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Renewable Hydrogen: Key to Defossilising Hard-to-electrify Industries

By Olivia Breese, CEO, Power-to-X, Ørsted

When it comes to renewable hydrogen, there is a clear gap between ambition and reality. On the one hand, there is widespread recognition that renewable hydrogen is the only real option for defossilizing hard-to-electrify sectors like shipping, aviation, and steelmaking, which contribute around 30 percent of global greenhouse gas emissions.

This is why governments have been dramatically scaling their targets. Today the global production of renewable hydrogen is around 0.1Million tons per year; by 2030, the EU alone is aiming to produce 10Million tons per year.

Based on the need for global climate action and the stated ambitions from governments, renewable hydrogen therefore seems an urgent priority. On the other hand, only around four percent of planned renewable hydrogen projects have reached Final Investment Decision – the signal that a project will move from planning to reality. There are simply not enough signatures on contracts and spades in the ground.

What explains this gap?

In a word: offtake. Renewable hydrogen currently comes with a clear cost premium compared to fossil-based hydrogen. This means that the potential offtakers – shipping, aviation, steelmaking – are wary of signing contracts to buy green hydrogen, which makes it difficult for both developers and the supply chain to invest and grow.

The way through this impasse involves simultaneously addressing supply and demand: providing financial support to kickstart the industry, while legislating to level the playing field for market actors and create a reliable demand-side pull. It also involves connecting supply and demand by building the pipelines that will transport renewable hydrogen from production sites to the regions where it is most needed.

In the EU, existing financial support such as the Important Projects of Common European Interest (IPCEI) has set the wheels in motion but could be more impactful if the question of timeline is addressed. Between submissions of applications and awards, fundamental changes in the economic environment – increased interest rates, costs of raw materials, bottlenecks in supply chains – can dramatically alter the business case and the amount of funding required. The past three years have shown that it may be difficult to scale such mechanisms quickly enough to kickstart an industry.

More recent initiatives in the EU are heading in the right direction. The European Hydrogen Bank provides a 10-year fixed-premium of up to €4.5 per kilogram for renewable hydrogen, which is a bold and welcome step. However, the total amount available in the first auction (€800Million) may struggle to make a major impact, and any awards cannot be combined with other potential funding mechanisms available in the EU. In addition, while auctions can work well for mature markets, they are by nature competitive and therefore uncertain, while developers and suppliers crave certainty so that they can invest in new supply chains.

In the US, the Inflation Reduction Act is an exciting development, but market actors are eagerly awaiting guidance on how the proposed tax credit for hydrogen production, 45V, will be implemented – not least to achieve the full credit at $3 per kilogram. The ongoing debate and delay create uncertainty once more: developers and suppliers cannot yet be sure that their projects will be financially viable.

On the demand side, the regulatory framework to create an offtaker pull is coming together. The new Renewable Energy Directive (REDIII), and the ReFuelEU and FuelEU regulations, set clear targets for the use of renewable hydrogen and derivates in industry, aviation and shipping. However, EU frameworks are still to be transposed into national laws in the coming months, and there is significant lack of clarity on enforcement and penalties for non-compliance. In addition, some industries will need to make major upfront investments in new facilities to switch from fossil fuels use to renewable hydrogen, as is the case in steelmaking, and it is only slowly emerging how they will be supported in this endeavour.

All of this is not to sound gloomy about renewable hydrogen. Massive progress has been made and the industry is here to stay. Spades are in the ground, including in Northern Sweden, where Ørsted is building FlagshipONE, the largest e-methanol facility in Europe to have taken FID. Governments and investors have put real money on the table; only the structure and mechanisms need revision.

Renewable hydrogen will undoubtedly be a major part of the future energy system. But if it is to fulfil its potential in time for global climate goals, the cost premium must come down and the supply chain must be scaled. For that, it’s crucial for policy to work from two sides in tandem: support the supply and boost the demand – and build the pipelines to connect the two.

 


Post-COP28: What Now? Waiting for the Sky to Fall?

By Gerard Kreeft

Instead of a narrative from myself I find it best suited to give attention to Princeton University’s Carbon Mitigation Initiative (CMI), which has aptly described, in summary fashion, the state of our little planet Earth and provided a sobering roadmap. I have taken the liberty to quote literally CMI’s narrative.

The key is building a Stabilization Triangle (see below).

The Carbon Mitigation Initiative (CMI) is an independent academic research programme that brings together scientists, engineers and policy experts to design safe, effective and affordable carbon mitigation strategies. Sponsored by bp and administered by the High Meadows Environmental Institute, CMI is Princeton university’s largest and most long-term industry partnership. Since its inception, CMI has been committed to the dissemination of its research findings in peer-reviewed academic literature so they may benefit the larger scientific community, government, industry and the general public.

Building the Stabilization Triangle

We already have the technology we need to take the world off the path toward dramatic climate change.

Carbon emissions from fossil fuel burning are projected to double in the next 50 years (Figure 1), keeping the world on course to more than triple the atmosphere’s carbon dioxide (CO2) concentration from its pre-industrial level. This path (black line) is predicted to lead to significant global warming by the end of this century, along with decreased crop yields, increased threats to human health, and more frequent extreme weather events.

In contrast, if emissions can be kept flat over the next 50 years (orange line), we can steer a safer course. The flat path, followed by emissions reductions later in the century, is predicted to limit CO2 rise to less than a doubling and skirt the worst predicted consequences of climate change.

Keeping emissions flat for 50 years will require trimming projected carbon output by roughly 8Billion tons per year by 2060, keeping a total of 200Billion tons of carbon from entering the atmosphere (yellow triangle). We refer to this carbon savings as the stabilization triangle.

