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Building out pipelines and power lines in Africa is going to take a massive push from investors.
The need to scale up investment into energy Infrastructure across Africa is a challenge that looms large, according to International Energy Agency (IEA) Deputy Director Mary Burce Worlick.
Speaking at an energy conference in Cape Town, Burce Worlick highlighted the scale of the problem, reminding that while the African continent may make up a fifth of the world’s population it only receives 4% of global energy investment.
“This imbalance should ring alarm bells for all of us… it risks perpetuating imbalances,” she said.
Current energy investment into Africa needs to ramp up to around $200 billion a year if the continent is to meet its climate goals by 2030.
But, the high cost of capital, at two or three times higher in Africa than in North America or Europe, remains a major barrier as it raises the bankability bar and makes projects difficult to finance.
“Lowering the cost of capital is critical for the chance for Africa to meet its energy and climate related goals.”
While the IEA does see the use of natural gas increasing across Africa over the next two decades, it predicts only a 5% rise in emissions, but “the developmental impact would be very significant for African countries.”
“Africa’s abundant energy resources can pave the way for a brighter future for all,” said Burce Worlick.
Developing cross-border energy infrastructure across Africa
Dr Omar Farouk Ibrahim, African Petroleum Producers Organisation (APPO) Secretary-General said a study done by the organisation several years ago identified that:
financing projects,
a lack of oil and gas technology expertise, and
the difficulty in creating alternative markets for oil and gas in the face of off-takers weaning themselves of dependency in the name of the energy transition
were creating a challenge for the oil and gas industry.
“The history of oil and gas exploration in Africa is one of dependence, at best, unequal interdependence,” said Ibrahim.
“But Africa cannot continue lamenting its mistakes. It’s time to look forward and take common actions to right the wrongs of the past.”
He emphasised that creating energy markets across the continent would require the provision of energy infrastructure at national, regional and continental level and that APPO would become more focused on this and on encouraging the development of cross border inter-regional infrastructure.
A place for gas as an energy source
Asked at the opening ceremony of Africa Energy Week how company boards decided where they would invest their money, Andrew Inglis, Kosmos Energy CEO, said it is clarity of strategy which is supported by both company shareholders and debt holders that determines how you pick the best projects.
“It’s about regulation that is predictable… You talk about sign, sign, sign but to do that you have to have a process that is predictable. You put those things together and that is ultimately where the money will go,” said Inglis.
“I find it quite curious that some of the Western leaders are advocating for Africa to prioritise renewable energy. For me, I have a vision of the Western countries having gone up the escalator of hydrocarbon development. They’ve gotten to the top and switched off the escalator, and then said to Africa ’now you come up the stairs’,” he mused.
Inglis reminded the AEW opening session that the United States has the lowest domestic price of gas in any country and uses the energy source to underpin its economic growth.
“That is what Africa can do. By ensuring it is used domestically, we can create affordable power.” |
