African Energy Chamber

The State
of African
Energy
2022
2
The State of African Energy 2022
The State of
African Energy 2022
2 African Energy Chamber

Credits
Production
Team
Executive Chairman
NJ Ayuk
Senior Vice President

Verner Ayukegba
Marketing & Communication Manager

Motheo Motlhanke
Digital Marketing Specialist

Amina Williams
Communications Coordinator
Sipho Ndlovu
Content Management, Analysis & Editing

Andrés Vega
Concept and Senior Designer

Ahmet Sağır
www.energychamber.org 3
4
The State of
African Energy 2022
Contents
Foreword 6
Introduction 8
Key Highlights 9
Chapter One –
Industry In Review 10
1.1.Market Overview. FCF generation expected to decline into 2022 as investment upcycle emerges 10
1.2. Oil Market. Covid causes unprecedented oil market turmoil covid lockdowns easing out
globally and OPEC+ agreements resulted in crude price recovery 16
1.3. Gas Market. Gas prices set to increase on the back of strong global demand. 20
1.4. Impact of COVID-19 on O&G industry 25
Chapter Two
African Upstream Review 29
2.1. State of African energy industry in 2022 29

2.2. Exploration poised for resurgence in 2022 38
2.3. LNG projects to boost Africa’s oilfield services outlook 44
Chapter Three
As Majors Exit, Nocs Acquire 34
Chapter Four
African E&P Financing Could Become More Reliant Upon Asia 58
Chapter Five
POWER & MINERALS 66
5.1. A challenging year for Africa’s economy and power industry 67

5.2. Market developments: Africa’s electricity sector in 2020 and 2021 70

5.2.1. Supply 70
5.2.2. Demand 74
5.4. Investment climate and projects pipeline 77
5.5. Scenarios of electricity supply outlook 79
5.5.1. Scenario 1: BAU Scenario – normal investment flows 81
5.5.2. Scenario 2: Making energy poverty history by 2030 81
5.5.3. Scenario 3: A ‘cleaner’ mix 82
Chapter Six
THE ENERGY TRANSITION, AFRICA’S ENERGY MARKETS: CHALLENGES AND OPPORTUNITIES 83
6.1. Energy transition and Africa’s energy markets 83

6.2. The impact of IEAs Net Zero Emissions scenario on Africa’s energy industry 86
6.3. Outlook of renewable energy sources 89
Photovoltaics (PVs) 89
Wind 90
Hydropower 92
Geothermal 94
Chapter Seven
OUR STRATEGY TO PROVIDE POWER THAT DRIVES ECONOMIC DEVELOPMENT FOR ALL 96
7.1. Providing Power That Drives Economic Development For All 96

7.2. Spotlight on gas: Aggressively promoting natural gas for Africa’s industrialisation drive 97
Selected case studies 100
Chapter Eight
ENERGY TRANSITION, AND AFRICA’S MINERALS VALUE CHAINS 103
8.1. The growing demand 103

8.2 Africa’s Share of Global Supply 104
8.3 Deepening Africa’s critical minerals value chain linkages 106
6
Foreword
Dear Reader,
This year’s report on The State of African Energy 2022

is unlike any of the ones we produced previously.
Last year was an extraordinary year for the oil and
gas industry as the COVID-19 pandemic hit the global
demand, leading to a fall in oil prices. Companies
responded swiftly by slashing their budgets and
delaying upcoming project sanctioning decisions.
The pandemic has also been particularly challenging
for many countries worldwide, more so in Africa. The
continent entered its first recession in decades, with
several African economies seeing a sharp slowdown
in economic activity since early 2020 with the
outbreak of the Coronavirus (COVID-19) pandemic.
Although we have seen a rebound in economic
activity, this renewed growth momentum on the
continent still lags behind other regions such as
emerging and developing Asia.
Reasons for the modest growth projections on the

continent include continued lack of access to all
important vaccines (vaccine inequity) and the weaker
fiscal position of most governments. As of the end
of mid-October 2021, less than 5% of the continent’s
adult population had been fully vaccinated. While the
African continent has recorded relatively lower cases These changing priorities have reflected increased
of the virus and deaths, there are several unintended attention to environmental, social and governance
socio-economic consequences of the pandemic, issues (ESG) by stakeholders and investors,
including for the continent’s energy sector. The manifested in various net-zero commitments. Going
pandemic-induced economic decline has negatively forward, energy projects, particularly upstream oil and
affected the progress made on electrification in Africa. gas, will be under more pressure to showcase their
Oil and gas companies and utilities, for example, ‘green street credibility’ to attract funding.
faced severe financial difficulties due to a freeze in
investments. Against this backdrop, the State of African Energy
2022 report assesses the energy value chain
Within the same period, there have been increasing encompassing upstream, midstream and downstream
calls by international governments, investors and investment needs, especially in light of the pandemic-
governments to do more to tackle the existential related market shocks and the opportunities therein.
threat of climate change – a key event this year will be
the UN COP26 Climate Summit in Glasgow, Scotland. The 2022 Outlook demonstrates is that all is not

