All posts tagged energy


102 Proposals Registered for 2,600MW in South Africa’s Latest Renewable Energy Bid

The South African government is registering 102 proposals for the 5th   round of its ambitious Renewable Energy Independent Power Producer Procurement Programme (REIPPP).

The government is targeting 2,600MW of new clean energy capacity.

For the round,  launched in March 2021 and closed on August 16th, 2021, the South African Department of Mineral Resources and Energy, expects 1,000 MW of solar power to be built, compared with 1,600 MW of new wind power capacity.

Of the 102 bids from independent power producers (IPPs), 63 bids are solar PV plants, and the rest (39) are onshore wind farms. The South African government plans to unveil the successful proposals in October or November 2021.

This is expected to accelerate with the closing of funding for the individual projects set for February or March 2022. Successful IPPs will then have 24 months to begin commercial operation of their facilities, which will be connected to the national  grid, operated by  Eskom, the state-owned utility.

Recent phases of REIPPP have been very successful with the construction of wind and solar farms in Africa’s most industrialised economy.

Since the programme began in 2011, over 4 201 MW of electricity generation capacity from 67 IPP projects has been connected to the national grid;

The South African government’s initiative is helping to diversify its electricity mix.

 


Shell Creates a New Energy Company in Nigeria: Markus Hector will Lead it

Shell has created a new company in Nigeria, named Shell Energy Nigeria.

The name, unlike Seplat Energy and TOTALEnergies, does not refer to the entire Shell Nigeria, but is one of the Shell companies in Nigeria (ScIN), like SNEPCO, the company focused on Production Sharing Contracts, SPDC, which operates the onshore JV assets and Shell Nigeria Gas, the downstream gas distribution firm.

Markus Hector, a former general manager of Shell LNG Market Development, has been tapped to drive the new unit.

Mr. Hector has a Master’s degree in engineering from the Hamburg University of Technology and MBA in General Management from the Rotterdam School of Management in Erasmus University.

He has spent close to 20 years in Shell LNG and Natural Gas Development system.

Shell entered renewables in Nigeria by seeding All On, an impact investment firm, which has invested over $21Million into the off-grid energy space since its formation.

It will now formalize its participation in the market through Shell Energy Nigeria, which will be part of a global group of energy and petrochemical companies with more than 80,000 employees in more than 70 countries.

Shell Energy was first registered in the UK as a home energy business born out of Shell’s acquisition of energy firm, First Utility in 2018.

Shell New Energies, a related company in the United States, works in new fuels for transport, including advanced biofuels and hydrogen; and power, through wind and solar, in an integrated fashion: from manufacturing to home delivery.


Re-Ranking the Oil Majors: One Year Hence

By Gerard Kreeft

In August 2020 Africa Oil + Gas Report reported its First Ranking of the Oil Majors: a summary of their energy transition strategy and vision. Fast forward to August 2021. The speed and changes taking place are breathtaking. Read on.

Two Contrasting Visions

(1) An Oil Sands‘ Moment

The Caspian Region and in particular Kazakhstan since the break-up of the Soviet Union has been a key frontier for the oil majors. Creating oil wealth and cashflow which has helped bankroll Tengiz, Kashagan, and Karachaganak. Major projects requiring great risks, and garnishing great financial wealth which in turn generated cash flow for the majors to develop projects around the globe, including Africa.

This is about to change. WoodMackenzie is predicting that by 2030, the Upstream Development Capex in the Caspian Region will drop 50% from an annual high of $20Billion in 2018.

WoodMac reports that most of the largest pre-FID (Final Investment Decisions), both brownfield and greenfield,  do not generate an  IRR(Internal Rate of Return) above 20%. Tax issues, cost overruns, and project delays are key constraints. Add carbon neutrality to the mix and you have the ingredients for a perfect storm.

When the Soviet Union broke up in the early 90s and Kazakhstan emerged as a new oil province, both Chevron and ExxonMobil, seen as ambassadors of US goodwill, gained access to the country’s black gold. Chevron’s prize was operatorship of the Tengiz field (50%) and ExxonMobil gained a 25% share. Chevron also has an 18% share in the large Karachaganak Gas Field. ExxonMobil has a 16.81% share of the troubled Kashagan Project. 

What once was a sign of great wealth- Kazakhstan’s oil riches- could turn sour very quickly. Both Chevron and ExxonMobil, key developers of Kazakhstan’s prosperity, are also the two key oil majors lacking any serious decarbonization and energy transition plans. While this is most relevant for the Caspian, it is also a warning for Africa, where both companies have major projects. 

The Tengiz Project deserves some attention given that it in a time of Chevron’s austerity it is swallowing up 70% of the international oil and gas budget.   Tengiz is currently producing560,000 barrels per day (BPD) and is being expanded by some 260,000BPD. Total costing is estimated at $45Billion. 

