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Africa’s energy market calls for more investment

ENERGY companies in Africa have used the recent digital World Energy Capital Assembly (WECA) to call for more capital in 2021 to fund the industry, with some of its professionals talking up the prospects for investors in African energy.

The WECA connects oil & gas executives with finance and investment professionals from around the world.

Dedicated to the capitalisation and development of the industry, the WECA provides access and introductions to global deal and market makers.

The recent Assembly had a spotlight on Africa, during which panellists spent almost two hours looking at the opportunities that 2021 could present for the continent.

The speakers included Kwaku Boakye-Adjei of Tema LNG Terminal Company (TLTC) and Yann Yangari of Gabon Oil Group.

Boakye-Adjei noted that traditional sources of finance for oil and gas companies were stock markets and huge banks and then limited private equity.

‘Now capital comes through private equity and commodity companies, but the capital for pure exploration is drying up, and this should worry all of us,’ he said.

‘It will result in a spike in oil prices, so foreign direct investments need to be more flexible in the approach they are taking.’

However, Keith Hill of Africa Oil Group noted: ‘Capital will always go to its friendliest place,’ adding: ‘The easiest cure to find funding is to perform.’

He pointed out that there was ‘$40 trillion of money under management in the world’.

He noted that oil companies, for example, were becoming more environmentally and socially aware.

‘Countries are starting to understand that they need to make themselves more attractive for investment.’ he added.

Yangari said Gabon had reviewed it strategy to make itself more attractive and to develop the market around hydrocarbons.

‘There are a lot of projects that will not be able to find financing – the heavy polluting projects.

‘We need to focus on how small-scale projects can power Africa, and once this happens economies will grow, which will push the need for more energy,’ Yangari added.

Boakye-Adjei of TLTC, Ghana’s first LNG import, storage and transportation company, which was incorporated in 2017 and is headquartered in Accra, said this would depend on the type of project

‘When you talk about LNG, it is no different to developing a major oil field – a large part of the revenue is being exported.

‘The real change and real impact we see with gas are projects that are bringing reliable sources of gas, at cost effective prices into the country.

‘I generally think IPPs [independent power brokers] have been a problem for Africa because you build these huge facilities to generate energy, but you lose about 30 per cent of energy in distribution.

‘This doesn’t work when you are dealing with large amounts of the population which are off grid and can’t access the benefits of that energy,’ Boakye-Adjei added.

‘In terms of gas, governments can let the private sector take a more prominent role in the offtake side.

‘Then you can avoid the losses that you see in distribution, whilst claiming the benefits of carbon reduction,’ Boakye-Adjei said.

‘In the next 12 months people need to acknowledge that problems with energy in Africa are different; we cannot use a one size fits all approach.’

Tom Hickey, CEO of Boru Energy Ltd., pointed out: ‘In the future, companies should and will work with government-owned assets to help them with their growth.

‘Companies owning the assets do not fit with the future of energy production.’

On the issue of energy companies in Africa supposedly becoming instruments of political manoeuvring, Boakye-Adjei said; ‘Speaking as a Ghanaian, to be honest, I think flexibility in terms of criteria for capital are more important.

‘We cannot bring in the same ideas as we use in North Europe and other areas in the world.

‘We in Africa have seen a benefit from government funding, because they can be more flexible and provide bespoke opportunities.

‘Whether there is also a political agenda, it’s down to governments to decide what is best for them.

‘Where there is a lack of capital, it is leaving a space for funding from companies that are state-backed, but this hasn’t been a bad thing,’ Boakye-Adjei added.

Yangari said the fact that the energy sector in Africa was moving away from investors within the Organisation for Economic Cooperation and Development (OECD) had ‘fostered other investors to look into Africa’.

‘Before, Gabon’s assets were largely run by French companies but now this is changing. ‘There are now various types of capital coming into the country’ he said.

Turning to the thorny matter of carbon emissions, the panellists agreed that this as not a problem for Africa at the moment.

Hill of Africa Oil Group pointed out that the US, with four per cent of the world’s population used 23 per cent of the world’s energy

He said African countries ‘haven’t made the steps in renewables but they’re still creating less C02’.

Hill added: ‘America, China and the EU need to work on getting C02 down.

‘However, their economies were built on cheap hydrocarbons and now we are telling Africa that they can’t.’

Boakye-Adjei said of the Tema LNG project: ‘We can reduce the amount of fuel we are wasting and carbon emission by changing the way we deliver electricity.

This could lead to a reduction of 30 per cent, ‘which has a huge impact on carbon emission’. ‘If you marry that with a move from heavy fuel, oil or diesel to gas you will cut that by another 30 per cent.

‘In Africa we can deliver that radical change but without impacting development.

‘Because without impacting development, they won’t support it,’ Boakye-Adjei added.

Boru Oil CEO Hickey, pointed out: ‘The challenge when we talk about Africa, is that people are trying to apply investment criteria that are used for countries that are growing at a much slower pace than Africa.

‘The potential for growth in Africa is so great.’

Gabon Oil’s Yangari noted: ‘Africa is not such a polluter as Europe and the US.

‘These places should take the hit, so Africa can develop and attract investment.

‘We have hydrocarbon resources and we need to develop them.’

He agreed that there was a need to reduce carbon emission and this would happen if ‘we stopped transporting energy so far’.

‘If you stay localised, then the carbon footprint is lower,’ Yangari added.

He admitted that ‘a zero-carbon economy is almost impossible [because] renewables cannot just replace hydrocarbons – gas will still have a big place’.

But transparency was important, Yangari warned.

 

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