A letter from our Executive Chairman, NJ Ayuk
lost, especially for the African continent. There are millions of people who live on the African continent.
at least three reasons why some of the adverse The increase in demand for battery metals will
predictions about Africa’s oil and gas and broader disrupt global supply chains and open new market
energy industry need putting in perspective. Firstly, opportunities for countries worldwide, particularly in
exploration activity in the region is expected to Africa
increase gradually to 2019 levels, albeit well below
pre-2015 levels. Greenfield activity is expected to Finally, in terms of doing business on the continent,
keep increasing for the remainder of this decade as we have to cut red tape to make life easier for
many of the LNG projects in East Africa start attracting hard-working Africans, businesses and investors
investments. Greenfield investments offshore in Sub- to work and grow the energy sector. We know
Saharan Africa are also expected to increase with the from experience that this will reduce the cost of doing
recovery in sanctioning activity. Six licensing rounds business, speed up approvals and make life
are expected to conclude before the end of 2021, better for Africans. We must never be ashamed of
with about 92 blocks on offer, while another fourteen supporting an industry that has brought so much
are expected to close in 2022. to Africa and will continue to bring people out of
poverty and reduce reliance on foreign aid.
Secondly, a key change visible in Africa is that the This year’s report’s core message is that Africa has a
continent is expected to sanction more gas resources fine opportunity to leverage all the energy resources
than the last decade, which focused mainly on crude at its disposal to support its post-COVID economic
oil projects. Due to energy poverty in Africa, net-zero recovery agenda, bridge the access gap, and fight
targets are not at the forefront of most countries’ poverty. This imperative must not be lost on us.
minds. Instead, providing sufficient energy to fulfil I hope you do enjoy reading the report.
the basic requirements of the population is foremost.
Africa’s abundant 600 trillion cubic feet (Tcf) of natural
gas reserves can help meet the continent’s future
energy demand and play a key part in electrification
in various countries due to its accessibility. Gas-to-
power generation can help move away from other
more polluting conventional fuels and assist in the
energy transition.
Thirdly, rapid moves to attain net-zero at all costs will Thank you,
severely negatively impact Africa’s energy sectors,
which are a critical source of employment and foreign NJ Ayuk
exchange earnings. Africa remains among the least Chairperson
CO2 — and other greenhouse gases — emitters African Energy Chamber
globally. The transition is less about technological
and fuel choices than sustainable livelihoods for the
8

Key Highlights
• Free cash flow (FCF) generation and government take lion+ levels in 2014 to an estimated US$33 billion in
declined by slightly less than 50% in 2020 2022
• Highest free cash flow generation expected in 2021 • Drilling activity is expected to fall to about 950 wells
supported by improving commodity prices and curbed per year in 2022 versus the 1475 wells drilled in 2012
capital investments
• 2021 offshore rig demand cut by 22% versus 2020, but
• Higher sanctioning and investment activities in 2022, 2022 demand estimated to double from 2021 levels,
decreasing free cash flow by 15% spelling out a busy market for drilling service providers
• Short term outlook suggests a good supply demand • While 2020 witnessed the second lowest discovered
balance for the rest of 2021 but an oversupply if OPEC+ volumes in the past decade, so far in 2021 much lower
delivers on its new supply targets volumes have been discovered
• There could be a correction in reference prices from • Only 1 high impact well has been drilled in 2021 which
2022+ if additional volumes from OPEC+ result in sup- resulted in non-commercial oil flows; 3 more are ex-
ply outrunning the demand pected to be drilled before the end of the year
• Demand and supply to recover after taking a hit in • A much more encouraging year is anticipated in 2022
2020 due to COVID-19 and a supply shortfall in 2021 with 13 high impact wells expected to be drilled
• Major reference prices to remain on the higher side • 6 licensing rounds are expected to conclude before
due to new LNG supply delays, exemplified in the re- the end of 2021, with about 92 blocks on offer. During
cent escalation in gas prices during 2021, also impact- 2022 14 rounds are expected to close, although 7 of
ed by pipeline flows these rounds remain uncertain
• COVID-19 and the subsequent disruption to glob- • Majors are divesting carbon intensive crude oil assets
al markets is estimated to have wiped out close to to meet carbon neutral goals through selling to NOCs
US$150 billion of exploration and development expen- and INOCs, amid a changing player landscape
diture from Africa between 2020 to 2025
• NOCs are acquiring majors crude oil assets
• Over the last 12 – 15 months, more companies and
especially majors have announced strategic revisions • European majors are expected to boost on gas out-
with increased focus on the energy transition, cutting put with the intention of tapping into global markets
down their carbon emissions and in doing so, reduce through the production of LNG
respective upstream expenditure going forward
• G20 governments allocates US$ 123 billion in public
• While 2021 is expected to see marginally higher up- sector financing to Africa and Middle East from 2013-
stream investment totaling just over US$33 billion in 2019
Africa, the estimated drop in African upstream expen-
diture over the years 2022 – 2025 is close to US$34 • European finance institutions demonstrate strongest
billion when compared to the estimates from year-end reluctance to invest in fossil fuel related projects
2020 • Asian financing institutions likely to remain as key
sources of financing for fossil fuel projects in Africa
• Upstream capital expenditure halved from US$60 bil-
10
1.1. Market Overview. FCF generation

