African leaders slam Western energy 'hypocrisy' but financing woes remain

In a rousing performance to open African Energy Week in Cape Town, the cry went out from a young troupe of singers: "We want change, we want energy, we want our basic human rights."

The pointed call to action set the tone for the continent's largest energy conference, with a parade of leaders, energy ministers and oil company representatives Oct. 17 exhorting the need to build out Africa's hydrocarbons industry in the name of economic justice, lest it gets left behind by the west's push away from fossil fuels.

"Affordable energy for all Africans is an immediate and absolute priority," said Namibian president Hage Geingob. "African countries have been working to ensure that our countries have access to energy to industrialize, to grow our economies and become dealers of hope for the largest demographic on the continent – our youth."

In a pre-recorded address, OPEC Secretary General Haitham al-Ghais insisted Africa should be treated equitably amid global calls for an energy transition, because the continent is not responsible for the bulk of the world's CO2 emissions. "The same environmental yardstick should not be used to compare regions at vastly different stages of development," Ghais said, noting that oil demand in the continent will rise by 80% by 2045.

But rhetoric is one thing, actual investment is another. The world's poorest continent, where 600 million people lack access to electricity – a statistic repeated several times in the conference's opening keynote speeches – is struggling to raise financing in an economic environment where many western companies are divesting from fossil fuels and policies are aimed at restricting oil and gas development.

Longstanding governance concerns in many African countries also continue to impact investor appetite.

Upstream deals

Achieving the conference's tagline, "Making energy poverty history by 2030," would require billions of dollars in both upstream and downstream deals, which the assembled government officials said they are eager to sign.

Plenty of praise at the conference was reserved for Namibia, where huge oil discoveries in the Orange Basin – perhaps the world's most exciting exploration play – look set to transform the fortunes of a country with just 2.58 million people and GDP of $12.6 billion according to the World Bank.

According to government estimates, the Southern African country could hold 11 billion barrels of oil resources.

Namibia "is clearly at the cusp of bringing a globally significant hydrocarbon industry," Geingob, the only head of state to attend Africa Energy Week, said. "It is an opportunity that is impossible to pass up." Geingob adding that 30% of all offshore rigs in Africa are currently operating in Namibia.

On the downstream side, Nigeria's colossal Dangote refinery is due to come online in the coming weeks, according to its builders, following years of cost overruns and delays. The 650,000 b/d refinery would make Nigeria self-sufficient in fuels, ending years of crude for fuel swaps that prevented Africa's biggest producer from reaping the economic benefits of its oil bounty.

However major African producers, including OPEC members Nigeria, Angola, Republic of Congo and Equatorial Guinea, have struggled to reverse production declines in recent years due to technical issues at aging oil fields and chronic underinvestment.

Uncertain future

Despite rallying calls for a just energy transition, projects like Uganda's East Africa Crude Oil Pipeline (EACOP), a 1,445-km 216,000 b/d conduit linking the country's Albertine Rift Basin oil fields with the Tanzanian port of Tanga, continue to face an uncertain future amid a significant environmental backlash, which has led Western banks to shun carbon-intensive projects.

"It is not sustainable – you cannot suffocate Africa anymore. Africa has spoken," Ugandan energy minister Ruth Nankabirwa told S&P Global Commodity Insights on the sidelines of the conference. "[The] energy transition must be just and realistic."

The message was echoed by South Africa's minister of mineral resources and energy Gwede Mantashe, who called out the "hypocrisy" of Western governments following Russia's invasion of Ukraine. Africa "should not be bullied" over the energy transition, he told journalists, given that the EU "increase consumption of South African coal eight-fold" following the war.

When pressed on where funding would come from for future energy projects, Nankabirwa said: "The whole world is not against Africa. Some Good Samaritan will come up."

The Chinese National Offshore Oil Co. is a shareholder in EACOP alongside TotalEnergies and the NOCs of Uganda and Tanzania. Data from S&P Global Commodity Insights showed China has swapped cheap loans for energy investments in Africa in recent years in a bid to build its influence and secure future supply.

"Africa has her natural resources, we are getting wiser and cleverer," Nankabirwa said, adding that countries were coming up with new laws designed to keep African oil and gas revenues in the continent.

The African Petroleum Producers Organization has partnered with Afreximbank to create the Africa Energy Bank, which is looking to fund energy projects on the continent from 2024, but it, too, is seeking external funding, including from Middle Eastern sovereign wealth funds.

Fuel imports

Forecasts from S&P Global paint a concerning picture, despite African leaders demands for home-grown energy projects to end energy poverty.

Africa figures to remain a significant net importer of refined products for the foreseeable future, exerting downward pressure on vital foreign exchange, with fuel consumption continuing to far outstrip supply for years to come.

Net fuel imports will rise from 1.9 million b/d in 2023 to 3.2 million b/d by 2050, S&P Global forecasts.

"Despite the ambition, it's hugely challenging to FID a new refinery," said Dan Evans, head of fuels and refining for S&P Global. "We expect Africa's refined products imports to continue to grow for the foreseeable future."