• Africa insists on gleaning more from hydrocarbons

Sopuruchi Onwuka

The declaration by the International Energy Agency (IEA) that some 67 percent of the $3.3 trillion of global energy investments in 2025 is dedicated to development of clean energy amplifies the staggered but determined move by global institutions to migrate global energy choices from fossil fuels.

Next big pointer is that the largest investors in green and cleaner energy are currently the leaders of the demand side of the global oil markets. The new reality which foreshadows inevitable demand shift in the global energy mix contends with projection by local pundits that demand for fossil energy is to dominate the market in the foreseeable future.

Both scenarios confront the ongoing advocacy by African governments for continued reliance on petroleum for firing the continent’s long term development agenda, especially in terms of energy security, energy independence and economic development revenues. The shifts in investment patterns point to new demand direction which may materialize more imminently than African policy pundits and market analysts forecast.

Whereas most of the African countries, including Nigeria, are signatories to the Paris Agreement which commits nations to actionable programmes that would contribute to collective global effort to rein in emissions and limited global warning to about 1.5 degree Celsius, they reject the implicit de-emphasis of fossil fuels for cleaner energy forms. And there have been concerted campaigns that whip up neo-colonial sentiments, and also a strong push for Africa to decolonize its hydrocarbon resources from control of the West.

Like other resource based groups like the Organization of Petroleum Exporting Countries (OPEC) and allies (OPEC+) which coordinate economic interest of members, African Petroleum Producers Organization (APPO) has assumed full responsibility for harmonize pan-continental energy policies that stand in direct confrontation with the prevailing global movement for energy transition.

Thus, governments and commercial petroleum players in the continent -whether international companies or local independents –have clear commitments to continue investing in development of hydrocarbon resources for the economic development of the world’s poorest continent which incidentally hosts the highest volume of global youth population.

In transmit their positions in the diplomatic code, African governments do not openly stand against energy transition or deny the reality of climate change. The continent’s policy drivers do not contend with the reality that hydrocarbon mining and utilization puff out massive emissions that harm the earth’s protective gaseous layers.

Arguments have relentlessly centered on the impact of energy transition and climate action on petroleum sustained economies like Nigeria; and there are fears that rapid migration of energy choices in a fast changing market would definitely spell fiscal doom for countries with highest population of the global poor.

Therefore, African ministers call for slower pace of energy transition to enable the continent catch up with the key global development thresholds by gleaning as much oil revenue as possible to drive economic growth and also fund investments in cleaner energy.

The African Petroleum Producers Organization (APPO), African Council of Energy Ministers and the advocacy platform, African Energy Chamber, are in chorus that energy transition must run in parallel with energy justice to ensure that the economic development agenda of developing nations are not truncated in perceived rapid transition of investments, production, demand and application of energy from fossil fuels.

Position of Africa and other developing petroleum exporters plagued with resource curse is that they require time to address prevailing energy poverty, build resilience and attain energy security. These economic development goals, they argue, can only be delivered with oil and gas revenues when abundant reserves are allowed to be monetized.

Figures show that significant proportion of the African population is yet to have access to modern energy forms.  Precisely, it has been declared at various forums that over 600 million Africans still lack access to electricity while those that are connected are drastically undersupplied. Most rural homes still cannot afford clean cooking fuels.

At investment shows hosted in the annual conferences including the Africa Energy Week (AEW), African Oil Week (AOW) and the Nigerian International Energy Summit (NIES); governments and mainly independent players have consistently vowed to press ahead with development and production of petroleum resources for Africa’s internal consumption and export income.

Secretary-General of APPO, Dr Omar Farouk Ibrahim, says that the movement for energy transition and associated squeeze on petroleum financing by international multilateral lenders have forced African nations to look inward and think of ways to sustain their energy sector. He said the novel Africa Energy Bank (AEB) is conceived to plug severe funding gap in the industry.

In the face of closing international funding windows, acute investment shortfalls and fiscal headwinds; African governments are in fierce race to attract limited petroleum investments, offering attractive incentives to companies with deep pockets for exploration and development investments.

In Nigeria, for instance, the new administration of President Bola Tinubu has been persistent with signals to international investors that the country’s fiscal landscape for petroleum business has improved. The government is also working to enhance the operating environment to make assets safer.

In series of Executive Orders, President Tinubu continues to add incentives to woo players in helping the country meet the aspiration of higher petroleum revenue. The latest executive order lowers project costs, caps tax credits at 20% of a company’s annual tax liability and introduces a performance-based tax incentive for upstream operators.  The latest executive order builds on earlier incentives to improve fiscal terms and shorten project approval times.