expected to decline into 2022 as
investment upcycle emerges
Free cash flow (FCF) generation Last year was an extraordinary is illustrated per continent, all con-
and government take declined year for the oil and gas industry as tinents are expected to generate
COVID-19 hit the global demand, positive free cash flows going for-
by slightly less than 50% in 2020
consequently leading to a fall in oil ward. The higher investment activ-
prices. Companies responded swift- ities in Australia and United States
Highest free cash flow genera- ly by slashing their budgets and de- were responsible for the negative
tion expected in 2021 supported laying upcoming project sanctioning cash flows in the period from 2012
by improving commodity prices decisions. Such steps helped opera- to 2015, however major investments
and curbed capital investments tors to withstand the storm and po- in the past and delayed sanctioning
sitioned the companies to reap the activity have returned the continents

benefits in the coming years. This to a positive free cash flow position.
Higher sanctioning and invest- year is expected to be a record year Australia is expected to generate
ment activities in 2022, decreas- in terms of free cash flow generation. the highest free cash flows of more
ing free cash flow by 15% Global free cash flow generation for than USD 20/boe followed by Eu-
all the publicly listed companies is rope generating USD 15/boe in 2021.
estimated to exceed USD 350 billion While Australia is expected to gen-
supported by the increase in oil pric- erate above USD 18/boe in the short
es. Most of the increase is expected term, Africa’s free cash flow per bar-
to come from North America while rel is expected to decline gradually
Africa is expected to contribute from USD 11/boe in 2021 to USD 6.5/
around USD 24 billion of the total. boe in 2025. Overall, the key contrib-
There remains a downward risk on utor to making 2021 a record year is
oil prices in 2022 and hence we esti- the United States, generating around
mate the free cash flows to decrease USD 10/boe in 2021 compared to
to around USD 300 billion in 2022 of USD 1/boe in 2020. North America’s
which USD 17 billion will come from cash flow per barrel is estimated to
Africa, which still remains above the drop to around USD 5/boe in 2025
2019 level of USD 220 billion. from the current levels of USD 9.5/
boe. As the next investment cycle
When observing the trends in Figure starts, free cash flow generation is
1.1.1 where the free cash flow gen- expected to decline gradually in the
erated per barrel of oil equivalent short term.

Chapter One – Industry in Review
Figure 1.1.1: Industry in review – Market overview

Upstream free cash flow evolution per continent – USD/boe nominal Source: Rystad Energy UCube August 2021
30 Australia Asia Middle East
Africa America S America N
20 Europe Russia
10
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
-10
-20
-30
-40
Africa is more in line with other continents to 2021 as free cash flow generation starts
and the cumulative free cash flow from all to decline as more resources are sanc-
African projects is illustrated on Figure 1.1.2. tioned and investment levels increase. This
In 2021, the continent is expected to gen- leads to an expected decline of 15% in free
erate free cash flows of around USD 50 bil- cash flow generation in 2022. In the first half
lion, slightly below the 2018 levels of USD of this decade, we estimate the largest vol-
55 billion. With quick response by the com- ume of resources to be sanctioned in 2024,
panies, the shock wave in 2020 was less with more than half comprising offshore
severe than that of 2015 crash. However, deep-water and ultra-deep-water projects.
the bounce back is expected to be limited
12
The exploration activity in the region is

expected to increase gradually to 2019
levels but well below pre-2015 levels. The Figure 1.1.2: Industry in review – Market overview
recovery is predominantly driven by ex- Upstream FCF evolution and forecast to 2025, Africa –
ploration in Ghana and Angola. However, USD billion nominal
greenfield activity is expected to keep in- Source: Rystad Energy UCube August 2021
creasing for the remainder of the decade 90
as many of the LNG projects in East Afri-
ca start attracting investments. Greenfield 80
investments offshore in Sub-Saharan Af-
rica are also expected to increase with 70
the recovery in sanctioning activity. A key
change in trend that is clearly visible in 60
Africa is that the continent is expected to
sanction more gas resources compared 50
to the last decade, which focused mainly
on crude oil projects. 40
30
20
10
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Top 10 companies by 2021 free cash flow in Africa –
USD billion nominal
Source: UCube August 2021
8
6
Figure 1.1.3 breaks down the expected
2021 and 2022 respectively free cash
5
flow per top 10 companies that are active
in Africa. With improved commodity pric-
4
es and recovery in production in coun-
tries such as Libya, the list is dominated
3
by national oil companies and Majors.
The national oil companies of Libya (NOC
Libya) and Algeria (Sonatrach) are the 2
top contributors for both the years and
Eni being the biggest contributor among 1
the Majors. BP’s cashflows improve sig-
nificantly driven by increasing production 0
from its asset-base in Egypt and Rosneft
Sonangol
Shell
ExxonMobil
Equinor
NOC (Libya)
Sonatrach
Eni
NNPC (Nigeria)
TotalEnergies
Chevron
also makes it to the list in 2022..