The expiry date for the Tengiz concession is 2033. What will happen then? Given the huge costs, high sulfur-based oil, and low chance of carbon neutrality, Tengiz could become a vast stranded asset.  To date, Shell has abandoned two Kashagan projects in Kazakhstan because of high costs. Tengiz was, for most of its duration, Chevron’s crown jewel, providing cash to developing assets elsewhere including Africa. Given Chevron’s current strategy it can only hope that Tengiz can continue to squeeze out more oil. 

TOTALEnergies faced a similar problem but choose an alternative strategy. In the summer of 2020, the company took the unusual step of writing off $7Billion impairment charges for two oil sands projects in Canada.  Both projects at the time were listed as ‘proven reserves’. By declaring these proven reserves as null and void, TOTALEnergies, with one swoop of the pen, cast aside the Petroleum Classification System which was the gold standard for measuring oil company reserves.

The company simply decided that these reserves could never be produced at a profit. Instead, TOTALEnergies has substitute renewables as reserves that can be produced profitably.

TOTALEnergies strategy is based on the two energy scenarios developed by the International Energy Agency (IEA): Stated Policies Scenario (SPS) is geared for the short/ medium term; and Sustainable Development Scenario(SDS) for medium/long term.  

Taking the “Well Below 2 Degrees Centigrade” SDS scenario on board, TOTALEnergies has in essence taken on a new classification system. By embracing this strategy the company is the only major to have seen the direct benefit of using the Paris Climate Agreement to enhance its renewable energy base.

In essence, the oil majors have two contrasting visions: a continued embrace of only oil; or a vision of renewables- produced at an IRR rate- formerly only thought possible from fossil fuel production.

If, as WoodMac predicts, major oil and gas projects will face enormous economic and environmental hurdles in  Kazakhstan, this could have a knock-on effect for Africa. Both Chevron and ExxonMobil have major assets in the Caspian region. The region’s predictable cash flow has provided the companies the necessary leverage for developing assets in other parts of the globe, including Africa. How will this play out in the coming 5-7 years? Will these two majors have an ‘oil sands‘ moment, much like TOTALEnergies had in 2020 in Canada, in 2020,  when it wrote off two oil sands projects listed as ‘proven reserves’?

The current RRR(Reserves Replacement Ratio) of all the majors is at historic lows, well below the norm of 100%(see below) and their projected change in oil production to 2030 promises more of the same( also see below).

ExxonMobil is in a state of turbulence. Once seen as the oil and gas industry leader, ExxonMobil is in uncharted waters. Its biggest challenges are legal, not the search for oil and gas: ExxonMobil’s management has been forced to accept three new board members, nominated by Engine Number 1, a small, but very influential investor; and an environmental court challenge which potentially could derail its Deepwater Guyana projects.  Surely the court decision in the Netherlands ordering Shell to cut by 2030 its CO2 emissions by 45% compared to 2019 levels, is a decision being followed closely by the courts in Guyana and the boardroom of ExxonMobil.  After all ExxonMobil’s upstream activities in the Netherlands and the UK are joint-ventured with Shell.

ExxonMobil has written down between $17-$20Billion in impairment charges and is capping capital spending at $25Billion a year through 2025, a $10Billion reduction from pre-pandemic levelsIts market capitalization now hovers at $250Billion; in October 2020 ExxonMobil’s market cap plunged to $140Billion.

To meet the green challenge ExxonMobil has unveiled a plan to build one of the world’s largest carbon capture and storage (CCS)  projects along the Houston Ship Channel in Texas. The proposed project would cost $100billion and would capture and store 100 million metric tons of CO2 per year. 

For the project to be economically viable, it would need major public funding and the introduction of a price on carbon in the US. ExxonMobil says the project could be fully operational by 2040. 

Yet public reactions are at best muted and at worst cynical. Carbon Market Watch sees CCS “as a lengthy distraction from the debate about greenhouse gas pollution from fossil fuels and getting emissions down at source”.

In 2021 Chevron’s share has lost some of its glitters but has remained resilient over the last 5 years, continuing to hover in the $100 range. In October 2020 its market cap was $142Billion, surpassing ExxonMobil for the first time; its market cap is now $200Billion+.

Chevron management nonetheless suffered an important defeat at its 2021 Annual Shareholders’ Meeting, when 61% of shareholders voted for a proposal by  FollowThis to encourage the US company to reduce its emissions. 

Chevron’s financial situation is better than ExxonMobil:  Primarily lower debt levels, a constant dividend, and an image of being in control. Spending in the period 2022-2025 will be $14-16Billion, instead of $19-22Billion: $3.5Billion outside the USA, of which 70% will be dedicated to Tengiz in Kazakhstan and the remaining $1.5Billion elsewhere. What is surprising is how vulnerable Chevron has become:  heavily financing its Tengiz asset which only represents less than 20% of its daily production of some 3 mboepd.

This is not promising for Africa where Chevron has major operations stretched across the continent:  major projects in Angola, Equatorial Guinea, and Nigeria receiving very limited funding in order to bankroll Tengiz. 

