Europe’s gas dash risks leaving African countries high and dry

In May, the European Commission announced a €210bn plan to end its dependency on Russian fossil fuels. Among REpowerEU’s stated goals was a desire to explore the energy export potential of African countries, despite promises at Cop26 to move away from fossil fuels. The European phase out of Russian energy prompted by the invasion of Ukraine presents an unexpected opportunity for African countries with sizable reserves of oil and gas.

Twenty-five per cent of EU oil and 40 per cent of the bloc’s gas comes from Russia. High oil prices have benefitted producers such as Nigeria and Angola in the short-term, and Algeria, Egypt, Congo and Senegal have all signed gas deals this year with Germany and Italy. But while Europe’s efforts to engage with African energy producers may benefit some countries in the short-term, Europe’s turn to Africa could cause serious economic and social problems longer term.

Many African governments support the idea that fossil gas be considered a transition fuel, and even the former UN climate envoy Mary Robinson has argued that African countries should be allowed to exploit their gas reserves to tackle energy poverty and support development. Any remaining carbon budget – the limited amount of Co2 that can be released into the atmosphere while keeping global warming within the 1.5 degree Celsius limit as agreed in the Paris Agreement – should, said Robinson, go to countries in Africa where, across the continent, 570 million people still lack access to electricity.

“There is an assumption, perhaps unverified, that there will still be a fossil fuel space to 2050, although it is narrowing,” explains Silas Olang, a director at the non-profit organisation the Natural Resources Governance Institute (NRGI). “Call it a necessary evil, but any kind of small space that remains should be provided to those who contributed the least to climate change.” 

However, the International Energy Agency has said there should be no new developments of fossil fuels if the world is to reach net zero by 2050. Africa’s climate and poverty levels, agree experts, make the continent particularly vulnerable to climate change impacts if the 1.5 degree limit is exceeded. There’s also the question of the timeline. The EU has committed to sourcing 45 per cent of its energy from renewables by 2030. Today this figure stands at just over 22 per cent. Eight years is a short horizon in oil and gas where investments are often planned on the basis of two or three decade returns. “It seems like Europe needs a lot of additional gas supply now but there’s a big question mark over whether it will need that past 2030,” says Thomas Scurfield, an economist analyst at NRGI.

[ See also: How to end the world’s dependence on Russian oil and gas ]

What this means in practice, say Scurfield and Olang, is that potential beneficiaries are limited to the small number of African countries which could quickly ramp up production. This solution could include increasing investment in existing gas plants in established producer nations such as Algeria and Nigeria which are operating below capacity to increase supply to Europe. Senegal, although less established, is another contender to become a supplier of gas to Europe, although the first batch of the country’s gas will only appear next year and is already promised to Asian buyers.

Content from our partners

How data can help revive our high streets in the age of online shopping

Why digital inclusion is a vital piece of levelling up

How to help ethnic minority-led firms succeed

As for oil, demand could peak as soon as the mid-2020s, before falling rapidly meaning that any benefits would also only accrue to countries that can quickly step up production. The majority of Africa’s oil and gas, although plentiful, is largely undeveloped, and wider opportunities exist only in the medium and longer term, says Vanessa Ushie, director of the Natural Resources Centre at the African Development Bank. “Moving from exploration to production in sub-Saharan Africa can take around a decade,” says Olang. “In that case, we will probably have missed [Europe’s] window of opportunity.” 

Stepping up production would also not be cheap. Energy consultancy Rystad estimates that for gas, some $400bn would be needed through to 2035 to scale up existing production and bring online the continent’s undeveloped potential. 

And, while large oil and gas investments in the context of global commitment to net zero are risky for any country, the outlay is likely to be costlier for countries with less developed oil and gas sectors. A March report into fossil fuel financing by a coalition of NGOs identified some $230bn of new oil and gas projects in the next 10 years that are at risk of becoming stranded assets should the world live up to its climate commitments. “It’s really important that states don’t take state money to either continue to invest in this legacy business, or potentially even worse, start to try and invest into an oil and gas economy,” says Mike Coffin of the Carbon Tracker Initiative, a think tank. A number of countries in Africa including Mozambique are developing LNG projects which are particularly resource-intensive since liquifying gas and shipping it is costly. “Participating in the global gas industry requires substantial investment that is predicated on it being useful for a number of decades,” says Coffin. Given climate change and net-zero ambitions this is unlikely to be the case. 

Given the large outlays needed, the responsible course of action says Olang would be for Europe to at least clarify its fossil fuel intentions and needs towards African countries. Linking any investments in fossil fuels with investment in renewables is also necessary, he says. REpowerEU links Europe’s short-term energy needs with  investment in clean technologies, such as green hydrogen, promising to combine gas cooperation with longer-term investments in hydrogen, renewable gases and other green energies to prevent stranded assets and ensure low-income nations can also become clean energy economies.

The concept of trading off fossil fuel supplies in the short-term for a long-term renewable energy transition is a good idea in theory, says Olang, but he worries that the reality may be different. “It’s worth remembering from history that developed countries have not lived up to their commitments.” Amos Wemanya, a senior analyst at Powershift Africa is also doubtful that any fossil fuel investment can pay off for Africa. “What we have seen with fossil fuel development in Africa before is that it is actually counterproductive to development. Multinational corporations work in cahoots with a few local elites,” he says, pointing to the Niger Delta where battles over control of oil have led to thousands of deaths and the displacement of people. 

Some countries such as Senegal have more robust resource management frameworks. The country recently passed a law prohibiting spending of future gas incomes on government salaries while allocating a portion of revenues to future investments in health and education. In the scramble to capitalise on what might be seen as the last opportunity to get their oil and gas out of the ground, some countries could, however, rush to sign off on projects without considering potential social and environmental harms.

Despite the short-term lure, governments across Africa should forgo any invitation to produce more fossil fuels for the European market, says Wemanya. The idea that exploitation of fossil fuels is necessary for countries to develop is, he says, based on outdated ideas. “The existing narrative holds that no country has ever developed without exploiting its fossil fuels, but we are living in different times. Africa has a huge benefit in being a latecomer in building the foundational infrastructure for development, including in energy. It can leapfrog the development pathways that the north underwent and build smarter, distributed energy systems powered by renewables.”

But while renewable technologies can help countries across Africa meet its own domestic energy needs, they don’t necessarily provide the export revenue some African countries are seeking to capitalise on through new deals with Europe. Coffin agrees this is an issue, but insists that the key question all countries need to answer when thinking about how to frame their economy is how “not to waste money by investing in something that is going to become stranded and will ultimately lose money”.

[ See also: Europe’s fossil fuel imports have funded Russia’s war ]

Source link

Leave a Comment

Your email address will not be published.