Energy sector trends are beginning to blow in favor of Africa

Petrol pumps are installed in the forecourt of a Sasol Ltd petrol station. in Pretoria, South Africa on June 4, 2020. / CFP

Petrol pumps are installed in the forecourt of a Sasol Ltd petrol station. in Pretoria, South Africa on June 4, 2020. / CFP

Editor’s note: Thomas W. Pauken II is the author of “US vs. China: From Trade War to Reciprocal Deal”, consultant on Asia-Pacific affairs and geopolitical commentator. The article reflects the opinions of the author and not necessarily the views of CGTN.

Amid the current challenges facing the world, such as soaring inflation rates, an international economy heading towards a slowdown, as well as the potential for energy and food shortages, global geopolitical and trade trends are undergoing a remarkable transformation. . These changes are shocking to many, but they can be seen as opportunities for many others. The new era could bring more success to emerging market countries in the Middle East, Latin America and Africa, as these are lands so rich in natural resources, especially in the areas of energy resources.

For now, Africa is poised for stronger economic growth, despite the headwinds. European Union (EU) member states and the United Kingdom (UK) are under pressure to find energy resources from other countries, as they turn away from Russian energy imports after the President Russian Vladimir Putin launched the “special military operation” in Ukraine from February. 24th. In 2021, Russia accounted for around 40% of total EU imports. Last year alone, the EU bought around 155 billion cubic meters (bcm) of Russian liquefied natural gas (LNG). The Paris-based International Energy Agency (IEA) revealed that in 2021, Germany imported an average of 553,000 barrels per day (bpd).

Brussels, London and Washington have coordinated their efforts to impose tough economic sanctions on Moscow in a bid to block Europe’s reliance on Russian oil and gas. Russia will simply redirect its energy exports to Asian markets, but African countries, which have large oil and gas reserves, can move closer to Europe. Yet there will be no silver bullet here, as Africa needs greater investment to embark on new exploration and drilling projects, as well as to build, repair and upgrade new networks of pipelines between Africa and Europe.

Upgrade for long-term success

“Africa will succeed in exporting more oil and gas to Europe in the long term, but not in the short term,” Jon Offei-Ansah, publisher of Africa Briefing, a London-based magazine, told CGTN in an exclusive interview. “Africa needs more investment – they need to build more critical infrastructure such as their pipelines. It is important to complete the pipeline such as the one that will transport gas through Morocco from the countries of West Africa.”

Jon Offei-Ansah also pointed out that German Chancellor Olaf Scholz visited Africa earlier this week and was told by his contacts in Senegal that Berlin was asking for more energy contracts, but domestic companies have already promised deliveries. to other markets, in particular to France. It will take time for Senegalese oil and gas companies to produce more energy and upgrade drilling equipment and pipelines.

“But Africa has the capacity – with more investment – to build the infrastructure to deliver more oil and gas to Europe in the medium to long term.”

Italy has already had some success in establishing good trade relations with Algeria and other gas-rich African countries. Algeria accounted for 8% of EU gas imports last year and Nigeria around 2%. According to a report by Africa Business, Eni, Italy’s leading oil and gas company, has entered into supply agreements with Angola, Congo-Brazzaville, Algeria and Egypt since last March. The company has announced its intention to commission an LNG project off the coast of Congo next year, which has the capacity to deliver 4.5 billion meters of gas.

Experts estimate that Africa could double its oil and gas production levels by 2030. And from 2023 or soon after, many new exploration and drilling projects will start operating. A popular project is the Tortue development located on the Mauritania-Senegal border, which is expected to start up and operate with gas deliveries next year.

Petrol pumps are installed in the forecourt of a Sasol Ltd petrol station. in Pretoria, South Africa on June 4, 2020. /CFP

Petrol pumps are installed in the forecourt of a Sasol Ltd petrol station. in Pretoria, South Africa on June 4, 2020. / CFP

Connect for Prosperity

African oil and gas companies have long faced challenges in attracting more inward foreign direct investment (FDI). Foreign investors have expressed concern over political instability on the African continent. The region has also seen a high number of long construction delays for many pipeline projects that are to cross Africa’s Sahelia region, where many terrorists, pirates and criminal gangs prowl and terrorize the surrounding area.

Nonetheless, oil and gas prices have soared, while the EU and UK could be on the verge of severe energy shortages this summer and into the foreseeable future. Now is the time for European oil and gas companies and investors to inject more finance into Africa and address the challenges of completing major regional pipeline projects, which are under construction.

African companies could also tap into the new Cairo-based African Energy Transition Bank, which is committed to providing alternative sources for African oil, gas and renewable energy companies. It is an African-owned and operated bank that seeks to finance African companies that are struggling to obtain financing from Western companies.

New trends for new tomorrows

For his part, NJ Ayuk, Executive Chairman of the African Energy Chamber, notes that European companies are paying greater attention to the African energy sector. “There has been a big change in mentality,” he told the media.

“We were invited to Berlin, Paris, Brussels. We had various communications and various bilateral discussions with the energy ministers of at least nine countries, where we had really fruitful conversations,” Ayuk added. . “That has never happened in the past.”

As a result, now is the time for African energy companies to shine brightly. But there is more good news. The sub-Saharan continent is also rich in the field of renewable energies. The Sahara Desert could become a global hub for solar and wind energy. Africa has a lot of energy resources to offer to the European market and beyond.

But there’s an old adage that goes “don’t put the cart before the horse”. Africa holds vast reserves of oil and gas, but the next step would be to upgrade the energy infrastructure on the continent. If Europe hopes to import more oil and gas deliveries from Africa, it needs to invest more in its pipeline networks as well as the drilling equipment there. However, if they choose to go ahead, it will become a “win-win” scenario for Africans and Europeans in the long run.

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