Figure 1.1.4 illustrates the evolution of Figure 1.1.4: Industry in review – Market overview
free cash flow earned by governments Government take evolution for Africa – USD billion nominal
in Africa. Various tax parameters such as
royalties, profit oil and other taxes con- Source: Rystad Energy UCube August 2021
tribute to these cash flows. These vary 250
on different parameters such as produc-
tion, profitability and commodity prices,
dependent upon the fiscal regimes of the
respective countries. While such cash 200
flows remain well below the 2012 levels,
they are expected to bounce back to
2019 levels of around USD 100 billion this 150
year from lows of USD 55 billion in 2020.
Thereafter, a gradual decline is expected.
While gas is going to play an important
role going forward, the government take 100
is not expected to change much and will
remain around 75% on average for Africa
50
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
14
Recently the spot market within the gas from signing 20 year-contracts to sign-
market has become quite active due to ing more 5 to 10-year contracts. Howev-
the ongoing market conditions such as er, even in these times of high activity in
high gas prices in Asia and Europe. We the spot gas market, long term contracts
have indeed observed more activity on continue to hold significant value as can
the spot market however, when it comes be seen from in Figure 1.1.5. In 2021,
to LNG project sanctioning, operators there have been more than 50 mil-
are still signing long term agreements to lion tonnes of long-term LNG contracts
avoid for uncertainties. Previously, it has signed, which is comparable to 2016 lev-
been noticed LNG projects being sanc- els. Driftwood LNG in United States, LNG
tioned after booking at-least 85% of the Canada in Canada, Qatar LNG in Qatar,
project’s capacity under long term con- Arctic LNG 2 in Russia and Pluto LNG in
tracts, but this has gone down recent- Australia are some examples of projects
ly. Another interesting trend is the shift that signed such long-term agreements.

Government take evolution for Africa – USD billion nominal Source: UCube August 2021
70
Less than 5 years 5-10 years 11-19 years More than 20 years US - Driftwood LNG
Canada - LNG Canada
Qatar - QatarGas LNG
60 Australia - Pluto, Portfolio
50
40
30
20 Artic LNG 2
10
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Many of the nations in Africa still rely on countries such as Mauritania and Sene-
hydrocarbons for export revenues and gal hold vast discovered gas resources.
domestic consumption. In North Africa, In East Africa, countries such as Uganda
Algeria is one such country that is a and Kenya are expected to begin their
major gas exporter to Europe and pro- first crude oil developments in the latter
duces significant crude volumes. In the half of the decade and Mozambique and
Sub-Saharan Africa, Nigeria and Angola Tanzania are making efforts to commer-
both produce more than 1 million bar- cialize gas resources.
rels per day of crude oil annually, while

COVID-19 in the short term and energy transition in the long term
are the most significant determinants of the industry outlook
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16
1.2. Oil Market. Covid causes unprecedented

oil market turmoil covid lockdowns easing
out globally and OPEC+ agreements
resulted in crude price recovery
Short term outlook suggests a Figure 1.2.1: Oil price outlook

good supply demand balance for (Brent USD/bbl nominal) Source: Rystad Energy Ucube August 2021
the rest of 2021 but an oversup-
ply if OPEC+ delivers on its new 120
supply targets 112
109
History Forecast

100
There could be a correction in 100
reference prices from 2022+ if

Annual average Brent
additional volumes from OPEC+ 80 oil price
result in supply outrunning the USD/bbl nom 72
64 67
demand
60 57 57
54 55 55
52
44
2021 has so far been the year of
recovery for crude oil prices after 40 42
COVID-19 brought the lows of 2020.
The lockdowns eased out gradually
throughout the world and resulted 20
in the lifting of transport restrictions.
Between 2019 to 2020 global liquids
demand saw an annual average con- 0 0
2012 2014 2016 2018 2020 2022 2024
traction of about 9 million barrels per
day, which is expected to recover by
about 5.15 million barrels per day in
2021. Figure 1.2.1 illustrates the im-
pact on average Brent oil price per
year, along with best estimate pro-
jection towards 2025.