To keep pace with global energy needs at the same time, the world must find energy technologies that emit little to no carbon, plus develop the capacity for carbon storage. Many strategies available today can be scaled up to reduce emissions by at least 1Billion tons of carbon per year by 2060. We call this reduction a wedge of the triangle (Figure 2). By embarking on several of these wedge strategies now, the world can take a big bite out of the carbon problem instead of passing the whole job on to future generations.

We Have the Technology

Each of the 15 strategies below has the potential to reduce global carbon emissions by at least 1Billion tons per year by 2060, or 1 wedge. A combination of strategies will be needed to build the eight wedges of the stabilization triangle.

EFFICIENCY

  1. Double fuel efficiency of 2Billion cars from 30 to 60 mpg.
  2. Decrease the number of car miles traveled by half.
  3. Use best efficiency practices in all residential and commercial buildings.
  4. Produce current coal-based electricity with twice today’s efficiency.

FUEL SWITCHING

  1. Replace 1400 coal electric plants with natural gas-powered facilities.

CARBON CAPTURE AND STORAGE

  1. Capture AND store emissions from 800 coal electric plants.
  2. Produce hydrogen from coal at six times today’s rate AND store the captured CO2.
  3. Capture carbon from 180 coal-to-synfuels plants AND store the CO2.

NUCLEAR

  1. Add double the current global nuclear capacity to replace coal-based electricity.

WIND

  1. Increase wind electricity capacity by 10 times relative to today, for a total of 2Million large windmills.

SOLAR

  1. Install 100 times the current capacity of solar electricity.
  2. Use 40,000 square kilometers of solar panels (or 4 million windmills) to produce hydrogen for fuel cell cars.

BIOMASS FUELS

  1. Increase ethanol production 12 times by creating biomass plantations with area equal to 1/6th of world cropland.

NATURAL SINKS

  1. Eliminate tropical deforestation.
  2. Adopt conservation tillage in all agricultural soils worldwide.

No one strategy will suffice to build the entire stabilization triangle.

New strategies will be needed to address both fuel and electricity needs, and some wedge strategies compete with others to replace emissions from the same source. Still, there is a more than adequate portfolio of tools already available to build the stabilization triangle and control carbon emissions for the next 50 years.

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 guest contributor to Institute for Energy Economics and Financial Analysis (IEEFA). His book ‘The 10 Commandments of the Energy Transition ‘is on sale at https://books.friesenpress.com/store/title/119734000211674846/Gerard-Kreeft-The-10-Commandments-of-the-Energy-Transition

 

 

 


NUPRC Accused of Favouritism in Marginal Field License Dispute

By Lukman Abolade, Senior Correspondent

Nigeria’s Upstream Regulatory Commission (NUPRC) has been accused of favouritism and undue interference in the allocation of a license to exploit the Ekpat Marginal Field, located in Oil Mining Lease (OML) 67 to MultiPlan Nigeria Limited after initially awarding the bid to another company, Magnumflo Nigeria Limited.

The dispute originated from the controversial 2020 bid round for Marginal fields. During this bid round, Magnumflo Resources, led by Executive Director Robert Bakre, submitted a bid for EKPAT OML 67. Initially, the Department of Petroleum Resources (DPR), now defunct, awarded Magnumflo and another company, Duport Midstream, shares of 57.11% and 48.89% respectively, for the Ekpat marginal field.

Unable to raise the expected signature bonus, Bakre told Africa Oil+Gas Report that he secured an investment agreement with Igho Okotete, the Managing Director of MultiPlan, after failing with investors outside of Nigeria.

A copy of the agreement seen by Africa Oil+Gas Report, Magnumflo agreed to allocate 60% of its 57.11% equity in OML 67 to MultiPlan before the ₦3.9Billion signature bonus was paid to the Central Bank of Nigeria (CBN) on its behalf.

The Memorandum of Agreement (MOA) emphasized collaborative development enshrined in a Joint Operating Agreement (JOA) to be signed after the payment to define roles, responsibilities, and mode of governance but it was never signed by MultiPlan.

Bakre said after MultiPlan had paid the signature bonus, a company based in Switzerland where he had sought funding from indicated interest to fund the asset to first oil and gas in lieu of but Okotete rejected the offer.

A month after the payment, Bakre approached Okotete to request payment for his share of the expenses incurred in the initial development of the asset, but Okotete refused.

Bakre explained, “It was the issue of financing his stake in terms of recurring expenditure, such as diesel, office expenses, and cost of goods, which amounted to 194Million naira, his portion. We were paying out of pocket. That’s where the argument started. He said No, and that’s where the argument started.

“He called us to his office one time, said the amount was too high. Could we negotiate instead? He suggested paying ₦100Million now and ₦50Million from first oil and gas. He also proposed capping our monthly expenditure. We agreed to everything, but the next day, instead of receiving the payment, I received an email stating that he needed to audit all our expenditure because he didn’t want any artificially generated receipts.”

The insistence of Magnumflo for Multiplan to sign the JOA and the latter’s request to audit the expenditure caused a stalemate between the parties and halted communication.

Multiplan told Africa Oil+Gas Report that the ₦194Million bill presented by the Magnumflo was a case

of extortion. “During the bid round, I bid, they did not award us any bid, although they initially told us that we won, and we did different checks but when they awarded, they did not award our own to us, so they gave to people and we found out that some of the people could not pay. These people (Magnumflo) came to me and said I should pay for them and they would give me 60% equity and I agreed. I paid $9.6Millon converted to naira about ₦4Billion, after paying the money, I went to the US to see my family, by the time I came back, they changed that they spend $550,000 and I should bring 60% of it”.