Post-Paris raises serious questions, the primary one being whether Chevron understands what the Energy Transition is about. Yes, Chevron has an environmental, social, and governance(ESG) policy managed and implemented at the highest levels in the company, including a new energy division. Key measures listed include:• Lowering greenhouse gases;• CCS (Carbon, Capture, and Storage) project at the Gorgon LNG project; and• Various health, educational, and community development projects.• Developing biofuels, wind, and solar projects in support of Chevron’s various business units.

Yet Chevron’s entire energy transition strategy is solely done within the confines of the fossil bubble.

Equinor continues defending its twin pillars of oil and gas and its growing offshore wind portfolio. Does the company have the financial depth and ability to achieve maximum leverage for both pillars?

Equinor’s offshore wind portfolio is pledged to grow to 12-16GW of installed capacity by 2030. Renewables will receive more than 50% of capital investments by 2030. Yet there is severe competition from a number of key European new energy players:• Enel in the next 10years will be spending €190Billion on renewables and by 2030 have 145GW installed capacity.• Ørsted will have an installed capacity of 50GW by 2030.• RWE will have 28.7GW of installed capacity by 2022.• Engie spent €7.4Billion on renewables and 33GW of installed capacity.• Iberdrola will spend €150Billion on renewables and target of 93GW installed capacity up to 2030

Equinor has chosen a series of joint ventures to develop its offshore wind portfolio:

Dogger Bank heralded to become the world’s largest offshore wind farm, is being developed together with SSE Renewables. Located in the North Sea, the project will produce some 3.6GW of energy, enough to light up 6Million households. More recently ENI has purchased a 20% stake in the Dogger Bank A & B Project. 

Empire Wind and Beacon Wind assets off the US east coast. In September 2020, BPannounced it was buying a 50% non-operating share. A basis for furthering a strategic relationship. The two projects will generate 4.4GW of energy.

Equinor’s more traditional natural gas business continues to be a reliable source of income: the company is Europe’s second-largest gas supplier. Combined volumes from Equinor and SDFI(Norwegian state’s gas volumes) constitute more than 20% of Europe’s gas market.

According to Patrick Pouyanné, Chairman and CEO of TOTALEnergies, the company energy production in the period 2020 – 2030 “will grow by one third, roughly from 3Million barrels of oil equivalent per day(BOEPD) to 4MillionBOEPD, half from LNG, half from electricity, mainly from renewables”.

This is the first time that a major operator has wittingly or unwittingly translated its renewables to BOE (barrels of oil equivalent). The golden rule was that RRR (Reserve Replacement Ratio) was always used to assess a company’s hydrocarbon reserves. This author has for some time argued that oil companies also include other fuels in their reserve count—be that wind or solar– to create a basket of energy reserves, thus increasing one’s reserve count and buttressing up one’s fossil reserves, and adding value to hydrocarbon assets.

By taking renewables on board the company has leapfrogged the competition. 

TOTALEnergies has confirmed that it will have a 35GW capacity in renewables by 2025 and has the ambition of adding 10GW per year after 2025. Translated, that could mean creating an additional 250GW by 2050. The vision is there; now the implementation.

A key to TOTALEnergies’ success is its ability to step into projects at an early stage. Some examples:

• 50% portfolio of installed solar activities from the Adani Green Energy Limited, India;

• 51% Seagreen Offshore Wind project in the United Kingdom;

• Major positions in floating wind projects in South Korea and France.

In terms of deepwater, TOTALEnergies will be focused on its two South African assets: Brulpadda(Drilled to a final depth of more than 3,600 metres) and Luiperd, the second discovery in the Paddavissie Fairway in the southwest of the block.

In May 2021 a court decision in the Netherlands ordered Shell to cut by 2030 its COemissions by 45% compared to 2019 levels. While this decision may be appealed, the repercussions are far-reaching for Shell and the rest of the industry. 

IEEFA (Institute for Energy Economics and Financial Analysis) recently evaluated Shell’s green progress. According to Clark Butler, the author of the report, Shell must shift at least $10Billion per annum or 50% of total capital expenditures from oil and gas and invest in renewable energy if they are to reduce their carbon intensity in line with their own stated goals.

Between 2016-2019, Shell spent $89Billion in total investments, of which only $2.3Billion was devoted to green energy. In 2019, Shell’s overall operating costs came to $38Billion and capital spending totaled $24Billion.

At present Shell is undertaking a major cost-cutting operation dubbed ‘Project Reshape’ across its three major divisions:• 35% -40% cuts at the Upstream division where the focus will be reduced to 9 core hubs such as Gulf of Mexico, Nigeria, and the North Sea. In Nigeria, Shell has announced plans for disbanding its onshore assets which will certainly spawn growth among Nigeria’s independents. • Integrated gas division, which includes the company’s LNG business, deep cuts are anticipated.• Downstream the review is focusing on the company’s 45,000 service stations, designed to play a key role in the energy transition.

Prior to the court decision, Shell was taking an incremental, testing-the-waters approach. Fiscal discipline was the order of the day so as to be able to continue paying its somewhat reduced, but still royal dividend of 4%.

