanding a $60Million subsidy from the Western Australian government. Shell’s actual outlay in CCS over the years remains to be seen. Its overall investment in renewables is well behind its stated targets. Any progress Shell demonstrates in removing carbon from the atmosphere using CCS (1Million tonnes per annum at Quest and up to 4Million tonnes at Gorgon) should be seen in light of Shell’s total emissions of 656Million tonnes per annum .

TOTALEnergies

The company “has also promised massive investment in CCS to remove up to 5 million tonnes of CO2 per annum (8% of scope 1 and 2 GHG emissions and 1% of scope 1/2/3 emissions).”  The company” is an investor in Equinor’s Sleipner CO2 storage as well as, with Shell and Equinor, the larger Nordic project under development, Northern Lights.”

 Equinor

“Equinor, the Norwegian state oil and gas producer, has been investing in CCS since 1996, mainly because Norway has had a carbon price since 1991. Its Sleipner CO2 storage and Snøhvit CO2 storage facilities have cumulatively captured and stored around 22Million tonnes of CO2. Compared to the rest of the fossil fuel industry, this is considerable achievement but this pales into insignificance when one considers that Equinor is responsible for over 330Million tonnes of CO2 emissions every year (scope 1, 2 and 3).”

“With the carbon price, there is a modest economic return on its CCS operations but the impact on emissions is immaterial in the scheme of Equinor’s contribution to global warming. By way of comparison, Equinor’s scope 3 emissions increased by 26Million tonnes per annum from 2014 to 2018.”

Some unsettling truths

According to Butler transportation and storage are key areas of concern. The CO2 must be separated, and transported to the sequestration site.

Transportation and storage are two key areas of concern. ‘Captured’ carbon must be separated, transformed and, in most cases, transported to the sequestration site. The energy used in this process and the leakages that can occur during transportation and handling can materially reduce the net impact of the CCS process.

Butler also points out that “the underground storage into which the carbon is injected is not always secure. Wells have weaknesses and gaps. Fracking causes long-term subterranean instability, and seismic activity could dislodge even the most carefully stored carbon”.

CCS storage must have a purpose other than a symbolic gesture of appearing green to the shareholders, investors and the public. Simply producing hydrocarbons and then using CCS to store CO2 so that a company can continue to produce hydrocarbons unabated has become a non-starter. Investors and shareholders are willing to give companies a pass on blue(methane) or gray(coal) hydrogen as long as it is obvious that green hydrogen is the end game.

For example, key questions still remain surrounding ExxonMobil’s $100Billion CCS project that would be built along the Houston, Texas Shipping Channel. This undoubtedly is being driven by Engine Number One, the small but very influential American investor group, seeking a new direction for the company. Is CCS the end game or is an alternative energy strategy being developed?

Then consider the dilemma of rising CO2 prices and actively supporting a global emissions trading scheme. A sign, one would say, for encouraging the CCS market. Yet the looming threat is that green hydrogen will in the coming decade destroy this potential market. How? Simply because electrolyzer capacity will be dramatically expanded and green hydrogen dramatically reduced in cost. It would then reduce the need for grey and blue hydrogen, and the need for storing CO2. In the European Union the current installed electrolyzer capacity is 4GW and expected to increase to 40 GW of installed electrolyzer capacity by 2030.

Of course, optimism cannot be dismissed. Fortune Business Insights, a market research company, expects the carbon capture and storage (CCS) market to grow to $7 billion annully by 2028. The company expects the market to exhibit a CAGR(compound annual growth rate) of 19.5 per cent from 2021 to 2028, while the global carbon capture and sequestration market size will grow from $2.01Billion in 2021 to $7Billion by 2028.

In Africa, the prime CCS example to date is at BP’s-Equinor’s In Salah oil and gas field in Algeria. More than 3Million tonnes of CO2  have been stored before being stopped in 2011 due to capacity limits in the geological structure.

Does Africa have the ability to store all the extra carbon dioxide that it is expected to generate in the coming decades? Possible areas of interest could be the Zululand basin in South Africa, a well-mapped onshore area, offshore Angola, onshore and offshore Nigeria and offshore Ghana. The Rovuma basin offshore of  Northern Mozambique could also be an area of interest.

Can Africa withstand the politics of illusion and see CCS for what it really is? A smoke screen for not addressing the real needs of the energy transition.

Finally, a simple conclusion. A simple substitute for CCS is a tree planting campaign. In Canada the federal government has pledged to plant two billion trees in the ground by 2030. To date deadline targets have come and gone. Yet this is a campaign which requires encouragement and continued public pressure.

