JOHANNESBURG,
South Africa, April 13, 2021/ -- In the past twelve months, the African
energy sector has seen several encouraging developments – in the form
of both Foreign Direct Investment (FDI) and strategic partnerships –
that have advanced the sustainable development of its natural resources.
In fact, despite a global downturn in investment in 2020, FDI flows to
developing economies accounted for 72% of global FDI, the highest share
to date. Given the magnitude of Africa’s oil and gas reserves – not to
mention its abundant renewable resource wealth – the continent remains a highly attractive market for inbound investment, which is vital for its growth.
Take
Uganda, for instance, which is home to one of the largest onshore
discoveries in sub-Saharan Africa. Following multiple petroleum
discoveries in Uganda’s Albertine Graben – estimated to contain 6.5
billion barrels of oil, of which 1.4 billion are considered recoverable –
foreign investments into the country are expected to reach nearly $20
billion. Last April, Total E&P Uganda B.V. signed a Sale and
Purchase Agreement with Tullow Oil PC, through which Total will acquire
Tullow’s entire 33.34% interests in Uganda’s Lake Albert development
project and the East African Crude Oil Pipeline (EACOP). Five months
later, the Ugandan Government and Total signed a host government
agreement for EACOP, representing a significant step toward reaching a
final investment decision. The deal pushes along an extended development
process – slowed by infrastructure issues, tax complications, then
COVID-19 – that not only promises to bring first oil by 2022, but also
provides a pathway to monetization via associated transport
infrastructure.
In addition to developments at Lake Albert, the
Ugandan Government has proven its commitment to attracting FDI to its
hydrocarbon sector through its second licensing round held last year, as
well as its invitation to local and foreign entities to forge
joint-venture partnerships with the Government. By prioritizing the
establishment of mutually beneficial partnerships, the emerging East
African producer aims to facilitate the successful transfer of skills,
knowledge and technology, initiating an influx of technical expertise
and working capital into the country.
“Those who have been locked
out from access to opportunity want the same from the energy sector
that the energy sectors want from governments. We must not forget local
content, local jobs, local opportunities especially for young people
and women” Stated NJ Ayuk Executive Chairman of the African Energy
Chamber (http://EnergyChamber.org)
Meanwhile,
in West Africa, Senegal has been reaping the rewards of a long-standing
partnership with Germany, which has resulted in more than one billion
Euros in funding, including significant support for small-scale power
plants and renewable energy projects. Holding sizeable potential for
solar and wind energy development, Senegal serves as a regional leader
in renewable deployment as a means of rural electrification. Indeed,
energy is a central component of poverty alleviation across Africa, with
electricity access enabling greater independence, clean cooking and
potable water, as well as dramatically improving the well-being of
individuals, businesses and communities alike. Rural populations are
cognizant of the challenges posed by a lack of stable electricity supply
– increased urban migration, lack of access to basic services, low
economic competitiveness, to name a few – and distributed renewables can
represent the fastest and least expensive path to electrification.
European
interest in Senegal has shed light on and served as a model for
co-operation opportunities between renewable-rich African countries and
developed partners, which offer cutting-edge technologies and technical
expertise to transform raw resources into viable off-grid and mini-grid
solutions.
Furthermore, while the cost of deploying renewable
technology has never been lower, the availability of renewable-focused
capital has never been higher. Investment in commercial and industrial
solar has demonstrated resilience against the pandemic, continuing to be
seen as a safe investment in light of rising utility costs and
increasing distribution of both solar and financial technologies. Yet
resource potential and low costs of equipment are not enough; Senegal
and other resource-rich African nations require active investor interest
and strong government support to unlock diversified energy mixes. In
turn, a lack of investment represents a pointed threat to the
achievement of long-term energy security.
“Young people and women
have shown their great resilience, and it is our hope we close these
deals in the renewable energy sector, Africans can have a sense of some
hope that they will be included in the industry contracts and
opportunities. It is no longer correct for the African to be the last
hired and the first fired” Concluded Ayuk.
Moreover, without
sustained levels of FDI continuing to move the needle on oil, gas and
renewable developments, energy export revenues run the risk of being
stranded and resources left undeveloped. For emerging producers like
Uganda – as well as Tanzania, Kenya, Mozambique, among several others –
this would mean foregoing critical government revenues that could aid in
a much-needed, post-COVID-19 economic recovery. FDI is vital to
Africa’s growth, and while it may be challenging to procure capital in a
tepid global economy, it is even more difficult not to. Yes,
COVID-19 has put emerging producers in a tough spot: new exploration is
seen as risky, and new producers lack existing assets or low-cost
development of marginal fields on which to fall back. However, it is not
an option to slow or postpone time-sensitive developments that promise
to harness natural resource wealth and make sustainable improvements in
standards of living across the continent. Africa requires a sustained
flow of investment and has proven time and again that it offers the
scope of projects and magnitude of resources that are worthy of foreign
capital.
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