Pump or dump? With oil in decline, Africa ponders its energy future

by Laurie Goering | @lauriegoering | Thomson Reuters Foundation
Thursday, 2 July 2020 17:05 GMT

ARCHIVE PHOTO: Plastic containers used in the crude oil clean-up, are seen at the Bodo site in Rivers State, Nigeria November 1, 2017. REUTERS/Afolabi Sotunde

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As COVID-19 bashes economies and demand for oil plummets, is this a moment to think green - or pump faster?

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By Laurie Goering

LONDON, July 2 (Thomson Reuters Foundation) - As the COVID-19 pandemic bashes economies and demand for oil, many African nations dependent on exporting fossil fuels are "haemorrhaging" cash, African energy experts warned this week.

The crisis - which comes as more investors shun carbon-heavy businesses - is a taste of what may happen if Africa's rich oil and gas reserves become "stranded assets" that cannot be pumped as the world shifts to clean energy to meet climate goals.

Fatima Denton, director of the United Nations University Institute for Natural Resources in Africa, said such a situation had always been "talked about as a hypothetical scenario".

"But it's fair to say it's what's happening now," she said.

Hard-hit nations could respond to the threat in two ways, African experts said: either by switching up a gear on renewable power in a bid to meet development and climate change goals, or by pumping fossil fuels faster while they still can.

"It's time to optimise our resources," Senyo Hosi, CEO of the Ghana Chamber of Bulk Oil Distributors, told an online event this week. "If we don't utilise (fossil fuels) in time, we'll make fools of ourselves and miss a major opportunity."

Cutting back on fossil fuel use to curb global warming is the job of rich countries that produce the vast majority of global emissions - not African nations which are responsible for only a tiny share, noted James Murombedzi, coordinator of the African Climate Policy Centre.

But Denton said the continent had the potential to leapfrog dirty technology in getting electric power to the 565 million Africans who still live without it today.

"Africa could become the custodian of a new sustainable development world order" if it can make that energy transition in a clean way, she added.

Doing so could also be an opportunity to root out corruption in oil and gas nations that has meant Africa's fossil fuel resources "have never benefited the great majority of our people", she said.

A worker walks between solar panels at Centragrid power plant in Nyabira, Zimbabwe, June 23, 2020. REUTERS/Philimon Bulawayo

'UNIQUE OPPORTUNITY'

Damilola Ogunbiyi, the U.N. Secretary-General's special representative on sustainable energy for all, said that as African states try to recover from COVID-19 "they are faced with a unique, once-in-a-generation opportunity to 'recover better'".

"Countries that recover better with sustainable energy will see the payoff in the form of resilient economies, new jobs and faster energy development", giving them a competitive advantage, she said as Sustainable Energy for All, a global energy access body, published a clean recovery guide for Africa this week.

Installing and maintaining solar mini-grids and solar home systems, in particular, could create millions of jobs for the fast-growing number of young Africans seeking work, clean energy backers said.

But finding political support and cash for a green energy transformation will be a huge challenge in many parts of Africa, not least with budgets flattened by the pandemic, they added.

Many African oil-exporting countries, from Gabon to Equatorial Guinea, have seen their oil revenues halved since the start of the pandemic, said Antonio Pedro, director for central Africa at the U.N. Economic Commission for Africa.

New licensing for fossil fuel exploration is also drying up, and projects are being postponed or cancelled in countries from Mozambique to Guinea Bissau, Pedro said.

Natural resources - including oil and gas - account for 25% of gross domestic product in Africa, he said, compared to 2% for richer countries in the Organisation for Economic Co-operation and Development.

The pandemic-linked slowdown is raising awareness of the risks of relying so heavily on revenue from fossil fuels and other natural resources, the experts said.

But if Africa is asked to back away from using its oil, gas and coal, it will need help to do it, said Rose Mwebaza, director of the U.N.-backed Climate Technology Centre and Network.

"The transitions are not going to happen without financial facilitation," she said.

Selam Kidane Abebe, a legal adviser to the African group of negotiators at U.N. climate talks, said African officials were willing to make changes in their energy systems, but they had to be ones that would cut poverty and boost incomes.

"If countries are not going to use these (fossil fuel) resources, there have to be other resources to promote their sustainable development," she told the online event.

Clouds gather but produce no rain as cracks are seen in the dried up municipal dam in drought-stricken Graaff-Reinet, South Africa, November 14, 2019. REUTERS/Mike Hutchings

CLIMATE THREAT

Africa already has most of the world's people lacking access to electricity, and climate change is making efforts to slash those numbers difficult.

Worsening droughts, particularly in southern Africa, now regularly dry up key hydropower dams, one of the continent's leading sources of clean energy.

Africa has huge potential for solar, wind and geothermal power, but so far the technologies "are not yet proven on a scale that can drive the industrialisation of this continent", said Murombedzi of the African Climate Policy Centre.

Investment by some multilateral agencies and countries from China to the United States also is still driving expansion of fossil fuel infrastructure in Africa - raising the risk of more stranded assets, the experts noted.

The World Bank in 2010 granted a $3.7 billion loan to build South Africa's large-scale Medupi coal-fired power plant, making it hard for the country to ditch the fuel, Murombedzi said.

"If South Africa moved out of coal, it would have not only the stranding of the facility itself but the ... debt South Africa owes," he said.

Denton said any effort to catalyse a shift to clean energy in Africa must take into account its heavy economic dependence on natural resources, including fossil fuels.

"The road to going green is fraught with many difficulties," she said. 

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(Reporting by Laurie Goering @lauriegoering; editing by Megan Rowling. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters. Visit http://news.trust.org/climate)

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