“Before I knew it, they have written a letter, cancelling the agreement I had with them, so I went to Court for about five months and court issued judgement in my favour that they did not have the right to cancel the agreement. The agreement was that after paying the signature bonus and we would work together but they are fraudulent, but they said they spent $550,000 in less than a month? Is there no due process of funding? I have the 60% of their 57.11%, they cannot do anything without my permission”.

When asked about the sudden intervention of the NUPRC in the commercial dispute between his company and Magnumflo, OKotete said he had written to the Commission because he felt he was being extorted in the name of Federal government.

The situation reached a tipping point when NUPRC, the regulatory body overseeing the oil and gas sector, allegedly interfered in the commercial dispute. Despite Magnumflo’s insistence on resolving the matter through arbitration, NUPRC reportedly favoured Multiplan’s stance, leading to a suspension of an arbitration process set up to resolve issues between the companies.

Magnumflo’s Bakre said: “Unbeknownst to us as at January of 2022, he (Okotete) had already written to NUPRC  he wanted to cease and repudiate the agreement with us because we were trying to extort money from him. By June, a week to the time they’re handing the license, that’s when we got to know about the letter. So NUPRC sat on the letter from January, for six months to June, they didn’t tell us anything, until a week to the day they were supposed to award a license to awardees, we got a letter from them which they call for a meeting that there’s an issue with our license, and that we should come for a meeting.

“When we got there, they said we’re not going to give you a license because this man is saying that he wants his money back. You guys need to resolve yourself. Return his money to him, so that we can give you your license and that was one week to go, how are we going to raise 3.9Billion naira in one week?

“They literally jumped into the arena. I don’t even know why NUPRC was entertaining his letters, because as far as I understand, we are the awardees, we were the ones that they should be communicating with, they had no business with Multiplan, only God knows what had happened to the point where they were entertaining him”.

After the one-week ultimatum, he noted that NUPRC did not give his company the license to the asset, insisting they pay back Multiplan’s money, and even threatened to withdraw their award saying they had applied to the presidency, to withdraw the award in ‘public interest’.

And so we went to NUPRC and said, Listen, you’re telling us to pay him back his money and you are writing this kind of letter, which investor in his right mind, do you think will give us money? What we need from you is a letter of comfort, to give us time to pay this money back. And just make clear to the investor that wants these things. And by the way, we were in arbitration to resolve this, because that was part of our agreement in the MOA. NUPRC did not even allow the arbitration process to go on when they jumped into the arena.

NUPRC’s threat to withdraw Magnumflo’s award heightened the company’s precarious position, prompting them to appeal for understanding from the commission and the challenges of securing investments amid the ongoing dispute.

Multiplan’s Okotete said: “At that point NUPRC called and intervened, they asked them to look for the money in  90 days and pay me back. NUPRC had written to withdraw the award because the company that paid is Multiplan. So, they explained that they would give the money back to me, till it elapsed, they did not pay, that was when they cancelled it and re-awarded it to me since we are the beneficiary and we bid too during the bid round,” he said.

He further noted that the license was awarded this year but he could not remember the specific month during an interview with Africa Oil+Gas Report.

“The license award was issued this year, it was the new Minister that issued it to us, the old arrangement was cancelled by the previous government, but the license and issuance were pending till the new Minister took office, because the Permanent Secretary could not sign. The award was withdrawn when we complained to NUPRC,” he noted.

In a letter dated 30, May 2023 signed by the Commission’s Chief Executive, Gbenga Komolafe, NUPRC conveyed a notice of withdrawal to Magnumflo.

According to the Commission, it noted that Magnumflo had ‘failed to provide consideration for the award, based on the legal principle that consideration must move from the promise’.

The NUPRC then re-awarded the 57.11% initially of Magumflo to MultiPlan.

Before withdrawing the award from Magnumflo, Africa Oil+Gas Reports found that Multiplan and Duport Midstream, another party involved, had already formed a Special Purpose Vehicle (SPV) named Ekpat Producing JV Limited.

The SPV with registration number 2014956, was created on December 28, 2022 which falls into the ultimatum given to the warring parties to resolve their dispute.

NUPRC’s alleged interference in favour of MultiPlan adds a layer of complexity to the commercial dispute between the companies. The regulatory body, tasked with overseeing the oil and gas sector, is now being accused of overstepping its mandate by entertaining grievances from one party over the other.

Magnumflo insists on being granted the license as the rightful recipient and also requests sufficient time for refunding MultiPlans’ signature bonus paid on its behalf, or alternatively, the reinstatement of their original agreement.

“What we want is that we should give us an opportunity to pay him back his money, if he says no, he really likes the asset, he will stick it up and work with us, then we want our 40% back, we are not disputing his 60%. But the issue is, if we’re going to work this asset, we need to work it properly. We have to have agreements in place that will ensure that corporate governance must be adhered to.

We are in court at the moment, the basis of going to court was to stop them from doing what they have done. And they’ve now done. The case will come up for hearing on December 14th,” Bakre said.

Africa Oil+Gas Report contacted the NUPRC to explain the reasons for interfering in a commercial dispute between two partners and eventually awarded the marginal field to Multiplan, the commission said ‘the government must also continue to send the message that investments in the oil and gas sector is secure and partnerships will be protected’.

NUPRC added that it received an approval from the President to award residual fields ‘to companies who participated in the bid round and demonstrated proof of funds. Multiplan entities met the criteria (and had won an asset directly in the bid round) and nominated this particular entity for the award of the asset, having paid the signature bonus’.

