NJ Ayuk, Executive Chairman, African Energy Chamber and CEO of Centurion International AG 03/15/2022
Russia’s invasion of Ukraine broadened the meaning of “energy transition” in Europe.
Usually, this term means moving away from the fossil fuels that have enabled progress for generations and instead turning to emerging green energy sources. But with the UK phasing out imports of Russian oil following the US ban – and other EU countries expected to follow – this time the transition refers to finding new hydrocarbon sources.
Currently, Russia supplies about a third of Europe’s crude oil imports and almost half of its natural gas, or some 150 to 190 billion cubic meters of gas per year. It will take a producer with significant resources to take Russia’s place.
The world is rightly wondering if Africa’s gas reserves – estimated at 221.6 trillion cubic feet – could be part of the energy solution that Europe so desperately needs.
My answer: Yes, African countries can help fill the void. They can supply the “Freiheits Gas” which will tear
Europe of its dependence on Russian pipelines.
But getting there will be difficult. African countries will need months to increase their gas production, especially since until very recently Western leaders and environmental organizations were aggressively pushing for a rapid halt to African gas investment in the name of climate protection – an effort that has caused foreign companies to take shelter. .
Reducing natural gas delivery and export times will require rapid action on the part of European and African players.
While Africa has abundant reserves of natural gas, it dramatically lacks gas infrastructure. Without rapid and significant uptake of investment by European countries, financial institutions and energy companies, it is impossible for Africa to have enough pipelines, storage capacity or processing facilities to respond adequately to the Europe’s gas needs.
African leaders must also act decisively to pave the way for European entities to successfully invest in African oil and gas infrastructure projects, strike deals rather than engage in unreasonable delays, and implement move the production and transportation of gas. And, at the same time, African governments must do all they can to accommodate African needs, even as they try to meet those of Europe.
Africans have argued that before rushing to renewable energy sources, we must continue to produce natural gas so that we can use it to generate electricity domestically and tackle the widespread energy poverty of the continent. We argued that we needed time to monetize the natural gas value chain so that we could build energy infrastructure, both for fossil fuels and renewables.
Monetizing gas in Africa would create economic opportunities for our youth at home. Many of them now undertake the perilous journey across the Mediterranean in search of greener pastures in Europe.
We can create greener pastures in Africa with clean natural gas and send low-carbon LNG and green hydrogen to Europe. African natural gas can be a critical pathway to growing and diversifying the economies of African nations and pave the way for a successful and just energy transition.
As we increase natural gas activity, we must not lose sight of our goals for Africa. We must work together, and strategically, to drive the programs that will make them happen, from commitments to conserve some of the natural gas we produce for gas-to-electric projects to monetization efforts.
So, yes, let’s work with European countries to help them reduce their dependence on Russian gas, but let’s not fail to meet the pressing needs of African nations at the same time.
Europe, you have to be pragmatic
For several years now, European countries, financial institutions and environmental activities have exerted immense pressure on African countries to abandon gas reserves and immediately switch to green energy.
More recently, this pressure has gone further, interfering with foreign investment in natural gas projects in Africa. At the 2021 United Nations Climate Change Conference (COP26) in Glasgow, for example, more than 20 countries and financial institutions pledged to stop public funding of fossil fuel projects overseas.
Environmental concerns that weren’t supported by science even prevented Dutch multinational Shell from carrying out a seismic survey to prospect for oil and gas reserves along South Africa‘s eastern coast last December, despite South Africa’s great energy needs and the role any oil or gas discovery could have played in alleviating the country’s energy poverty. (Shell just made a successful discovery in Namibia, and I’m confident they will successfully use carbon capture technologies to produce carbon-neutral hydrocarbons.)
But if this pattern of interference with African oil and gas financing and production continues, existing gas projects in Mozambique, Tanzania, Nigeria, Equatorial Guinea, Mauritania, Congo and Senegal risk be threatened. New and expanded gas projects are unlikely. Capital goes where it is welcome.