Presidential Adviser on Energy, Mrs Olu Verheijen, states that the new policy and fiscal incentives are conceived to activate a wave of investments that would translate to achievement of rapid energy security for the country.

Other African countries, including new hydrocarbon provinces in the continent, are also in the race for new investments as energy transition looms large.

At the 30th African Oil Week (AOW) in Cape Town, government of South Africa called on petroleum players across the world to extend their exploration to the nation’s prolific hydrocarbon basins, assuring that Africa still remains relevant to global energy supply despite disruptions from climate activists.

Minister of Mineral Resources and Energy, Gwede Mantashe, emphasized the significant untapped potential of South Africa’s oil and gas reserves, urging investors to look beyond the global shift towards renewables and recognize the lucrative opportunities at hand.

“Notwithstanding the crusade against oil and gas development in South Africa, it is encouraging that over the last 10 years, the African continent has seen considerable interest in oil and gas blocks with major petroleum players making valuable investments,” he declared at the event.

He pointed to Eni’s discovery in Côte d’Ivoire and Mozambique’s booming LNG revenue as prime examples of the sector’s potential.

“We appeal to the delegates at this conference and the investment community to continue investing in the development of oil and gas to enable a prosperous energy outlook for Africa and promote sustainable development.”

Africa’s upstream independent companies including Oando also assert their readiness to proceed with petroleum investments in the continent, noting that international oil companies in the continent are under climate commitments to limit new investments in exploration.

Group Chief Executive Officer, Mr Wale Tinubu, demanded African governments to quickly transfer the ownership and control of petroleum exploration and production to indigenous players, warning that the prevailing sentiment for energy transition was pulling both cash and resources out of the continent.

Wale Tinubu argued that the international oil companies that traditionally controlled operations were now in the mode of recovering their investments from Africa and refocusing from oil to new energy portfolios. He pointed out that the foreign companies have become very choosy with investments in order to align with home sentiments and prejudices against continued demand for fossil energy.

He pointed out that the IOCs have pulled significant $15 billion from African economies, adding that “there is no continuous investment for steady growth of development in the continent.”

Wale Tinubu stated that the indigenous oil companies, having displayed enormous capacity in acquiring and operating assets from IOCs, now position to transform  and lead Africa’s oil and gas sector, diversify into gas and renewable energy, and also participate in global energy markets.

He called on African governments to disregard all pressure to give up on petroleum development, arguing that the continent still wallows in energy poverty, underdevelopment and economic crises.

He made it clear that petroleum remains the key resource to address energy supply deficits, poor economic and social development, industrialization, balance of payments, strengthening of local currencies and rebuilding of external reserves.

Congolese minister of hydrocarbons, Jean Richard Itoua, declared in Cape Tpwn that Africa has its own position on climate action and energy transition.

At a conference in Cape Town, South Africa, ministers and senior energy officials from over 20 African countries agreed to accelerate delivery of hydrocarbon resource benefits for enhanced living standards and enhanced economic growth of the continent.

The ministers also explored pathways to ensure that energy development translates into tangible improvements in living standards, including increased electrification, job creation, and economic growth.

Mantashe told delegates that “our primary responsibility is to liberate the people of Africa from the shackles of extreme poverty, high unemployment, and persistent inequality,” adding that “energy is the flywheel for any nation’s economic growth.”

Ghana’s Minister of Energy, Herbert Krapa, called for stronger regional cooperation in achieving the goals.

Prior to the last COP in Baku, African delegates took a decision to demand to be allowed to utilize petroleum resources to address energy poverty in the continent.

Nigeria’s Minister of State for Petroleum Resources in charge of oil, Senator Heineken Lokpobiri, declared ahead of COP29 that there was a unified position that Africa would demand time to catch with the rest of the world on climate action. He dismissed the tone of urgency in the global drive for transition from traditional fuels as geopolitics, arguing that trends in the energy market still show strong demand for petroleum.

He stated that Africa remains the victim of both resource exploitation and climate change. He added that it would be a shame if the continent also falls victim of unjust energy transition. On possible transition of demand from petroleum at the international energy markets, Lokpobiri said a parallel arrangement was being worked out among African countries for intra-continental energy trade.

In stating that African countries would drive development with petroleum under the African Continental Free Trade Agreement (ACFTA), he stated that the continent is united at all levels of coordination to continue utilization of petroleum energy to get citizens out of poverty.