“The Commission will be urging the court currently hearing the case to follow the precedent laid down by the Federal High Court It is high time Nigerian courts cease to allow companies that lack the financial capacity to frustrate the development of petroleum assets. The government did equity between the parties by engaging in a year-long mediation process that failed to yield any fruit,” the Commission explains.


AfGIIB, InfraCorp & Solarge Plan ‘Large Scale’ Solar PV Manufacture in Nigeria

A solar PV manufacturing plant, described as one of the first large scale production facilities in the world for lightweight solar panels with ultra-low carbon footprint, is being planned for development in Nigeria.

The 1,000MW capacity project is a collaboration between the Infrastructure Corporation of Nigeria (InfraCorp), a $15Billion government-backed, privately managed infrastructure development, the African Green Infrastructure Investment Bank (AfGIIB) and Solarge International BV, a European manufacturer of lightweight solar panels.

There were no details on the project site, or timeline, when the plan was unveiled on the sidelines of the Conference of Parties (COP) 28, the climate change conference in Dubai, United Arab Emirates.

Nigeria is an unlikely site for a large-scale solar plant manufacturing factory. There is no single solar power plant in the country that has a capacity exceeding 10MW. Indeed, the highest capacity solar plant in the country is the 10MW facility, sited near the Challawa Industrial Estate, in the Kumbotso local government area of Kano state, in the country’s north. It was commissioned in February 2023.

The government, in 2016, signed power purchase agreements (PPAs) with 14 independent power producers (IPPs) for the construction of 1, 120MW of total installed grid-connected solar capacity. None of these plants were ever constructed, as disputes over tariff price and guarantees to mitigate developers’ risk drew a wedge between the government and the IPPs.

Even so, there’s a growing number of Standalone Solar Home Systems for Households and Micro Small Medium Enterprises (MSMEs) as well as Mini-grids for specific, remote localities not connected to the grid.

It is these systems that are expected to provide the initial market for the proposed manufacturing facility.

The three partners: InfraCorp, Solarge and AfGIIB, collectively note that the facility “will play a pivotal role in Nigeria’s commitment to sustainable local manufacturing and critical infrastructure for achieving net-zero emissions and advancing its energy transition plan to cleaner and sustainable energy sources, reducing reliance on traditional fossil fuels”.

The parties also see the plant as an avenue for job creation, acceleration of electrification as well as a growth vehicle for the economy.

“More fundamentally, the project reinforces the drive towards localisation, green manufacturing and import substitution agenda of the country.”, declared Lazarus Angbazo, ICEO nfraCorp.

Nigeria already has a solar panel manufacturing factory. It is a 100MW automated Solar PV manufacturing plant, commissioned by Auxano Solar on September 28, 2023, in Lagos, the country’s commercial hub. Prior to establishing the new facility, Auxano ran a plant with an installed capacity of 10MW in an area called Navy Town, in the west of Lagos. It was the country’s first privately owned, solar PV manufacturing plant.

What the planned project by InfraCorp, Solarge and AfGIIB, is mainly contributing, however, is a combination of scale, capacity increase and the fostering of international relationships.

Jan Vesseur, CEO of Solarge, said the joint efforts “will contribute to the realisation of a sustainable and resilient energy future for the country and strengthen the long-standing bilateral relationship between the Government of Nigeria and the Netherlands.”

 


Tanzanian Government to Grab Higher Share in 100MMscf/d Gas Producing Acreage

“TPDC can purchase a 20% production interest in Mnazi Bay, increasing its ownership to 40% in the project. The joint operating agreement will be amended…”

Paris headquartered junior, Maurel et Prom (M&P), has signed an agreement with the Tanzanian government, that leads, it says as “a positive step towards receiving the approvals to complete the acquisition” of all existing shares of Wentworth Resources, a producer of natural gas in the country’s Mnazi Bay region.

The company says the deal strengthens its existing long-term partnership with the state hydrocarbon firm: Tanzania Petroleum Development Corporation (TPDC).

Mnazi Bay Complex is a conventional gas field, producing l103Million standard cubic feet per day of gas, (103MMscf/d) which satisfies about half of Tanzania’s domestic market. It is located onshore in the Mtwara region of Southern Tanzania, operated with 48.06% share by M&P Exploration and Production Tanzania Ltd.

Wentworth Resources, headquartered in the UK, is a partner in the project, with a 31.9% stake. TPDC holds the remaining 20%.

M& P’s agreement with TPDC is structured as a ‘call option’, which provides a pathway for TPDC to increase its ownership by up to 20% in the production interest (the Call Option) of the Mnazi Bay project.

“As part of this agreement, M&P has received the required pre-emption waiver from TPDC and Tanzanian government’s approval for the acquisition, and only the final consent from Tanzania’s Fair Competition Commission (FCC) remains outstanding, which is expected to be granted before the Jersey Court sanction hearing”, M&P says in a statement.

“As the acquisition is to be implemented by means of a scheme of arrangement pursuant to Article 125 of the Jersey Companies Law, and given the approvals received, Wentworth has made arrangements for the Jersey Court to consider and if, thought fit, sanction the Scheme at a court sanction hearing to be held on December 19, 2023.

Following this date, M&P will take ownership of Wentworth and acquire its 31.94% direct and indirect interest in Mnazi Bay.

Subsequent to the closing of the acquisition, M&P expects TPDC to execute the Call Option whereby TPDC can purchase a 20% production interest in Mnazi Bay. As a result, M&P will hold a 60% ownership and TPDC will hold a 40% ownership in Mnazi Bay. The joint operating agreement will be amended to reflect new partnership conditions, and will allow TPDC to appoint secondees to participate in the operations of the Mnazi Bay field.