Figure 1.2.2 illustrates the month over balance restored to the oversupply
month market imbalances with corre- situation of 2020. Following this, the
sponding stock builds or stock draws. supply – demand balance was restored
The disastrous month of April 2020 or rather moved towards an under-sup-
saw unprecedented market turmoil plied market as restrictions came into
resulting from various economies en- force. The remainder of 2020 saw the
tering lockdown, the effect of which liquids supply drop down to an average
was compounded as OPEC and Rus- of 90 million barrels per day with de-
sia increased production resulting in mand gradually recovering to an aver-
an oversupply situation of about 23 age 91.6 million barrels per day. OPEC+
million barrels per day. Suppliers glob- production quotas remained in place
ally responded to the oversupply situ- and lockdown restrictions eased out
ation and negative prices by curtailing during early 2021, resulting in liquids
production. OPEC+ and government supply dropping marginally below de-
mandated production cuts saw some mand.
Figure 1.2.2: Global liquids supply and demand balances: current base case
Million barrels per day Source: Rystad research and analysis; OilMarketCube
Implied Stock Change Products Demand

30 108
History Forecast
106
104
24 102
100
98
96
18
Hypothetical over-supply of 2.15 94
million bpd for 2022 if OPEC+
92
delivers on its new supply targets.
Such oversupply would cause a 90
12
price correction 88
86
84
6 82
80
78
0 76
74
72
-6 71
Oct-19
Dec-19
Feb-19
Apr-20
Jun-20
Aug-20
Oct-20
Dec-20
Feb-21
Apr-21
Jun-21
Aug-21
Oct-21
Dec-21
Feb-22
Apr-22
Jun-22
Aug-22
Oct-22
Dec-22
18
10.0
Figure 1.2.3: Global oil products (liquids) demand forecast by scenario
Million barrels per day
5.0
0.0
-1.6 -1.4
-5.0
-2.6 -2.6 -2.1
-3.3
-4.4 -4.4 -4.2
-4.7 -5.3 -4.7 -4.6 -5.1
-5.2
-6.1
-6.9
-10.0 -7.9
-8.4 -8.6
-8.9
-11.1 Impact of structural decline vs pre-virus* Impact of structural growth vs pre-virus**
-15.0 Aviation Trucks
-15.8 Vehicles Maritime
Petrochemicals Other
-20.0
-21.6
Total impact vs pre-virus Slow vaccination scenario
-25.0
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
July-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
Jan-21
Feb-21
Mar-21
Apr-21
May-21
Jun-21
July-21
Aug-21
Sep-21
Oct-21
Nov-21
Dec-21
Early 2021 regained further balance but main substantially low, and international unfold, how economies will react and
the COVID-19 second wave across Eu- aviation restrictions undermine a prompt ultimately what the impact will be on oil
rope and Asia created further turmoil. recovery of jet fuel demand. Overall, markets. As health experts around the
The long-lasting effects of this second 2021 is estimated to see a balanced sit- world suggest vaccination to be one of
wave in Europe and the new outbreaks uation where supply meets demand. the strongest barriers against the spread
in Asian countries slowed down oil de- of the virus, a slow vaccination trend can
mand recovery in 1H21. However, the So far in the second half of 2021 Chi- be dangerous. Figure 1.2.3 illustrates
demand recovery can be expected to na has witnessed a surge in COVID-19 a potential view of what can happen
speed up in the second half of the year, cases and certain regions in India are should the global vaccination process
prompted by increased internal mobil- showing a worrying trend of COVID-19 see a slow progress resulting in further
ity as the rates of vaccinated people cases, with risks of further restrictions spread of the virus. The base view is a
increase globally. Although a seasonal ever present. As such, going forward to- gradual increase in demand throughout
increase of flight activity is currently ob- wards 2022 there remains some uncer- 2021 to reach the pre-COVID demand
served, global jet fuel demand levels re- tainty around how the virus outbreak will levels by late 2021.

Source: Rystad research and analysis
2.0 2.2 2.3

1.4
0.6 0.9
0.2 0.4
-0.1
-0.9 -0.7 -0.4
*Structural declines represent legacy de- Provided that the demand outlook is in line with
clines regardless of Covid in the following the base view, the lag can be expected to be-
sectors: agriculture, industry, energy own come very apparent in 2022 if OPEC+ sticks to its
use, buildings, non-energy use and power current plan to increase production by 400,000
**Structural growth represents growth re- bpd per month and then introduce higher quotas
gardless of Covid in the following sectors: for the “Chosen 5” – Saudi Arabia, Russia, Iraq,
buses, maritime and petrochemicals. *** Kuwait, and the UAE – in May-22.
Pre-virus levels are 2019 demand for the cor-
responding month of the year. Other sectors Overall, across the oil price expectations of lead-
include: agriculture, buildings, energy own ing E&Ps the general consensus appears to be
use, industry, non-energy use and power. a downwards revision in oil price outlook, yet
the overarching view is that the price will remain
north of 50 USD/bbl. Such a price level is sup-
ported by the cost of bringing new volumes to
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Aug-22
July-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-22
the market. Figure 1.2.4 compares the communi-

cated oil price outlooks from the latest updates.
Figure 1.2.4: Long-term oil price assumptions very similar across majors
USD per barrel Source: Rystad Energy research and analysis
85
80
Before the downturn, the majority of E&P companies had long-term

75
price assumptions of $70–$80 per barrel
70
65 Equinor: $64 (2021-2050)
Shell, Eni: $60 (2023+)

60
Total: $56.8 (2021-2050) Repsol: $59.6 (2020-2050)
55
BP: $55 (2021-2050)
50
Petrobras: $50 (2025+)
45
2025 2030 2035 2040 2045 2050
20
1.3. Gas Market:

Gas prices set to increase
on the back of strong global demand.
Demand and supply to recover Both gas demand and gas production tion curtailments, several LNG projects
after taking a hit in 2020 due to have consistently grown over the last also faced sanctioning delays and ex-
decade, representing a trend that is pected first gas. One such case is the
COVID-19 and a supply shortfall
expected to continue going forward as 13 MMtpa Mozambique LNG project in
in 2021 global decarbonisation efforts intensify. Area 1, the start-up of which is likely to
However, last year witnessed a drop get delayed significantly as the country
Major reference prices to remain due to COVID-19 restrictions impacting handles threats from insurgency. That
on the higher side due to new gas demand and supply, which fell by said the project is still anticipated to
LNG supply delays, exemplified 3% and 4% respectively. As illustrated in go ahead and the status remains sus-
figure 1.3.1 the majority of the reduction pended. Sanctioning of the other Area
in the recent escalation in gas
in gas production came from Russia, fol- 4 project, the 15 MMtpa Rovuma facility,
prices during 2021, also impact- lowed by North America. Demand from has also been delayed. On the back of
ed by pipeline flows Asia remained resilient while dropping LNG supply delays, the long-term out-
slightly for most of the other continents looks for TTF and Asia LNG prices have
including North America, Russia, and the increased and a peak in gas price is ex-
Middle East. pected in 2025. As new projects come
online by 2027, the gas prices will see
Apart from the immediate gas produc- some downward pressure.

Figure 1.3.1: Gas Market

Gas supply growth by continent - Bcm Source: Rystad Energy UCube August 2021
250
America N
America S
Asia
200
Middle East
Russia
150 Europe
Australia
Africa
100
50
-50
-100
-150
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
In addition to low European storage levels, Russian gas exports remain lower than expected and consequently the TTF
gas prices are expected to be on the higher side. It is estimated that European prices will average $8.1 per MMbtu in 2021
while Asian LNG prices are expected to average $9.7 per MMbtu on the back of strong demand.
22

Historical gas reference price and outlook to 2030 – USD/MMbtu Source: Rystad Energy UCube August 2021
20
18 Henry Hub
East Asia LNG oil indexed

16
East Asia Spot
14
TTF
12
10
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
For the next two years, there is suf- including Arctic LNG 2, Golden Pass,
ficient LNG supply to satisfy the de- Nigeria LNG Train 7 and Qatar’s North
mand, as new projects come online in field expansion project, a supply defi-
2022 such as Coral FLNG in Mozam- cit is expected from 2024 onwards,
bique, Tangguh Train 3 in Indonesia, displayed in Figure 1.3.3. This is driv-
and Calcasieu Pass in the US. During en mainly by strong demand resulting
this time, LNG demand is expected from gas-fired power generation as
to grow at a healthy CAGR of 5%. De- increased environmental pressure sty-
spite the start-up of key LNG projects mies coal-fired generation.


Global LNG supply by lifecycle and LNG demand balance- MMtpa
Source: Rystad Energy GasMarketCube June 2021
700
Producing
Under development
600 104 Mtpa of supply LNG demand
deficit expected by 2030
unless new projects are
sanctioned
500
Others
Mozambiqu
e
Qatar
Russia
400 United
States
Others
300 Russia
Nigeria
Malaysia
200
United States
Australia
100
Qatar
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
As greener energy sources attract more attention and mature markets focus on emissions, it is expected
that total natural gas demand will be lower than previously estimated. Gas demand is forecast to reach
about 4.5 Tcm in 2040, down by roughly 250 Bcm or 5.5% from previous estimates. Peak demand is esti-
mated to have shifted from 2037 at 4.9 Tcm to 2032 at 4.7 Tcm. North America and Europe are estimated
to contribute to the majority of the reduction in demand.
24

Global natural gas demand by continent- Bcm Source: Rystad Energy GasMarketCube June 2021
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

