OPINION: Countries need access to cheap and reliable energy for their economies to grow and to underpin a better quality of life for their populations.
The preferred energy sources in Africa since the 1950s have been coal, oil and — more recently — gas.
Foreign companies with expertise and finance have developed these resources, while governments from Lagos to Luanda and Brazzaville to Bata sat back and watched the dollars roll in.
Economies grew, but local populations rarely benefited due to corruption, a failure to create indigenous industries and little investment in infrastructure and education.
However, politics has changed over the last decade as governments in places as diverse as Senegal, Ghana, Equatorial Guinea, Uganda, Kenya and Mozambique start to address graft, aim to use hydrocarbons in-country, and add value by creating local supply chains and indigenous oil companies.
But just as Africa gets its act together, global warming and Covid-19 look to have sounded a death knell for these ambitions before they can be fully realised.
Anti-fossil fuel sentiments combined with an oil price slump have seen Western investors look askance at upstream funding requests.
Most small- and mid-cap players cannot explore in Africa because they lack finance and potential partners, and see little future in oil exploration.
Supermajors have also scaled back Africa spending, while state-owned players like Sonangol in Angola are in a weak financial position.
But all is not doom and gloom. Eskil Jersing, a veteran explorer of Africa — who has worked in supermajors, mid-caps and small-caps — predicts a final oil price bull run that will support a fresh wave of E&P spending on the continent before oil’s inevitable decline.
African gas has a better future, particularly for domestic gas-to-power, as it is the transition fuel, with Mozambique and Senegal aiming to maximise the benefits of their abundant gas resources.
This contrasts with Tanzania where, despite hosting 50 trillion cubic feet of gas, a proposed liquefied natural gas plant and regional gas network still languish due to what Jersing, former chief executive of Wentworth Resources, calls President John Magufuli’s “muscular nationalism".
Tanzania’s tale should be a warning to other countries — such as Kenya — to quickly monetise upstream resources before oil and gas falls completely out of favour.
Africa needs hydrocarbons in the next two decades because of its rapidly growing population, and, even now, 840 million citizens do not have access to regular energy supplies.
The continent’s governments need to tackle this energy supply problem quickly, but must also acknowledge there may be insufficient Western capital available for African E&P, while Asian investors may not make up the shortfall.
It is time for Africa to plough its own furrow and to seek ways to self-fund hydrocarbon projects over the next 20 years with a focus on domestic and regional usage rather than exports.
The African Continental Free Trade Area should help foster the right conditions to achieve this.
Gabriel Obiang Lima, Equatorial Guinea's Minister of Petroleum, is unequivocal about the continent's need to continue exploiting hydrocarbons.
Given that Africa has been responsible for just 2% of carbon dioxide emissions since the 1750s, he says: “Under no circumstances are we going to be apologising. Anybody out of the continent saying we should not develop oil and gas, that is criminal. It is very unfair.”
In the words of Rwanda’s far-sighted President Paul Kagame: “We Africans have to walk the talk. We have to do the very things we say or we know are necessary to do, to get to where we want.”
(This is an Upstream opinion article.)