The acquisition shall be funded by the £63Million placed in escrow as part of the acquisition announced on 5 December 2022. Upon execution of the Call Option, TPDC will contribute its share of the acquisition consideration, and Wentworth’s cash balance and corporate winding down costs will be shared between M&P and TPDC.


Tanzania Approves Assignment of Afren’s Former Interest to Octant

Tanzania’s Minister of Energy has approved the assignment of 74% interest in the Tanga block from Afren Tanzania Ltd. to Octant Energy Tanzania Ltd., in accordance with Section 86(2) of the Petroleum Act 2015.

The parties Petrodel (26%) and Octant (the operator – 74%) can now move into the final three-year period in which they plan to reprocess the 3D seismic survey of Tanga acquired in 2013.

“The Tanga block is optimally located as it includes a deep basin with a very thick sedimentary section that has the potential to host several source rock intervals and reservoir/seal pairings”, Petrodel says in a release. “Potential petroleum plays recognised to date are Lower Cretaceous sands deposited in deltaic to shallow marine environments, Upper Cretaceous submarine fans, Eocene shelf sands and Miocene fluvial and deltaic sands”, the company explains. “Both structural and stratigraphic traps have been identified by previous mapping campaigns”.

Oil seeps and shows encountered in previous wells drilled on the nearby Pemba Island attest to the oil potential of the block and surrounding area.  Previous interpretations have indicated the likely presence of several giant (>100 MMB) prospects within the Tanga block.

“Petrodel had been a first mover in Tanzania and was awarded Tanga, Latham & Kimbiji exploration licences under competitive tender”, remarks Michael J Prest, the company’s Founder and Chief Executive. “We farmed out an interest to Afren (now defunct) and so we are delighted with what is a most positive and significant development and we look forward to working with our partner Octant in realising Tanga’s significant potential.”

Petrodel was awarded Tanga, Kimbiji and Latham licenses in Tanzania in 2006. Tanzania is home to sub-Saharan Africa’s third largest gas resources, with reserves estimated at 57.5Trillion cubic feet.

 

 


Africa Could Lose $25Billion per Year as new EU Carbon Tax Comes into Effect, AfDB Warns

A new EU carbon border tax could significantly constrain Africa’s trade and industrialization progress by penalizing value-added exports including steel, cement, iron, aluminium and fertilizers, the African Development Bank (AfDB)Group has warned.

“With Africa’s energy deficit and reliance mainly on fossil fuels, especially diesel, the implication is that Africa will be forced to export raw commodities again into Europe, which will further cause de-industrialisation of Africa,” AfDB President, Akinwumi Adesina Adesina, told delegates at the Sustainable Trade Africa Conference held at the UAE Trade Centre in Dubai.

“Africa has been short-changed by climate change; now it will be short-changed in global trade,” the Pan African Bank chief said at the summit, on the sidelines of COP 28.

And it could be worse. Benedict Oramah, President of the African Export-Import Bank, Afreximbank, warned that “preliminary results of a study recently commissioned by Afreximbank reveal that rapid decarbonisation by fossil fuel-exporting countries in Africa could cut merchandise exports by $150 Billion.”

Adesina commented: “Because of weak integration into global value chains, Africa’s best trade opportunity lies in intra-regional exchanges, with the new Africa Continental Free Trade Area estimated to increase intra-Africa exports over 80% by 2035.”

The AfDB chief stressed that Africa was already being overlooked in the global energy transition, according to data from the International Renewable Energy Agency.

“Africa received just $60Billion or 2% of the $3 trillion of global investments in renewable energy in the past two decades, a trend that will now impact negatively on its ability to export competitively into Europe,” said Adesina as he called for what he termed the Just Trade-for-Energy Transition (JTET) policies, which would enable Africa’s renewable ambitions without restricting its trade prospects.

Africa will need to use natural gas as a transition fuel to reduce the variability of renewable energy and stabilize its energy systems in support of its industrialization, Adesina explained.

 


Invictus Formally Declares a Natural Gas Discovery in Zimbabwe

By Sully Manope, in Windhoek

Australian minnow, Invictus Energy, has moved from citing “encouraging signs of hydrocarbon”, in its drilling campaign in Zimbabwe, to formally declaring a hydrocarbon discovery.

The company is on the sidetrack to the Mukuyu-2 well, (Mikuyu-2STK), its fourth hole on the Mukuyu prospect, in the Caborra Basa project, onshore Zimbabwe.

“We are delighted to declare a gas discovery from the Mukuyu-2 sidetrack well in the Upper Angwa formation”, Scott Macmillian, Invictus’ Managing Director, declared in a statement. “The discovery represents one of the most significant developments in the onshore Southern Africa oil and gas industry for decades”.

Invictus explains that the decision to call a discovery was made after an intermediate wireline logging was run with the primary objective of obtaining hydrocarbon samples from Upper Angwa reservoirs located close to the base of the Upper Angwa formation following indications from real-time logging while drilling and mudgas.

“A limited suite of wireline logging data was acquired over the interval from 1,969metre Measured Depth (MD) to 2,975mMD in the Basal Pebbly Arkose and Upper Angwa formations, which identified multiple hydrocarbon bearing reservoirs in the Upper Angwa. A total of four hydrocarbon samples were recovered to surface from two separate zones in the Upper Angwa, using the wireline formation testing tool. A further two formation water samples were recovered from the Basal Pebbly Arkose formation”.