1.4. Impact of
COVID-19 on O&G industry
COVID-19 and the subsequent The African oil and gas industry has so form a key focus area for governments
disruption to global markets far been one of the hardest hit in the to center strategies upon.
aftermath spurred by the COVID-19
is estimated to have wiped
outbreak. The initial aftereffects of 2021 saw the crude price stabilize well
out close to US$150 billion of the demand vacuum and price crash above the lows of 2020. The Chevron
exploration and development caused by the pandemic led to produc- operated Sanha lean gas develop-
expenditure from Africa be- tion sanctions imposed by the African ment, the Eni operated Cuica field in
tween 2020 to 2025 OPEC member nations. The initial reac- Angola, CNOOC operated Kingfisher
tion from the operators included delays South project and Total Energies oper-
to projects with high breakeven prices, ated Tilenga project onshore Uganda
Over the last 12 – 15 months,
reduction of broader capital and oper- are key projects that have been sanc-
more companies and especially ating expenditure, and cashflow neutral tioned. As a result, capital expenditure
majors have announced stra- forecasts at lower oil price curves. Eni in Africa is estimated at approximately
tegic revisions with increased and ExxonMobil have both stated that US$33 billion, slightly above the year
focus on the energy transition, they were going to focus on develop- end 2020 estimates. However, as the
cutting down their carbon emis- ing projects with a breakeven crude Major’s long-term strategies regarding
price of less than $35 per barrel. Shell the energy transition and carbon emis-
sions and in doing so, reduce
announced that it was going to dis- sion cuts are announced, upstream
respective upstream expendi- tance itself from deep water mega-proj- investments in Africa over the years
ture going forward ects off the coast of Nigeria. Many of 2022 – 2025 are expected to be cut
the projects in Africa that were up for down by about US$34 billion com-
While 2021 is expected to see sanctioning were planned assuming pared to the year-end 2020 estimates.
marginally higher upstream an oil price of between $55 and $60
per barrel. The oil price crash to below The level of post-FID greenfield invest-
investment totaling just over
$35 per barrel revised project econom- ments has not changed by much com-
US$33 billion in Africa, the esti- ics expectations, especially as some of pared to the estimates post the most
mated drop in African upstream the top upcoming final investment deci- recent pandemic related restrictions,
expenditure over the years sions (FIDs) in Africa have a breakeven as illustrated in Figure 1.4.2. However,
2022 – 2025 is close to US$34 crude price of over $45 per barrel, with lower sanctioning activity and reduced
billion when compared to the some even close to $60 per barrel. Fo- brownfield investments during the
cusing on reducing project breakevens years 2022 – 2025 are expected to
estimates from year-end 2020
remains a crucial challenge for the Af- drive down overall capital expenditure
rican continent as a whole and should in Africa during the period
26
Figure 1.4.1: Contraction in African investment outlook

African upstream capex (including exploration), October 2020 estimates vs. current estimates
(2021 Report) Billion USD, nominal Source: Rystad Energy UCube August 2021
100
90
~34 BUSD
removed from 2022-25 time frame
80
70
~34 BUSD
60
14% 0%
50 19%
40 17% 0%
-3%
30
20
10
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Figure 1.4.2: Impact of COVID-19 on expenditure in Africa, before v after COVID-19, split by lifecycle
Billion USD Source: Rystad Energy UCube August 2021
70
Producing Under development PRE-FID
56
42
28
14
0
2020 2021 2022 2023 2024 2025 2020 2021 2022 2023 2024 2025
Oct 2020 forecast Current forecast

Figure 1.4.3 below further breaks on projects developed using various

down the changes in upstream ex- kinds of platforms and FLNG vessels,
penditure expectation comparison with the overall impact represented
between the October-2020 forecast through lower spending in the latest
and the latest forecast. Lower on- forecast compared to the year end –
shore brownfield spending and down- 2020 forecast.
sized LNG spending in Mauritania
are the drivers behind the reduced Lower oil price expectations may
onshore capital expenditure. Cost shave off growth potential as projects
intensive deep-water spending was are deemed commercially unviable
on the chopping block as well, result- and/or deferred further out in time.
ing in reduced investments on FPSO At the current expected crude price
– subsea tieback projects. Marginal forecast, investments are expected to
changes are expected in spending rebound to 2019 levels by 2024.
Figure 1.4.3: Impact of COVID-19 on expenditure in Africa, before v after COVID-19, split by facility type
Million USD Source: Rystad Energy UCube August 2021
70
Onshore Onshore LNG plant Platforms FLNG Subsea tie back FPSO Fixed and floater
56
42
28
14
0
2020 2021 2022 2023 2024 2025 2020 2021 2022 2023 2024 2025
Oct 2020 forecast Current forecast
28
Source: : Rystad Energy UCube August 2021
However, the pandemic has spurred 70

governments like Nigeria to accelerate
the long delayed administrative and
fiscal reforms in the country, namely Investments at 70 USD/bbl
the long awaited and hugely signifi- Investments at 60 USD/bbl
cant Petroleum Industry Bill which has 56 Investments at base case
was signed into law in July 2021. Ni-
geria also concluded its marginal field
bid round during the pandemic which Investments at 40 USD/bbl
resulted in the award of 57 marginal
42
fields and the agreements are expect-
ed to be completed soon. Many other
African nations can also be expected
to float exploration blocks. The econ-
omies of the hydrocarbon-producing
28
African nations are heavily reliant on
their respective output to meet both
domestic energy needs and exports.
As the possibility of additional market
pressures from the pandemic looms 14
closer, an extended period of low
crude prices could prove detrimen-
tal to the health of these economies.
Swift action to improve the outlook for
investments in a lower oil price envi- 0
ronment could serve to benefit the Af- 2019 2020 2021 2022 2023 2024 2025
rican continent, yet this is contingent
upon rapidly implementing further in- Figure 1.4.4: Investment outlook sensitivity to oil price scenario
centives for development. Billion USD