Shell, undoubtedly in the coming months, will fast-track its new energy strategy. Two projects, which will probably be showcased, to serve as examples of what we can anticipate in the future:

NortH2 Vision, in which Shell and Gasunie have combined forces to create a mega-hydrogen facility, fed by offshore wind farms, which by 2030 could produce 3-4GW energy and possibly 10GW by 2040, becoming one of Europe’s largest hydrogen projects.

Refhyne Project, Rhineland Refinery. Shell is completing the largest PEM electrolyzer in the world at the Rheinland refinery in Germany (10MW). The company aims to become the leading supplier of green hydrogen, where hydrogen production is powered by renewable energy for industrial and transport customers.

Will the BP-ENI merger of activities in Angola become a model for other African countries? An Algerian variant is perhaps already in the making.   Reuters reported that a potential deal would allow ENI to acquire BP’s 45.89% stake in the Amenas natural gas plant and a 33% stake in the Salah gas plant. ENIexpects to transform Algeria into a hub with the acquisition of BP’s assets.

ENI is Africa’s biggest oil and gas producer with a production of 900,000(BOEPD).

The 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.

Egypt could prove to be more challenging for both companies to find a lasting solution either to work together or a possible takeover of assets. BP currently produces, with its partners, close to 60% of Egypt’s gas production through the joint ventures the Pharaonic Petroleum Company (PhPC) and Petrobel (IEOC JV) in the East Nile Delta as well as through BP’s operated West Nile Delta fields.

Nonetheless, ENI claims to be Egypt’s largest oil and gas producer and its huge Zohr gas field is viewed as an example of the company’s extensive assets in the country. Most recently ENI, together with EEHC (Egyptian Electricity Holding Company) and EGAS (Egyptian Natural Gas Holding Company) has signed an agreement to assess the technical and commercial feasibility of producing hydrogen.

Could the BP-Eni joint venture also be extended to assets in Russia and Kazakhstan? BP’s 20% share of Rosneft and Eni’s two large assets in Kazakhstan-co-operatorship of the large Karachaganak Project, and its 16.81% share of the Kashagan Project-could provide food for thought.

Will BP become the first super-major to become an investment vehicle that is both green and can guarantee shareholders a handsome return on investment?

BP’s goal is to become greener, but in the process building an investment structure, which requires only a few skilled accountants. The company has either sacked employees or will be delegating BP’s headcount to its joint ventures. The goal is becoming lean and mean, reducing costs and hopefully increasing margins. In short, an investment vehicle. 

BP is promising returns in the range of 12% -14% in 2025 – up from around 9% today, financed by a $25Billion divestment fund and a pipeline of 25  oil and gas projects. Oil production will also be reduced to 40% by 2030.

To date the company has initiated a series of joint ventures in order to speed up its transition:

• BP and Ørsted announced that they will jointly develop a full-scale green hydrogen project at BP’s Lingen refinery in Germany. The two firms intend to build an initial 50MW electrolyser and associated infrastructure, which will be powered by renewable energy generated by an Ørsted offshore ‎wind farm in the North Sea and the hydrogen produced will be used in the refinery.

• BP and Equinor revealed that BP would become a 50% partner, of the non-operated assets Empire Wind (Offshore New York State) and Beacon Wind (Offshore Massachusetts). BP and Equinor will jointly develop four assets in two existing offshore wind lease located offshore in New York and Massachusetts that together have the potential to generate power for more than two million homes.

• BP joined Statkraft and Aker Offshore Wind in a consortium bidding to develop offshore wind energy in Norway. The partnership–in which BP, Statkraft, and Aker Offshore Wind will each hold a 33.3% share–will pursue a bid to develop offshore wind power in the Sørlige Nordsjø II (SN2) license area. 

The speed with which BP unveiled its strategy to spend $5Billion per year to green itself so that it could have 50GW net regenerating capacity by 2030, .indicatesthat it wants a seat at the green table occupied by the new energy elite-Engie, Enel, E-on, Iberdrola, Ørsted, RWE, and Vattenfall- who have pole positions in determining the direction of the global renewables market.

The question is: is that an ambitious enough target to hand BP a place at the green poker table?  Perhaps a starting position, but hardly enough to be classified as a heavy-weight, green poker player!

Conclusions

1. The court decision in the Netherlands demanding Shell lower its CO2 footprint, together with the IEA’s insistence that the world does not require more oil and gas projects beyond 2050, are the two drivers that will determine the future of the oil and gas industry.

2. The proposed BP-ENI joint venture, which will combine their Angolan assets, will likely be modeled across Africa, and possibly other oil and gas provinces. Excluding ENI for the first time, as an independent member of the big oil fraternity.

3. Look for more co-operation between Chevron and ExxonMobil, most dependent on oil and gas assets, to ensure they can maintain an image of economies of scale.

4. Shell and TOTALEnergies will have to make strategic decisions regarding their deepwater activities, renewables, and LNG & natural gas. Are the three divisions of each company large enough, focused enough, have sufficient budget, and a proper strategy in place to ensure that a reduced carbon footprint is achieved and at the same guaranteeing green shareholders a golden dividend which they anticipate? 

