While Africa is part of the global transition to low-carbon energy, oil and gas consumption on the continent will increase, at least in the short term. This was observed by Standard Bank’s Energy and Infrastructure Executive Coverage: East Africa Name Kigundu at the African Association of Refiners and Distributors conference at the Century City Convention Center in Cape Town on Tuesday.
The decarbonisation plans of international corporations were affecting investment in Africa. There was a decline in investment in the oil sector, but investment in the liquefied natural gas (LNG) sector is likely to increase, it reported.
LNG would likely become a major energy source for the continent. African demand for LNG was expected to double by 2040, with Mozambique and Egypt potentially leading the sector during this period.
In many African countries, there was the possibility of building product pipelines, including transnational ones, to transport LNG and other energy products, to reduce dependence on the use of road transport for distribution. And phasing out road transport (even if it only meant switching to rail transport, not pipelines) would significantly reduce Africa’s greenhouse gas emissions.
In terms of carbon emission reduction technologies, cost-benefit analyzes had to be done before African countries implemented them. Regulatory systems would have a major impact on these developments.
Industries whose carbon emissions were difficult to reduce could not be ignored, he stressed. They needed funding to move to low emission technologies. One concept that had been developed was the Transition Bond. These links were gaining strength.
The Africa Finance Corporation (AFC) will continue to finance fossil fuel projects in Africa, a senior investment associate at AFC assured. Shayo Olumide, speaking at the same conference. AFC was fully African owned and financed and had total assets of $10.5 billion. So far it had invested in 36 African countries. “We are focused on African industrialization,” he stressed. Its five main focus areas were heavy industry; energy and renewable energies; natural resources; transport and logistics; and telecommunications.
“We will continue to support this [refining] industry”, he said. But times had changed and this had to be appreciated. New refinery projects had to include sustainable elements. For example, it was necessary to reduce the torsion of gases; renewable energy was to be used to help power the refinery; and the equipment installed in the refinery had to be more energy efficient. Carbon capture and storage was being looked at by “everyone”, but the technology was not yet established. However, there was a possible option of planting forests near the refineries.
Being able to quantify the carbon emission reductions these steps would achieve would make it easier to secure financing for refinery projects. Several financing options were available. But all required, as a central element, a strong commitment by the borrower to environmental, social and governance objectives and compliance.
“Demand for energy products is increasing,” noted Afreximbank’s director and global head of customer relations Rene Awambeng. Institutions on the continent were to continue financing the rehabilitation and construction of refineries on the continent. In fact, the continent had no choice but to invest in its refineries. Refining African hydrocarbons outside the continent and then having to re-import the refined products was extremely costly for the continent.
He cited Niger as an example of a country that refined all of its own hydrocarbon production. African countries should copy Niger. And African countries had to make use of their own resources. “In the medium and long term, we have to consume [the energy] that we produce”, he affirmed.
“But we have limited ourselves [financial] capacity”, he emphasized. “We need to strengthen the capacity of our banks.” African countries should put their money in African banks and not, as they often did, in non-African banks.
Still, an African Energy Bank was being created, to finance fossil fuel projects across the continent and to finance Africa’s transition to clean energy.