Lokpobiri noted that all heads of government, ministers, African Energy Commission (AEC), African Petroleum Producers Organization (APPO) and all multilateral organizations in the continent are in agreement to delay energy transition until the continent achieves energy security.

He stated that energy transportation has to be just, fair and equitable, adding that African countries, OPEC and other developing countries support the position that poor nations must achieve energy security before embarking on transition.

“Millions of Africans must be lifted from poverty,” he said, adding that there is urgent need to promote investment for higher production.

But the blame for Africa’s energy poverty also rests with Africa and its governments. The high level of energy poverty in countries that export energy is perceived as critical index of mismanagement of Africa’s resource wealth. Domestic energy gap in an energy exporting country is an unpardonable paradox.

The Oracle Today reports that whereas there still remains strong market incentive for petroleum investments across the globe, one cannot totally ignore the gradual and sustained movement in the pattern of new energy investments that drift from petroleum fuels.

The recent report by the International Energy Agency clearly indicates that clean energy accounts for significant $2.2 trillion of the global $3.3 trillion industry capital deployments projected for 2025. The remaining $1.1 trillion investments decisions in the year are split among petroleum, coals and other traditional energy sources.

Over the past decade, China’s share of global clean energy spending has risen from a quarter to almost a third, underpinned by strategic investments in a wide range of technologies, including solar, wind, hydropower, nuclear, batteries and EVs. At the same time, global spending on upstream oil and gas is gravitating towards the Middle East.

Today’s investment trends clearly show a new Age of Electricity is drawing nearer, the IEA stated, noting that investments in fossil fuels were 30% higher than those in electricity generation, grids and storage a decade ago.

“This year, electricity investments are set to be some 50% higher than the total amount being spent to bring oil, natural gas and coal to market,” it added.

“Globally, spending on low-emissions power generation has almost doubled over the past five years, led by solar PV. Investment in solar, both utility-scale and rooftop, is expected to reach $450 billion in 2025, making it the single largest item in the global energy investment inventory. Battery storage investments are also climbing rapidly, surging above $65 billion this year.

“The IEA also stated that capital flows to nuclear power have grown by 50% over the past five years and are on course to reach around $75 billion in 2025. It added that rapid growth in electricity demand also underpins continued investment in coal supply, mainly in China and India,” the IEA stated in the report.

The report hinted of preference for cleaner side of fossil development in the pattern of hydrocarbon investments. It stated that investments in the industry would propel stronger demand for gas than oil.

“Between 2026 and 2028, the global LNG market is set to experience its largest ever capacity growth,” the IEA stated, adding that investment in new liquefied natural gas (LNG) facilities is on a strong upward trajectory as new projects in the United States, Qatar, Canada and elsewhere prepare to come online.

The Oracle Today reports that LNG development also leads hydrocarbon investments in Africa even as lower oil prices and demand expectations are set to result in the first year-on-year fall in upstream oil investment since the Covid slump in 2020.

It noted that spending patterns would remain very uneven globally, with many developing economies, especially in Africa, struggling to mobilize capital for energy infrastructure.

“Today, Africa accounts for just 2% of global clean energy investment. Despite being home to 20% of the world’s population and rapidly growing energy demand, total investment across the continent has fallen by a third over the past decade due to declining fossil fuel spending and insufficient growth in clean energy,” according to the IEA report.

 To close the financing gap in African countries and other emerging and developing economies, the agency stated that international public finance needs to be scaled up and used strategically to bring in larger volumes of private capital.

Clearly, what the 2025 investment patterns signals is eventual decimation of fossil fuels in the mix of global energy demand.

Again, the IEA report also shows that China, which is currently the destination of largest volumes of global oil exports, is now the leading investor in new energy options. This further indicates that the Chinese and other economies that lead oil demand are working to create new paths to clean energy options. Significant displacement of oil and gas from China’s energy demand is bound to quake the oil market.

The indications support the arguments that long term investments in petroleum development are no longer sustainable, explaining the caution among international oil companies in staking huge capital in new exploration programmes in Africa.

Review of new petroleum investments by western oil majors shows that most of the new projects are related to gas export, or in gas prone oil developments that hold potential for gas processing and export.

After years of export focused and cash targeted petroleum industry operations in the continent, it has become suddenly clear at this point that Africa has paid little attention to its domestic energy requirements. And this realization is coming at a time when the world is determined to divert funding, technology and demand from fossil energy.