Such a scheme should also encourage the oil and gas sector to contribute and participate. A scheme which is practical and easy to understand why it is of such huge benefit to the energy transition. Certainly, it should prove to be of interest to Africa’s new energy players.

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.


Predictions 2022: How Africa Will Become a Hotbed of Consolidations, Acquisitions and Mergers

By Gerard Kreeft

The Energy Transition will continue to be dominated by two extremes: the continued growth of renewables-wind and solar-and a continued pushback by the oil and gas sector to maintain more than just a foothold in the energy landscape.

Not so much an energy transition, but an exchange of political power, disguised as an energy transition. Such a transition of energy power is fast finding its mark in Africa. A fast-moving continent which will see new players, both national and international. Both the oil and gas and renewable sectors could become a hotbed of consolidations, acquisitions and mergers.

In Africa the oil majors are for the most part playing a retreating role; instead, new players, who for the most part are not well known, will become dominant players. Some of these new players are involved in the oil and gas sector and others in the renewables sector.

 Exiting but with some exceptions

In Africa the oil majors will continue divesting assets no longer deemed to have shareholder value. Shell has for all intents and purposes exited Nigeria, and BP and Equinor are not pledging new funding to oil and gas prospects in Angola.

ENI and BP have indicated that they will merge their upstream activities in Angola. Will this be a precedent for merging their additional assets in Africa? If this is to happen other companies will join the frenzy in order to merge and consolidate assets.

If not exiting immediately, the name of the game is to extend the life cycle of a project to ensure that all of the project’s economic value is harvested. In most cases not developing new fields but adding satellite fields and oil recovery projects to maintain low project costs.

The sole exception is high value, low-cost projects such as Mozambique’s two major LNG projects: Rovuma being developed by ExxonMobil and Mozambique LNG being developed by TOTALEnergies. Yet both projects could possibly suffer delay again, or require additional partners to further mitigate the financial risks.

Nonetheless deepwater exploration, not a task for the faint-of-heart, will continue. TOTALEnergies is continuing to attract attention with its exploration campaign off the southern coast of South Africa. Its Luiperd and Brulpadda discoveries have given a further stimulus for continued exploration.

Opportunities for new oil and gas entrants

Less headline grabbing is the unfolding of new entrants seeing new business opportunities. Some examples:

Reconnaissance Energy Africa, also known as ReconAfrica, has started an eye-catching drilling campaign in the Kavango Basin in the Kalahari Desert of North Eastern Namibia.  Drilling of their 6-2 well commenced in early January 2021. Well 6-2 is the first of three wells to be drilled in the totally undrilled Kavango Basin, viewed as a classic high risk/ high reward type of oil and gas play.

Savannah Energy has taken over key assets from ExxonMobil in Chad and Cameroon: in Chad the Doba Oil Field and in Cameroon the Chad-Cameroon Oil Pipeline.

Recently Perenco has strengthened its Gabon base. TOTALEnergies has divested interests in seven mature oilfields operated by Perenco.

 Angola’s recent onshore licensing round for the nine oil and gas blocks in the Lower Congo and Kwanza basins received 45 proposals from 15 different companies with a proposed investment sum of over $1Billion. At first glance, this looks like a positive response to help kickstart an oil economy.

Angola’s National Oil, Gas, and Biofuels Agency (ANPG) stated that the bid round was designated to attract foreign companies not normally present in country and Angolan companies to boost the national potential both in terms of business and workforce. Could the Nigerian example, where today 25 indigenous companies produce nearly 400,000BOPD, also work in Angola?

Professor Jason Bordoff, Co-Founding Dean of the Columbia Climate School, Founding Director of the Center on Global Energy Policy, and Professor of Professional Practice in International and Public Relations at Columbia University SIPA, recently indicated that private equity companies are turning their attention to assets being aborted by the oil majors. Private equity now accounts for 10% of all North Sea production, up from virtually zero in 2014. Bordoff concludes that Chinese banks have also shown an ability to fill these investment slots. Could Sub-Sahara Africa become part of this scenario?

 Africa’s new green energy players

An important part of the equation could well be Africa’s power sector, normally seen as a distinct and separate category and not associated with the oil and gas industry. Their story has in many cases not been properly told. In a period of great transition, we can anticipate movement from the power sector. Companies, large internationals and others regional in scope, who already have a proven track record. Some key players to watch:

 ACWA

ACWA is Saudi owned, has 42GW generating power with a value of $66billion, spread over 13 countries. In Morocco the company has developed three solar parks totalling 500MW for the Moroccan Agency for Solar Energy (MASEN).

