Following sustained decline in foreign investors’ interest in Africa’s oil and gas sector, African Energy Chamber (AEC) declared that several Western banks and financial institutions had implemented policies aimed at reducing support for fossil fuel projects in the region.
In a report titled, “Africa’s energy sector to litigate banks and financiers for financial apartheid in oil and gas sector”, it said the development had led to a sharp decline in investment in the continent’s oil and gas industry, a sector that is crucial for its economic future and energy needs.
AEC argues that these institutions are practicing “financial apartheid,” arguing that while similar projects receive support in Europe, Africa’s high-cost energy projects are being neglected.
The decline in investment is already having a noticeable impact, exacerbated by global shifts towards cleaner energy and prioritizing of ESG practices. Major international oil companies are reducing their presence in Africa.
For instance, Equinor has withdrawn from offshore exploration in South Africa and ExxonMobil has exited a deepwater oil prospect in Ghana. This decline is contributing to a bleak outlook for Africa’s energy sector.
“As the international community moves to boycott investments in the African energy sector, African people and African development stand to suffer,” says NJ Ayuk, Executive Chairman of the AEC.
“The role of oil in Africa’s energy and economic future is apparent, and consequently, should be defended as Western elites move to disrupt African progress,” he added The broader implications of financial divestment are profound.
Many African governments rely on fossil fuels as a cost-effective means to alleviate energy poverty and boost state revenues. However, the increasing pressure on financial institutions to cut funding for high-carbon projects creates uncertainty about the future of Africa’s energy sector.
The International Energy Agency (IEA) has added to these challenges with its calls to cease funding for oil and gas projects, highlighting a disparity: while natural gas is considered a ‘green’ energy source for Europe, it does not receive the same treatment in Africa.
According to Ayuk, “the IEA has lost its relevance and its authority.” Originally focused on managing oil supply disruptions, the IEA now prioritises policies aimed at achieving netzero emissions by 2050.
Its 2019 projection that no new investments in oil, gas, or coal are needed if the world continues on this path has been particularly controversial. Several key African projects are at risk due to the withdrawal of financial support.
Significant initiatives like TotalEnergies’ Mozambique LNG project, ExxonMobil’s Rovuma LNG project, Nigeria’s Train 7 LNG expansion, Senegal’s Sangomar oil field, Uganda’s Tilenga project and the East African Crude Oil Pipeline (EACOP) require substantial financing to advance.
Despite these setbacks, some projects are progressing. TotalEnergies is advancing its $20 billion Mozambique LNG project, aiming to develop the Golfinho and Atum fields with a production capacity of 12.88 million tonnes per year.
Eni’s Coral South FLNG project in Mozambique has achieved a production capacity of 3.4 million tonnes per year. Additionally, the Greater Tortue Ahmeyim (GTA) LNG project, which started gas production in November 2022, is being developed by bp, Kosmos Energy and the national oil companies of Senegal and Mauritania.
This project includes an FLNG facility with an initial capacity of 2.5 million tonnes per year.
Meanwhile Nigeria’s Train 7 project, an expansion of the existing NLNG facility on Bonny Island, aims to boost production by 8 million tonnes per year, bringing the total to about 30 million tonnes per year.
This development is crucial for Nigeria’s growing population and its ability to meet its energy needs. However, delays persist.
The Tanzania LNG project, involving Equinor and Shell, is stalled due to proposed government changes. UTM Offshore’s FLNG project in Nigeria, initially planned for 2023, has been postponed.
Additionally, the EACOP faces significant criticism from financiers and environmental groups, complicating its development and financing.