5. Look for more extended co-operation between Shell and TOTALEnergies in deepwater, renewables, and LNG and natural gas. They may possibly hive off whole sectors and create new joint ventures to maintain market share.

6. Equinor will seek more extended co-operation with BP and the new energy elite-Engie, Enel, E-on, Iberdrola, Ørsted, RWE, and Vattenfall-to ensure a place at the green poker table.

7. BP’s strategy to turn itself into an ‘Investment Vehicle’; setting up a series of joint ventures to implement its new renewable strategy, will be closely monitored by the rest of the sector and shareholders. 

8. Europe’s new energy elite-Engie, Enel, E-on, Iberdrola, Ørsted, RWE, and Vattenfall-will determine the speed and strategy of the Energy Transition. Will Africa be part of this strategy?

9. The Oil Majors’ energy transition strategy for Africa has been one of ‘beads and trinkets’. Their African balance sheets have financed their renewables strategy elsewhere around the globe. This is unlikely to change.

Gerard Kreeft, BA (Calvin University, Grand Rapids, USA) and MA (Carleton University, Ottawa, Canada), Energy Transition Adviser, was the 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 Institute Energy Economics and Financial Analysis (IEEFA).

 


Lekela Begins Connecting 250MW Wind Farm to Egypt’s National Grid

Lekela Power has started connecting the first phase of the 250MW West Bakr wind farm to Egypt’s national grid.

20 wind turbines will be connected in this phase of the project, a joint venture between the British investment fund Actis and Mainstream Renewable Power, located 30 km from the town of Ras Ghareb in the Gulf of Suez.

The remaining 76 turbines will be delivered before the end of 2021 by Siemens Gamesa Renewable Energy, which has secured the contract to build the farm from its owner Lekela,

West Bakr Wind Farm is a Build, Own and Operate (BOO) concession, one of the first projects entirely funded by the private sector in Egypt’s Renewable Energy plan, which seeks to reach around 4,500MW capacity by 2023.

The facility’s output will be fed into the Egyptian Electricity Transmission Company (EETC) grid under a power purchase agreement (PPA), over a 20-year period. “West Bakr will be able to power 350,000 Egyptian homes while avoiding the emission of 550,000 tonnes of CO2 equivalent per year”. according to Lekela.

“The West Bakr wind farm will increase Egypt’s wind power capacity by 18%”, the company claims.

Lekela, based in Amsterdam, is owned by Acts and it is one of the busiest Independent Power Producers operating in Africa. It developed Taiba N’Diaye, the 158MW Wind Farm in Senegal; delivered the 140MW Loeriesfontein 2 in the Hantam Municipality in South Africa’s Northern Cape and commissioned the 80MW Noupoort Wind Farm as well as the Khobab Wind Farm in the same country.

 


ENEL Commissions 140MW Wind Power Farm in South Africa

Italian independent power producer (IPP) ENEL Green Power, has started commercial operation of a 140MW (at peak) wind energy farm in Kouga, in South Africa’s Eastern Cape province. 

Christened ‘The Oyster Bay wind farm’, it was awarded as a concession under the 4th phase of tenders of the country’s Renewable Energy Independent Power Producer Procurement Programme (REIPPP)

ENEL Green Power, a subsidiary of the ENEL group, launched construction work on the facility in 2019, after the signing of a 20-year power purchase agreement (PPA) with state-owned Eskom.

ENEL Green Power says it has invested €180Million in the construction of the facility, capable of producing 568 GWh of electricity per year “while avoiding emissions into the atmosphere of 590,000 tons of CO2 equivalent over the same period”. William Price, the company’s CEO in Soth Arica, says it is “ the ninth such clean energy facility commissioned by Enel in South Africa.

The other facilities are located in Nojoli (88 MW), Gibson Bay (111 MW) and Nxuba (140 MW) in the Eastern Cape, Upington (10 MW) and Adams (82.5 MW) in the Western Cape, Paleisheuwel (82.5 MW) in the Western Cape, Pulida (82.5 MW) in the Free State, and Tom Burke (66 MW) in Limpopo. These solar and wind power plants inject 800 MW into the Eskom grid”.


EDF Completes a 35MW Wind Power Facility in the Ciskei

EDF Renewables, an Independent Power Producer (IPP) subsidiary of the Electricité de France (EDF) group, has connected its Wesley-Ciskei wind farm to South Africa’s national grid.

This is the last step before the commercial operation of the facility, located near the city of Hamburg in the Eastern Cape Province.

The new power plant has a capacity of 34.5 MW and consists of ten V126 wind turbines supplied, and installed by Vestas Wind Systems, a Danish company.

EDF Renewables was awarded the concession in the 4th bidding round of the Renewable Energy Independent Power Producer Procurement of South Africa (REIPPP) in 2016.