Wireline log interpretation calculates a preliminary net pay estimate of 13.9metres for the Upper Angwa, “however, this estimate is still subject to further calibration of the logs with core and fluid data to determine appropriate net cutoffs and subsequent pay estimates”, Invictus explains. “Significant additional gross sands were intersected within the Upper Angwa gas leg but are below the current net reservoir cutoff. These intervals may have better reservoir development elsewhere in the Mukuyu field and along with the refinement to the net pay criteria represents additional upside. Further appraisal and technical evaluation of log, core, seismic and well test data is required to determine the full extent of the resource size.

Prior to the Mukuyu-2 Sidetrack, Invictus had earlier drilled Mukuyu-1, Mukuyu 1 Sidetrack as well as Mukuyu 2. In all cases it filled the media with upbeat reports of “elevated mud gas and fluorescence were encountered and strong gas shows”.

Now “the Mukuyu-2 discovery, seven kilometres away and 450 metres updip of the Mukuyu-1 well, which can subsequently be classified as a discovery, provides confirmation of the large potential of the Mukuyu field which has a structural closure of over 200km2 “, Macmillian says. “With additional hydrocarbon bearing reservoirs ahead, the focus now is to complete the drilling and evaluation program and obtain further wireline data including fluid samples to declare an additional discovery from the Lower Angwa formation.”

Gas and fluid properties from the recovered samples will be confirmed following laboratory testing once the sample bottles are dispatched from the rig for analysis. No additional fluid samples were captured in order to preserve the wireline formation sampling tool and remaining sample chambers for use in the interpreted Lower Angwa hydrocarbon-bearing zones where thicker sandstone units were penetrated in Mukuyu-2.

The Exalo Rig 202 is drilling ahead “towards the total depth at approximately 3,400mMD sidetrack section  through the remaining Upper and Lower Angwa reservoirs where multiple hydrocarbon bearing zones were intersected in Mukuyu-2.”, Invictus notes in that report.

 


How will Africa cope in the COP28 Global Poker Game?

By Gerard Kreeft

Two parallel visions have emerged from COP28: John Elkington, co-founder of think-tank Volans, author of 21 books and member of the Neste’s Advisory Council on Sustainability and New Markets has noted …In 15-20 years, I think we will be looking at a totally transformed economic landscape. A huge number of companies will have disappeared – and new ones arrived – it will be a moment of absolute market convulsion.” Voltans on its site gives us a stark choice: “Capitalism’s future is contested in a way it hasn’t been for decades. Our economic system as a whole is confronted by a stark choice: evolve or die.”

Yet a very contrasting vision has emerged from APPO (The African Petroleum Producers Organizations) which  declares the approach adopted by the International Energy Agency as biased and states that it’s a direct hinderance to inclusive economic growth in Africa.

How can these two world views be reconciled?

The Present Situation: Viewed by  John Elkington

Elkington argues that COP 28 marks the halfway point between the 2015 Paris Agreement and 2030, by which point the world’s governments are pursuing efforts to limit the rise in global temperatures to 1.5C above pre-industrial levels, and well below 2C. They also agreed to limit greenhouse gas (GHG) emissions to net zero – the level at which GHGs from human activity can be absorbed naturally – between 2050 and 2100.

COP28 is the first five-yearly Global Stock taking (GST) conducted by the UN Framework Convention on Climate Change, which describes it as “like taking inventory. It means looking at everything related to where the world stands on climate action and support, identifying the gaps, and working together to chart a better course forward to accelerate climate action.”

The GST also urges more action on all fronts, noting that the world is not on track to meet the Agreement’s long-term goals. Seventeen key findings include that emissions are rising too fast to meet the 1.5C by 2030 target (they would have to peak within the next two years, but are still climbing) and that reaching net zero by 2050 would require “absolute economy-wide emission reduction targets” at a cost of “trillions of dollars”.

The GST gives us a better sense of the gap between what we should be doing and what we are managing to achieve, Elkington says, but warns that “it won’t be a pretty picture – we are a long way off the targets”.

Note: based on an article by Nick van Mead

Present Situation: Viewed by  the APPO

The APPO  states that the approach adopted by the International Energy Agency is a biased one and a direct hinderance to inclusive economic growth in Africa:

“The International Energy Agency (IEA) has published a report strongly advocating for an end to fossil fuel use and promoting unrealistic and unattainable approaches to achieving net-zero by 2050 as the Conference of the Parties (COP28) is upon us. The report shows a rapid decline in oil demand, urges an immediate transition to renewables, and states that carbon capture is merely an illusion. ..the IEA approach poses detrimental impacts on Africa’s economies, representing a biased perspective that fails to take into account the needs and challenges of the continent.”

“Africa is on the precipice of rapid, economic transformation. The continent holds over 125Billion barrels of crude oil reserves and 620 trillion cubic feet of natural gas reserves, resources which stand to serve as catalysts for industrialization and economic development. These resources can provide the over 600Million people and 900Million people currently without access to electricity and clean cooking solutions, respectively, with affordable energy. Yet, at the same time, the continent faces the worst impacts of climate change and is being told to abandon its oil and gas resources, despite only contributing less than 3% of global greenhouse emissions.”

Who can deny the energy poverty that Africa is suffering?

Yet will oil and gas industry in Africa provide the energy transformation that APPO is promising?

There  is a high need to dispel  a number of illusions that continue to exist. For starters that the oil majors have contributed a net worth to Africa’s economies.  According to Toyin Akinosho, publisher of Africa Oil + Gas Report, African revenues from the oil and gas majors are financing the energy transition in the rest of the world: “. . . the oil majors are funding clean energy from the balance sheet of dirty oil.”