 Enel

Antonio Cammisecra, CEO of Enel Green Power symbolizes Enel in Africa. “We’re Africa’s top privately-owned renewable energy operator. This is something we can definitely feel proud about but still, it’s a drop in the bucket if we consider the sheer size of Africa’s untapped potential and the huge amount of energy it needs.”

The company claims to be Africa’s largest independent renewable energy player in terms of installed capacity. According to Enel’s 2019-2021 strategic plan the Enel Group is investing around €700Million in the continent, building 900 MW of wind and solar capacity.

Engie

Gillian-Alexandre Huart, CEO of ENGIE Energy Access, is Engie’s man in Africa. Its Access to Energy business in Africa, is tasked with providing millions of households and businesses across the continent with clean and affordable energy.

 Engie’s Energy Access is now one of the leading off-grid, Pay-As-You-Go (PAYGo) solar and mini-grid solutions providers in Africa, serving over one million customers and impacting more than five million lives in nine countries – Uganda, Zambia, Kenya, Tanzania, Rwanda, Nigeria, Benin, Côte d’Ivoire, and Mozambique. Engie Africa counts nearly 4,000 employees, and has 3.15GW of power generation capacity.

EDF (Électricité de France)

EDF partners with innovative start-ups to provide energy and services to a rural clientele in South Africa, Côte d’Ivoire, Ghana, Senegal, Kenya and Togo.

Such services enable more than 1 million people to light and power their low-consumption household appliances or also to be equipped by solar powered water pumps, thereby significantly improving their crop yields.

The company plans an extensive expansion of its solar and wind activities throughout Africa in the coming years.

Lekela

LeKela’s current portfolio includes more than 1.3GW of power involving projects in Egypt, Ghana, Senegal and South Africa.

The company’s focus is utility-scale projects which supply much-needed clean energy to communities across Africa.  The focus is on taking projects from mid-or late-stage development into long-term operation.

Scatec

Scatec is a Norwegian, renewable power producer, developing, building, owning and operating solar, wind and hydro power plants and storage solutions. Scatec has more than 3.5 GW in operation and under construction on four continents. The company is targeting 15 GW capacity by the end of 2025. In Africa the company has projects in Egypt, Mozambique, Rwanda, South Africa and Uganda.

Some final considerations

  1. Recently IRENA (International Renewable Energy Agency) and AfDB (African Development Bank) have jointly announced support of low carbon projects to enhance the energy transition. IRENA states in its Global Renewable Outlook that sub-Sahara Africa could generate as much as 67% of its power from indigenous and clean renewable sources by 2030. In the energy transition this would increase welfare and stimulate the creation of up to 2Million green jobs by 2050.
  2. Certainly public-private partnerships should be part of this mix. Governments to ensure a broad basis of support and energy companies who have the know-how and project management skills. A key bonus for oil/energy companies is knowing that renewables can be added to their reserve count.
  3. Developing Africa’s Green Deal should be the key theme for a new partnership among oil and gas companies, national oil and gas companies and electrical and transmission companies. Such collaboration should work closely with The Clean Energy Corridor which aims to support integration of cost-effective renewable power options to national systems, promote its cross-border trade and support creation of regional markets for renewable energy.
  4. The Clean Energy Corridor initiative has two African components: (1.) African Clean Energy Corridor (ACEC) for the member countries of Eastern and Southern African power pools.  (2.) West African Clean Energy Corridor (WACEC) within the Economic Community of West African States.
  5. Africa could well become a major hydrogen producer. For example, the Hyphen Hydrogen Project in Namibia will invest $9.4Billion over a period of nine (9) years. The project sponsors aim to produce 5GW of power by 2030, and 3GW of electrolysis capacity. A production of 300,000  metric tons of green hydrogen per year is anticipated once the project ramps up. According to the Government of Namibia a large focus would be on exporting hydrogen to Europe and to sell some of the output to neighbouring countries to “take advantage of the vision that our leaders have for the African Continental Free Trade Area”.
  6. According to Professor Jason Bordoff wealthy nations in 2009 pledged to provide $100billion annually in climate finance to low income countries. That has not happened. Now roughly $1Trillion-$2Trillion is required annually in clean energy investments in developing and emerging markets to achieve net-zero in 2050. In 2020 clean energy investments in these nations was only $150Billion.

 

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