ENI Signs off on BioFuels Study with The Kenyan Government

Italian explorer ENI has signed a Memorandum of Understanding with Kenya’s Ministry of Petroleum and Mining to promote the decarbonization process through new industrial models of the fully integrated circular economy along the whole bio-fuel production value chain.

The European major says that the parties will jointly conduct feasibility studies to develop waste and residue collection as well as agricultural projects, with the purpose of establishing a wide range of feedstock sources that do not compete with food cycles, to be transformed into bio-fuels and bio-products that might contribute to feed ENI’s bio-refineries in Gela and Venice, Italy. The parties will also assess the opportunity of converting the Mombasa refinery into a bio-refinery, as well as the construction of a new plant for second-generation bio-ethanol from waste biomass, leveraging on Eni technologies Ecofining™ e Proesa®.

The agricultural development project focuses on the development of sustainable oil crop cultivations – namely, low ILUC (indirect land-use change) feedstock such as cover crops, castor in degraded lands, croton trees in agro-forestry systems, and other agro-industrial co-products.

The waste and residue collection would be focused to promote and implement a collection system for used cooked oil (UCO) and of other agro-processing residues.

This initiative will contribute to diversifying Kenya’s energy mix and supporting the overall de-carbonization process, while also decreasing the Country’s dependence from imports of petroleum products. Other expected benefits include developing sustainable agricultural activities and a circular economy, producing power from renewable sources, fostering the economic competitiveness of the local industry, and creating new jobs.

“The agreement contributes to the objectives of the Paris Agreement on Climate Change and to the UN Sustainable Development Goals”, ENI declares in a release. “The projects also contribute to the implementation of the Kenya Bioenergy Strategy, Updated Nationally Determined Contribution, Kenya’s National Development Plans, including Kenya Vision 2030. Also, the initiatives are in line with ENI’s commitment to play a pivotal role in the decarbonization process and with the Company’s target to become palm-oil free by 2023 and to double bio-refineries capacity to around 2Millilon tons by 2024”.

ENI has been present in Kenya since 2013 through its subsidiary ENI Kenya.


ENGIE Angles for Leadership in Nigeria’s Mini-grid Renewable Energy Sector

PARTNER CONTENT

ENGIE is projecting portfolio investment budget of about $100Million in Nigeria’s solar Mini-grid sector between now and the year 2025.

The company, one of the ten leading renewable energy developers in Africa, has created a subsidiary to capture the solar home system and mini-grid market in Nigeria and Ghana, two countries where grid-scale solar and wind opportunities are not on the radar of governments, but which have sizeable markets to take advantage of off grid services.

The new subsidiary integrates a company formerly known as Fenix International, a widely known participant in Nigeria’s pay-as-you-go (PAYGo) solar industry, as well as ENGIE Mobisol, a solar home systems company and ENGIE PowerCorner a mini-grids provider, under one entity and one name – ENGIE Energy Access.

ENGIE Energy Access Nigeria says it plans a phased deployment of Mini Grid power stations across underserved rural communities around the country, adding that the company is currently operating in eleven states of the federation and has completed a Mini Grid plant in Niger state, right in the geographical centre of the country. ENGIE anticipates spending between $120,000 to $500,000, on each of the planned 300 grid assets to be completed by 2025 in Nigeria. That number is 30% of the planned target of 1,000 plants across Africa.

ENGIE, credited with construction and operation of Africa’s largest wind farm to date: the 300MW Tarfaya Wind Farm in Morocco, was formed in 2008 through the merger of Gaz de France and Suez. It is thus a large, independent electricity producer while Fenix International started operations in Nigeria back in 2018 as part of ENGIE’s ambition to expand its footprint in Africa.

ENGIE Energy Access Nigeria says it is in a unique position as the only energy player offering end to end off-grid energy solutions with both solar home systems and mini-grids under one roof. “As Fenix International, we only offered solar home systems, and with ENGIE Energy Access we are now able to offer both solar home systems and mini-grid solutions to our customers. Our decentralized solutions cover the full spectrum of energy needs from basic lighting and phone charging (with our basic kit selling for $108 (or ₦44,500) and can be paid off in 20 months) to more advances systems for households all the way to powering productive use equipment to promote entrepreneurship and boost economic activity in rural communities across Nigeria.

 


Egypt’s Red Sea Resort to Generate 5MW from Solar PVs

The management of Soma Bay, a holiday Resort on the Red Sea in Egypt, has inked a set of agreements with TAQA Power to install solar photovoltaic (PV) facility on the resort.

The first part is a PPA (Power Purchase Agreement); stipulating TAQA Power to invest in building and operating a PV station with the capacity of 3.8 MW, over the course of a 9-month period, and on the land owned by Somabay. 

Subsequently, TAQA Power is entitled to a concession management agreement of the solar power station for 30 years. The second part of the agreement is an EPC Contract “Engineering, procurement, and construction”; where in  TAQAPower is to design, deliver and install another PV station, with a 1.2 MW capacity, and then transfer its management to Abu Soma Touristic Development (ASDC). The total contracted capacity of both stations is up to 5 MW.”

