Page 5 - AfrElec Week 46

AfrElec COMMENTARY AfrElec
African officials highlight importance of oil and gas
Despite climate concerns, fossil fuels are still viewed as an important driver of economic growth and development
AFRICA
WHAT:
Africa’s track record of dependence on resource extraction is running up against concerns about climate change
WHY:
African officials still see oil and gas as an important driver of development
WHAT NEXT:
African enthusiasm for oil and gas will continue to outweigh interest in renewable energy for the time being
AFRICA has a long track record of focusing on resource extraction – sometimes unwillingly, as may have been the case during the colonial era, and sometimes enthusiastically.
In any event, this pattern has certainly per- sisted in the oil and gas sector. Many of the Afri- can states that produce crude oil and natural gas are heavily dependent on the revenues generated by the sale of those commodities. For example, in Nigeria, the continent’s largest oil producer, the proceeds of crude sales account for virtually all of state budget revenues. In Angola, Africa’s second largest source of oil, the figure is closer to 80%.
These two countries, along with other oil and gas producers, have indicated repeatedly that they would like to diversify their economies in order to reduce their reliance on extractive industries that can cause environmental degra- dation and that are dependent on the vagaries of world commodity markets. So far, though, they have not found a way to ensure the success of economic diversification campaigns.
As a result, oil- and gas-producing states in Africa still rely on the revenue streams generated by resource extraction. In turn, resource-extract- ing companies – both international oil compa- nies (IOCs) investing in Africa and national oil companies (NOCs) overseeing the exploitation of the resources in question – have continued to turn to world financial markets and state-spon- sored lenders in order to secure the credit they need to sustain operations.
Recently, though, greater awareness of cli- mate-related issues has led some lenders to back
away from fossil fuels and promote renewable energy instead. The European Investment Bank (EIB), for example, recently announced plans to stop providing credits and other forms of sup- port for fossil fuel projects. Likewise, Norway’s sovereign wealth fund indicated earlier this year that it intended to unload some of its holdings in fossil fuel-extracting companies.
This shift has been interpreted in some quar- ters as a harbinger of the impending collapse of oil and gas extraction. African producers appear to disagree, though. Indeed, some of them have expressed adamant support for fossil fuel pro- duction over renewable energy projects – and have criticised those who call for moving away from hydrocarbons.
“Not negotiable”
This stance was much in evidence at the Africa Oil Week (AOW) conference in Cape Town ear- lier this month.
For Gwede Mantashe, South Africa’s Min- ister of Mineral Resources and Energy, renew- ables do not yet compare favourably to oil and gas. Renewable energy projects have very seri- ous drawbacks, in that they are typically more expensive than fossil fuel initiatives and are not always in line with producer states’ other goals, he said.
“We have set a number of objectives, and one is a security of supply,” he told Platts on the sidelines of AOW. “That is what we need for the economy to pump ... That objective is not nego- tiable.” He added: “We want to supply energy at a cost-effective level because if it is too expensive,
Extractive industries are not in imminent danger of dying
Panel discussion at Africa Oil Week conference in Cape Town (Photo: AfricaNews.com)
Week 46 21•November•2019 w w w . N E W S B A S E . c o m
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