Now, with the crisis in Ukraine, it has become clear that we are not yet close to the laudable goal of zero-emission energy, we are simply not there yet. A few days after the Russian invasion, gasoline prices were already rising slightly, a sign of the market’s dependence on crude oil as a transport raw material. Today we see that fuel prices are the highest in decades. As for natural gas, it reached a historic record in Europe on March 7 and continues to set records. So, no, Europe is not there yet, and neither is Africa. Producing, transporting and using natural gas, the cleanest of all fossil fuels, is not even a necessary evil. It’s a reasonable way to meet widespread energy needs while controlling carbon dioxide emissions.
What if we made a course adjustment in response to the crisis in Ukraine?
Imagine if the European Investment Bank and other financial institutions started financing gas projects.
No, it wouldn’t provide the gas Europe needs today, but it will help in the longer term by providing an alternative to Russian energy. It will help make African countries a reliable and sustainable source of natural gas for Europe in the future. And it would position Africa to meet its own pressing energy needs.
I challenged many companies to commit to signing green gas and hydrogen deals during Africa Energy Week in October in Cape Town. The recent green hydrogen development agreement signed by the German energy company, Emerging Energy Corporation, in the Republic of Niger is a step in the right direction.
A final thought on Europe: it must stop crippling Africa with handouts and foreign aid. Aid must stop. It does not help us. We would much rather see Europe cooperate with us and focus on free market enterprise, economic freedom and monetization of gas.
Africa’s next steps
It would be easy to attribute all the responsibility for the lack of infrastructure in Africa to the lack of European investment. But African governments share the responsibility. We must do for ourselves what we expect others to do for us. It is not up to Europe to build Africa.
For years, African countries have placed much more importance on the production of crude oil and the revenues they have received from the oil majors than on the production of natural gas and its monetization to finance infrastructure development. Fortunately, this mindset has evolved with more African countries, including Nigeria, Equatorial Guinea, South Africa and Ghana, pursuing natural gas monetization initiatives.
But these processes take time.
African governments have also been far too slow to act when gas production opportunities arise. There are a slew of gas deals pending. We have to admit that bureaucracy and triangulation in negotiating and approving deals has slowed down the gas industry in Africa. In many countries where I have worked, it takes longer to get negotiation and government approval for a gas project than to build it. Today, companies can even line up financing and be ready to invest, but if the negotiation and approval process is slow or interrupted, there is no point in getting a gas deal in Africa. We have seen many licensing rounds launched and no agreement signed. And any proposal that fails to reduce red tape will not work and Africa’s gas potential will be a disaster. Look at the huge amounts of gas, nearly 300 trillion cubic meters, in Nigeria that has yet to be produced. Look at existing stalled projects in Cameroon, Equatorial Guinea, Tanzania and Mozambique.
I was present when Niger, Algeria and Nigeria signed the Niamey Declaration last month. The end result of their cooperation is that the long-delayed Trans-Saharan Gas Pipeline will finally move forward. This is important news for a project that has been stalled for more than 20 years by investor concerns over security and the inability of governments to negotiate and move the deal forward. The $2.2 billion, 4,128 kilometer (2,565 mile) pipeline holds tremendous promise for the African countries involved – it will stretch from Warri, Nigeria, to Hassi R’Mel, Algeria, via Niger – and for Europe. When completed, it will transport 30 billion cubic meters of gas per year from Nigeria, Algeria and Niger to Europe.
African countries need to start accelerating their natural gas projects and putting them in motion so that market forces can drive them.
African governments should also encourage foreign investment in natural gas by developing production sharing contracts specifically for natural gas production, so investors know what to expect.
And, they must reject resource nationalism: now is not the time to demonize international oil companies and foreign operators in Africa. Now more than ever, fostering cooperation between nations is vitally important if we are to achieve our goals.
From my point of view, the stakes are high for two continents at the moment. Africa’s natural gas reserves can meet large and pressing needs for both. But only if European and African actors mobilize and commit to working together in a spirit of cooperation. And only if they move decisively. Now let’s change our mindset and get to work.