“TAQA Power’s agreement with Abu Soma Touristic Development counts as a model for utilizing renewable energy and capitalizing on its economic value,” says Samy Abdelqader, TAQA Power’s Cheief Executive officer.

Somabay is one of Red Sea’s most prominent coastal destinationand one of Africa’s most sought-after tourist sites. The 10 million square metre peninsula south of Hurghada, which harbors an exquisite recreational sandy beach along its 11KM coastline, says a statement on the website of Abu Soma Touristic Development, which manages the bay. “Our primary objective is to generate the power required using solar energy to reduce electricity and water desalination cost, thereby closing the gap between our consumption and distribution demands.”


The Greening of BP- Phase 2: Becoming an Investment Vehicle?

By Gerard Kreeft

Helge Lund, BP’s Chairman of the Board, is perhaps ideally suited to take BP to its next challenge: the first super-major to become an investment vehicle which is both green and can guarantee shareholders a handsome return on investment. 

Lund is a veteran of oil and gas politics, having served as Equinor’s CEO for 10 years, and CEO of British Gas before it was taken over by Shell. As Board Chairman of BP, he is chartering BP’s green future. Not only has he overseen the company’s transformation to becoming greener, he is in the process building an investment structure, which now requires only a few skilled accountants. The company has either sacked employees or will be delegating BP’s headcount to its joint ventures. The goal is becoming lean and mean, reducing costs and hopefully increasing margins. What to

date has happened?

What BP Promised

In 2020, BP painted a glowing portrait for its shareholders of how it would reach the promised green land:• An underlying EBIDA (Earnings before interest, depreciation and amortization) of between 5% – 6% per year through to 2025 with returns in the range of 12% – 14% in 2025 – up from around 9% today.• After allowing for the impact of divestments, and reflecting the expected share buyback commitment, EBIDA per share is expected to grow by 7%- 9% per year through to 2025.• From 2025 onwards, when its low carbon projects start to kick in, expect growth of between 12%- 14% to be maintained.• BP has announced it wants to reduce its oil production by 2030 by 40%. • According to BP, its $25Billion divestment will provide the basis for up-scaling its low-carbon business. A pipeline of 25 oil and gas projects, and additional 18 projects in the pipeline are also key

factors.• BP also announced that it would be spending $5Billion per year to green itself and

by 2030 will have 50GW of net regenerating capacity.  To date the company has a planned pipeline of 20GW of green generating capacity.

To date, BP has taken the following green steps: 

BP and Ørsted announced that they will jointly develop a full-scale green hydrogen project at BP’s Lingen refinery in Germany. The two firms intend to build an initial 50MW electrolyser and associated infrastructure, which will be powered by renewable energy generated by an Ørsted offshore ‎wind farm in the North Sea and the hydrogen produced will be used in the refinery.‎ 

BP and Equinor revealed that BP would become a 50% partner, of the non-operated assets Empire Wind(Offshore New York State) and Beacon Wind (Offshore Massachusetts). BP and Equinor will jointly develop four assets in two existing offshore wind leases located offshore New York and Massachusetts that together have the potential to generate power for more than two million homes. BP is to pay Equinor $1.1 billion for interests in the existing US offshore developments and to form astrategic partnership to pursue other offshore opportunities together in the fast-growing US market.

Most recently, BP joined Statkraft and Aker Offshore Wind in a consortium bidding to develop offshore wind energy in Norway. The partnership – in which BP, Statkraft and Aker Offshore Wind will each hold a 33.3% share – will pursue a bid to develop offshore wind power in the Sørlige Nordsjø II (SN2) licence area. According to the consortium SN2’s favourable location provides power export access to local and adjacent markets. The consortium also intends to explore opportunities to provide clean power to electrify offshore oil and gas facilities. 

BP is to purchase 9GW of solar development projects in the US from independent US solar developer 7X Energy. The acquisition represents a significant step towards developing its net renewable generating capacity to 20GW by 2025 and to 50GW by 2030.

Finally, BP and ENI have stated that they will be merging their assets in Angola into a joint venture, possibly with a view to also bringing in other African assets. This could include:

Algeria, where BP has helped to deliver two major gas developments at Salah Gas and In Amenas, both of which are joint ventures with Sonatrach and Equinor.

BP currently produces, with its partners, close to 60% of Egypt’s gas production through the joint ventures the Pharaonic Petroleum Company (PhPC) and Petrobel (IEOC JV) in the East Nile Delta as well as through BP’s operated West Nile Delta fields. 

In Mauritania and Senegal, BP and its partners are developing the Greater Tortue Ahmeyim gas field with a 30-year production potential. The field has an estimated 15Trillion cubic feet of gas and is forecast to be a significant source of domestic energy and revenue.

What will happen to BP’s 20% share in Russia’s Rosneft which comprises three oil and gas joint ventures? Maintaining a presence in Russia could be very strategic, given the country’s oil and gas assets and the fact that a green strategy is still waiting to be discovered.

