Africa needs domestic gas, not LNG, for power – Siraq


“A stable and competitive framework for investment requires policy certainty; transparent decision- making processes that enable projects to be progressed quickly (pace is intrinsically linked to value); competitive and stable fiscal terms; and a stable legal framework.
“Often Governments are too quick to tighten fiscal terms immediately after early discoveries, thereby introducing significant hurdles for subsequent exploration.
“Fiscal terms and the opportunity to participate in new licensing rounds must remain competitive to attract risked capital.”

Speaking to the African Energy Chamber in an interview recently on industry policy misrepresentation and misappropriation and consequently, oil production decline, coupled with the current and prevailing low carbon gas monetization across the African continent, CEO Impact Oil & Gas Siraj Ahmed says Africa has abundant oil and gas resources to navigate itself out of the logjam besetting its oil and gas industry at the moment.

While expressing concern about the restricted oil exploration activity due to global shift in capital investment from fossil fuels to renewable energy projects toward accelerating the ongoing global energy transition agenda, said the continent must wake up and act now to be able to move with the energy transition train.

“The continent needs to act now if it is to reap the benefits of its oil and gas resources”, he said.

He stated that with production underperformance currently experienced in countries like Nigeria, Libya, Angola, the Republic of the Congo, Equatorial Guinea, Africa will only suffer the brunt of negative economic downturn to be visibly seen both in terms of access to cheap energy and revenues into the treasury, all of which he says will come with its destabilizing effects on the continent as a whole. Adding however that “temporary underperformance can be managed, but persistent underperformance would be far more damaging, holding back development and the ability of these countries to invest in the energy transition.”

Emphasizing the need for Africa to grab every opportunity offered by technology he said that though technology requires power – whether a smartphone, tablet, laptop, or other gadgets, it was the only instrument that drives progress in any economy. Insisting that for any failure to invest in energy only shuts a country out of the global economic scheme of things. For “nations that fail to invest in energy will be left behind and will lack the economic growth to fund development…”

He stated that reduction in supply, at least in the short term, meant higher oil prices, which in turn leads to higher inflation, which also hits the poorest the hardest, maintaining therefore that these countries have all the means and ability to turn this around, for “underperformance need only be temporary” he said.

Stressing that though COVID and the global issues such as the energy transition have played big roles in the entire oil production decline saga in Africa, lack of investment in exploration and the question of what countries must do have played bigger roles. Besides this he said, was the declining nature of both equity and debt capital for oil and gas projects, which also was largely albeit not exclusively, due to pressure to meet the energy transition.

“With an ever-decreasing supply of global capital for such projects, funders can be selective about where capital is invested and, therefore, competition is stiff and the threshold to secure it is high”, he said.

He maintained that countries in Africa, whether with existing production, where infrastructure-led exploration can provide lower risk additional resources or, countries with frontier exploration potential, the need to provide a stable and competitive framework for investment cannot be over-emphasized. For “it is these higher risk, but higher resource, new frontiers with the opportunity to make large scale economic impact, that have the greatest challenges to attract capital”, he stated.

He explained that Norway which started producing oil since the 70s had recently announced the award of 53 new licenses, with Equinor picking up interests in 26 blocks, in addition to announcing its plans to drill 25 exploration wells during 2022, a big gap if compare countries like South Africa, which has seen only two exploration wells in the last 10 years. Attributing Norway’s progressive and stable industry growth to adopting an operating a model that enables and incentivizes exploration, push her up to among the first 15 oil producers globally, and allowing it create a sovereign wealth fund worth over a trillion dollars.

“Much of Africa’s production is in shallower waters and is rapidly maturing. Declining production requires investment in exploration. It is important, therefore, to incentivize frontier exploration alongside ILEX opportunities, and maintain a suitable fiscal framework. A one size-fits-all fiscal framework will limit exploration to smaller, near field exploration opportunities.

“The demand for energy is only growing, whilst there is a rapid and concurrent reduction in investment in exploration and production. This reality, and the consequences of it, are reflected in current global oil and gas prices and the apparent economic and geopolitical turmoil it is causing. It is unlikely that the demand trend will reverse soon, so Africa should invest to reverse its growing production shortfall”, he stated.
On industry approach to low carbon gas monetization and financing in Africa he said,

“Natural gas is a relatively low carbon energy source when compared to oil or coal, therefore it is an obvious transition fuel that could meet the energy needs of Africa from its own resources. However, this must be done quickly since the transition period is not indefinite.

“Powering African countries through the use of domestic gas has a number of advantages: importing LNG and/or oil has a much higher carbon footprint than utilizing domestic gas; it enables a just transition away from coal in countries such as South Africa where 80% of its electricity is generated from coal; and it provides a cleaner alternative to firewood and charcoal, used by more than 60 percent of families in sub-Saharan Africa for meal preparation and to meet other energy needs, due to the absence of affordable alternatives. This is damaging to health and a significant contributor to forest degradation.

“Natural gas should form part of a wider energy mix that embraces other low carbon energy sources. The role of the oil and gas industry in Africa can and should be broader than exploration and development of oil and gas resources.

“We are increasingly seeing agreements between Governments and IOCs to collaborate on investment in a multi-energy strategy that supports development of renewable projects alongside major oil and gas projects. For example, as part of the recent Final Investment Decision for the Uganda-Tanzania crude oil pipeline, the Kingfisher and Tilenga oil projects in the Lake Albert region of Uganda and TotalEnergies signed a deal to explore opportunities to develop renewable energy projects. Initiatives such as this bring expertise as well as finance to the continent.”


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