Around 30 percent of TOTALEnergies’ production is in Africa, but less than 0.5 percent of its new energy investment will directly benefit the continent. Yet, according to Akinosho, TOTALEnergies is the best African renewable energy investor out of the majors. These include:

  • ENI: In Egypt, where ENI is a major player, the company has not featured in the country’s relatively aggressive renewable energy plan.
  • BP: The company has pumped over a billion barrels of oil out of Angola in the last twenty years but has excluded Africa from all of its renewable energy plans.
  • Equinor: It pumps 120,000 BOEPD(Barrels of oil equivalent) in Angola but has no plans for renewables.
  • Chevron: Its focus is not so much on investing in stand-alone renewable projects but increasing renewable power in support of its business to lower its carbon intensity.
  • Shell: The company will likely take $7.5Billion out of Nigeria from 2021–2025. Shell has funded some off-grid projects through solar developers in Nigeria, which basically represents Shell’s footprint in Africa.

Nigerian Petroleum Development and Sonangol: Energy Champions?

In the APPO statement reference is made to Angola’s crude oil revenue of $39Billion in 2022 and Nigeria’s revenue of $45Billion. We should not imagine that national oil companies have a better track record. Africa’s two major national oil companies in Sub-Sahara Africa—Nigerian National Petroleum Corporation (NNPC) and Sonangol (Angola)—have demonstrated little hope of becoming national energy champions.

Take the Nigerian Petroleum Development Company (NPDC), the operating subsidiary of the NNPC, which “is a massive incompetent wrecking ball, which has been gifted joint-venture participation in 10 mining leases (OMLs) all of them producing.” The NPDC is seen as a bright star within the NNPC’s portfolio. Why? Because the degree of its performance is in direct proportion with the help it gets from its partnership with other oil majors.

Sonangol, the Angolan state oil company, has had a rocky ride since 2017. In the past, Sonangol had two roles: that of concessionaire, a highly judicious key role that gave it power and legitimacy, and being a state oil company with its responsibilities for exploration and development of the resources. Sonangol was then stripped of its concessionaire role, which was given to the newly created National Agency of Petroleum, Gas, and Biofuels.

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

Will Hydrocarbons and CCS stimulate the Transition to Renewables?

APPO argues that IEA Executive Director Fatih Birol  is undermining African future oil and gas production. APPO is referring to  the Net Zero Emissions  2050 Scenario(NZE) which  is a normative scenario that shows a pathway for the global energy sector to achieve net zero CO2 emissions. According to APPO, attacking Africa’s right to developing its oil and gas reserves is a direct threat to developing Africa’s renewables. The argument being that oil and gas will fund the renewables. Yet as we have seen neither the oil majors nor Africa’s two major national state oil companies—NDPC and Sonangol—have proven to be new energy champions.

APPO argues that Carbon Capture and Storage (CCS) is an important asset to ensure that Africa’s oil and gas assets can be developed. Yet IEEFA(Institute for Energy Economics and Financial Analysis) in a recent bulletin was unusually blunt in assessing CCS projects:

Carbon capture and storage (CCS) is an expensive and unproven technology that distracts from global decarbonization efforts while allowing the oil and gas industry to conduct business as usual. Even if realized at its full announced potential, CCS will only account for about 2.4% of the world’s carbon mitigation by 2030, according to the Intergovernmental Panel on Climate Change (IPCC). It’s worth noting that not one single CCS project has ever reached its target CO2 capture rate. An IEEFA study has reviewed the capacity and performance of 13 flagship projects and found that 10 of the 13 failed or underperformed against their designed capacities, mostly by large margins.”

What can Africa Anticipate from COP28?

Between 2020 and 2030, Africa requires upwards of $2.8Trillion to meet its National Development Goals. Where is that funding supposed to come from?  According to Omar Farouk Ibrahim, Secretary General of APPO, “Africa is not only being stripped of the resources to finance a transition but continues to be disappointed by empty global promises”.

Over the years, we have seen significant financial commitments made by global partners. In 2009, developed nations pledged $100Billion in annual financing for developing countries, and yet, between 2016 and 2019, only $20Billion was provided to Africa. Commitments have shown to fall short of action, and the same can be said for other financial pledges made in the years since”.

Is COP28 proving to be different?

Adnan Doha, partner at Baker McKenzie’s Dubai office recently summarized various commitments to date:

  • In May 2023, the Africa Finance Corporation and the Japan Bank for International Cooperation (JBIC), signed a memorandum of understanding to collaborate on infrastructure projects that accelerate the energy transition in Africa.
  • In 2022, the G7 countries announced that a $600Billion lending initiative, the Partnership for Global Infrastructure Initiative (PGII), would be launched to fund sustainable infrastructure projects in developing countries, with a particular focus on Africa.
  • In 2022, the US announced it was mobilizing $200Billion for developing countries over the next five years as part of the PGII. This funding will be in the form of grants, financing and private sector investments. One of the priority pillars of this funding will be “tackling the climate crisis and bolstering global energy security”. Some deals have already been announced, including a $2Billion solar energy project in Angola.
  • Power Africa, a US government-led programme that focuses on addressing Africa’s access to electrical power, has also provided significant support for the energy transition. In its 2022 annual report, Power Africa noted that one of its achievements had been to successfully deliver first-time and improved electricity access to 37.7Million people in Africa through 7.6Million new on- and off-grid connections to homes and businesses in 2022.
  • In February 2022, the European Commission announced investment funding for Africa worth EUR 150Billion. The funding package is part of the EU Global Gateway Investment Scheme and is said to be in the form of EU combined member funds, member state investments and capital from investment banks.
  • China and Africa have also recently agreed to work together on improving Africa’s capacity for green, low-carbon sustainable development. At the 2021 Forum on China-Africa Cooperation, green development was one of nine programs identified as part of the China-Africa Cooperation Vision 2035.
  • Many new cross-regional energy transition initiatives have recently been announced. The Africa Carbon Markets Initiative (ACMI) was launched at COP27 with the goal of substantially expanding Africa’s participation in voluntary carbon markets. The ACMI is aiming for the production of 300Million credits annually in Africa by 2030 and 1.5Billion credits annually by 2050. It noted that these targets would provide much-needed financing for the, energy transition in Africa. Many African countries, including Gabon, Kenya, Malawi, Nigeria and Togo, supported the initiative.
  • Egypt launched, under the leadership of its COP 27 presidency, the Africa Just and Affordable Energy Transition Initiative, which will identify local strategies and energy mixes needed to steer African countries away from reliance on fossil fuels. The implementation of a clean energy transition cannot be the same globally. The initiative aims to meet the universal access by 2030 and energy demands of Agenda 2063 for the African continent and, among other means, includes consolidating and facilitating technical and policy support.
  • Tanzanian President Samia Suluhu Hassan presented a $18Billion energy transition proposal covering 12 southern African countries that are connected via the Southern African Power Pool. The proposal is to increase renewable energy generation (solar and wind) by around 8.4 GW. The 12 countries are Angola, Botswana, the Democratic Republic of the Congo, Eswatini, Lesotho, Mozambique, Malawi, Namibia, South Africa, Tanzania, Zambia, and Zimbabwe.
  • Multilateral and development finance institutions (DFIs) have been important allies in developing and mobilizing funding in Africa’s renewable energy sector. They have provided funding for projects, but they have also structured successful programs to address potential risks. For example, the Sustainable Energy Fund for Africa (SEFA), a multi-donor Special Fund managed by the African Development Bank, provides catalytic finance to unlock private sector investment in renewable energy and energy efficiency.

According to Doha access to power on the continent has been hampered by the lack of access to competitive funding, the dire state of Africa’s utilities infrastructure, and the need for energy policy and legislation to be adapted to boost investment. However, new systems and networks are now being designed around future environmental stressors and energy demands, without having to consider the limitations of old infrastructure.

“New and cost-effective solutions that utilize renewable energy, green hydrogen, battery storage and smart power technologies, as well as the global drive towards a secure energy supply that addresses climate change and stimulates economic growth, are all leading to innovative private equity (PE) and M&A investment opportunities.

However, according to Bloomberg, clean energy investment in Africa is concentrated in a handful of markets: South Africa, Egypt, Morocco, and Kenya. These countries have been the recipients of three-quarters of all renewable energy asset investments, totaling $46Billion, on the continent since 2010.

It is hoped that the many initiatives that focus on boosting access to renewable energy in Africa will result in a whole-continent approach, switching on access to power for the 43% of the African population who are not yet benefiting from the region’s renewable resources.”

A final note

Africa may long continue to have an abundance of fossil fuels but one should remember that the Stone Age did not end because of a lack of stones.

The final word is best given by John Ellington: “ Capitalism’s future is contested in a way it hasn’t been for decades. Our economic system as a whole is confronted by a stark choice: evolve or die.”

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 guest contributor to IEEFA(Institute for Energy Economics and Financial Analysis). His book ‘The 10 Commandments of the Energy Transition ‘is on sale at https://books.friesenpress.com/store/title/119734000211674846/Gerard-Kreeft-The-10-Commandments-of-the-Energy-Transition

 

 

 

 

 

 

 

 

 

 


Greenco Signs PPA with Ilute Power for 25MW Sola PV in Zambia

Africa Greenco Group, Serengeti Energy and Western Solar Power have signed a Power Purchase Agreement (PPA) for the Ilute Solar PV Project in Zambia.

Ilute Solar has been developed by Western Solar Power, a Zambian Renewable Energy Developer, and Serengeti Energy, an African Renewable Energy IPP owned by KfW, STOA, Proparco, Norfund, Swedfund and NDF, following the execution of a System Operations Agreement (SOA) between GreenCo and ZESCO Limited, the Zambian National Power Utility.

Situated in the Sesheke District of Western Province in Zambia, the 25MWac Ilute Solar PV Project is the first of its kind in Africa, GreenCo claims in a press release.

“Leveraging the competitive markets of the Southern African Power Pool (SAPP), the project adopts an innovative private sector and market-based approach to mitigate customer default risk. Unlike the conventional practice of transferring project risk to the government, Ilute Solar will use the vast markets available through SAPP to secure project financing without the need for sovereign guarantees”, GreenCo says.

“The ground-breaking project will serve as a testament to the practicality and success of an open access regime within the Zambian Electricity Supply Industry (ESI), aligning with the legislative amendments of 2019 and will open up new avenues for financing renewable energy projects in Africa”, GreenCo explains.

GreenCo declares that “with a substantial direct foreign investment of $37Million, Ilute introduces distinctive financing structures aimed at diversifying Zambia’s energy sources.

“FMO and the Sustainable Energy Fund for Africa (SEFA) are the envisaged senior lenders progressing on their due diligence. ZESCO will be paid by GreenCo for providing its sophisticated system operations services, exemplifying a collaborative effort in the renewable energy sector and thus aligning seamlessly with the legislative amendments of 2019, showcasing the feasibility of an open access regime in the Zambian Electricity Supply Industry (ESI). The SOA between GreenCo and ZESCO, further demonstrates a shared goal of enhancing Zambia’s energy sector”, GreenCo adds in the release.

 

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