The New Energy Players

The speed with which BP has unveiled its strategy indicates that it wants a seat at the green table,occupied by the new energy elite-Engie, Enel, E-on,Iberdrola, Ørsted, RWE, and Vattenfall- who have pole positions in determining the direction of the global renewables market. Is BP’s $5Billion per year investment to green itself and its goal of 50GW net regenerating capacity by 2030 enough to warrant it a place at the green poker table?  Perhaps a starting position, but hardly enough to be classified a heavy-weight, green poker player! Consider the competition:• Engie: in 2021 will spend €11-12Billion on investments across a broad swath of sectors including solar, wind (on and offshore), hydro plants, biogas, and developing gas and power lines, and will have 33GW of global renewable installed capacity by 2021.• Enel: strategic plan outlines total investments of €190Billion by 2030 and tripling renewable capacity to 145GW. • Ørsted: by 2030 will have installed capacity of 50 GW. • Iberdrola: in the period 2020-2025, will be spending €75Billion on renewable energy and has a pending target of 95GW of installed wind capacity.• RWE: by 2022 RWE will have 28.7 GW of installed wind and solar capacity.• Vattenfall: In the Nordic countries Vattenfall has low emissions with practically 100% of the electricity produced based on renewable hydro-power and low-emitting nuclear energy.

Then there is the paradigm that BP and the other majors have to face: an oil company becoming an energy company. The oil company strategy: high risk = high returns being replaced by high risk= low/no returns. 

New energy companies by contrast- Engie, Enel, Iberdrola, Ørsted, RWE and Vattenfall- all are low risk: their dividends are competitive with the oil majors. Iberdrola has a 5% dividend planned for 2021, and Enel  paid 5.15% in 2020, and Engie 4.77% in 2019. Their stock prices are steady and positive. Their green strategy has been delivered, in place and accepted by the investor community.

It should not be surprising that the investor community is wondering how a transformed BP can become an energy company promising to deliver results that other energy companies can only dream about: an EBIDA per share of between 7%- 9% per year through to 2025 and from 2025 onwards when low carbon projects start to kick in growth of between 12%- 14%.

Answers may start to appear more quickly than we realize.

Charles Donovan, Director of the Centre for Climate Finance and Investment at Imperial College and lead author of a recent study released by Imperial College and the IEA (International Energy Agency) found that renewable energy investments are delivering massively better returns than fossil fuels. The study(May 2020) analyzed stock market data to determine the rate of return on energy investments over a five-and 10-year period.

Renewables investments in Germany and France yielded returns of 178.2% over a five year period, compared with -20.7% for fossil fuel investments. In the UK, also over five years, investments in green energy generated returns of 75.4% compared to just 8.8% for fossil fuels. In the US renewables yielded 200.3% returns versus 97.2% for fossil fuels.

Green energy stocks were also less volatile across the board than fossil fuels, with such portfolios holding up well during the turmoil caused by the pandemic, while oil and gas collapsed. Yet in the US which provided the largest data set, the average market cap in the green energy portfolio analyzed came to less than a quarter of the average market cap for the fossil fuel portfolio—$9.89Billion for the hydrocarbons versus $2.42Billion for renewables.

Speaking to Forbes.com, Donovan said “The conventional wisdom says that investing in fossil fuels is more profitable than investing in renewable power. The conventional wisdom is wrong.”

Conclusions

That BP has taken the step of becoming an investment vehicle is a bold and radical step and could create a number of exciting investments. BP’s strategy is in place. Now the implementation.

The various joint ventures could provide new possible investment options, given the decentralized decision-making and shorter lines of communication.

BP’s strategy is one being developed and watched by the other majors. How long can the other majors including ENI, Equinor, Shell, and TOTALEnergies continue to balance the various investment balls in the air, hoping to fund both their exploration and development assets and their renewables? This can continue for a short time but ultimately more strategic decisions have to be made. More crossovers between the oil majors and the new energy players. Also, more mergers downstream. In short, a total revamp of the energy value chain.

The oil majors have helped propagate their own myth that fossil fuels yields are indeed better than renewables. With BP proclaiming it is now an energy company the company may have a lot of explaining to do to convince its shareholders that their return on investment and their golden dividend can be guaranteed.

Is not BP’s strategy to become a partner with Equinor in its US offshore wind projects, and their decision to partner with Ørsted at BP’s Lingen refinery in Germany to produce hydrogen the most visible evidence that the energy value chain is starting to produce new alliances?

In Africa, the BP-ENI joint venture could set off a series of mergers and acquisitions among the other majors and national oil companies. Perhaps with a new strategy in place renewable energy in Africa headed by the majors may become a serious part of the mix.

Finally, do not be surprised that the BP’s Net Zero Scenario of reducing fossil fuels to 20% of today’s share of primary energy by 2050 becomes a reality. The urgency of the task ahead is virtually a guarantee that this BP scenario will happen sooner rather than later. 2030 and not 2050 could become BP’s new deadline to become CO2 neutral.

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.

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