Chapter Two – African Upstream Review
Chapter Two
2.1. State of African energy
industry in 2022
Upstream capital expenditure From the peak in 2014 at about US$63 2019, with overall capital expenditure
halved from US$60 billion+ billion, capital expenditure in Africa estimated to be US$30 billion. It is ex-
steadily declined to about US$35 bil- pected that currently under develop-
levels in 2014 to an estimated
lion by 2019. This decline is a result of ment projects will lift capex in 2022 to
US$33 billion in 2022 lower activity from new projects, gen- US$33 billion. The spending level is
eral cost compression in the industry expected to stay relatively flat for the
Drilling activity is expected to and friction in getting new projects years 2022 – 2023 and any growth in
fall to about 950 wells per year sanctioned due to external influences 2024 – 2025 is expected to come from
in 2022 versus the 1475 wells such as export route disagreements contingent expenditure. Ensuring such
and fiscal parameters. Going into 2020, contingent investment takes place is in
drilled in 2012
expenditure dropped further to below the hands of the decision makers ca-
US$24 billion, representing an almost pable of incentivizing projects through
2021 offshore rig demand cut 35% drop versus 2019. The impact of innovative deal structuring and collab-
by 22% versus 2020, but 2022 COVID-19 is the main culprit as the pan- oration efforts. The fruits of such labor
demand estimated to double demic deferred investment decision could reward the continent with an ad-
from 2021 levels, spelling out a on many projects. As some greenfield ditional US$40 billion of investment,
investments return, 2021 is expected critical for sustaining the longevity of
busy market for drilling service
to be better than 2020 but still under the oil and gas industry.
providers
Figure 2.1.1: African upstream capex, 2012-2025, split by life cycle

70
60
50
40
Contingent
30
Producing
20 Producing
10
Abandoned
0
2012 2014 2016 2018 2020 2022 2024
30
Wells drilled in Africa and associated 2015. In 2016, further declines ensued
continental shelves ultimately repre- with around 1000 wells drilled and the
sent the activity that ensures hydro- trend remained flat till 2019, overall rep-
carbon recovery from its underground resenting a 45% drop-in activity versus
deposits. Figure 2.1.2 below illustrates 2012. Reduced drilling activity onshore
how an estimated 1475 wells were Libya and Egypt are the main drivers
drilled during 2012 with 66% drilled behind this decline. COVID-19 then
onshore and the remaining 34% drilled did what years of civil war could not –
offshore. From 2012 – 2014 there was it brought a complete halt to offshore
a slight increase in the overall number drilling in Angola and the overall wells
of wells drilled, but the oil price drop drilled in 2020 fell further down to an
in 2014 led to a sharp decline in drill- estimated 780 wells, a mere 53% of
ing activity, falling from approximately 2012 levels and just under 50% of 2014
1570 wells in 2014 to close to 1150 in activity levels.
Figure 2.1.2: Wells drilled in Africa, split by on/offshore

Count Source: Rystad Energy WellCube August 2021
Onshore

Going into 2021, activity is expected to translated into rig demand expecta-
slightly improve from 2020 levels as tions. In other words, how many drilling
onshore drilling picks up. The current rigs have to be operational for a year
estimate indicates about 950 wells are in order to drill the wells. Figure 2.1.3
to be drilled, representing a year-on- below illustrates offshore rig demand
year increase of about 9%. Beyond split by jackups and floaters. Jackups
2021 there is limited respite expected are typically used in shallow water with
until 2025 with the number of wells water depth up to 125 meters while
hovering around 900 – 950 per year. floaters serve drilling demand in deep-
er waters.
The number and type of wells can be
Figure 2.1.3: African offshore rig demand evolution, 2012-2025, split by floater / jackup
Rig years Source: Rystad Energy RigCube August 2021
Floater
Jackup
32
The rig demand pattern is similar to 2018 levels again, however the unprec- slightly from 2022 to 2023 but picks
what was observed in the estimated edented impact of COVID-19 meant back up to 2022 levels by 2025. Fig-
number of wells drilled per year. From that 2020 levels fell as low as 27 rig ure 2.1.4 below demonstrates further
a high level of demand in 2012 to 2014 years, a year-on-year decline of about how the expected growth towards 40
of about 80 – 85 rig years, the late 45% and 2021 is pointing to record low rig years in 2025 is contingent on new
2014 oil price collapse reduced drilling rig demand of about 21 rig years. projects being sanctioned. Based on
demand significantly. By 2018 demand the oil price outlook presented in the oil
was down to 37 rig years implying a re- However, from 2022 onwards it is ex- market outlook, the combined potential
duction of 53% from 2012 and 57% from pected that rig demand is to rebound of these new projects and further ex-
the highs of 2014. In that respect, 2019 significantly as drilling programs as- ploration activity will be able to propel
was a more promising year as demand sociated with projects currently under demand towards pre COVID-19 levels.
increased towards 50 rig years repre- development are initiated and a higher However, should the oil price not re-
senting an increase of almost 30%. oil price expectation helps to revive ex- cover it could jeopardize about 60% of
ploration activity. the expected 2025 rig demand, repre-
At the start of 2020, demand was not senting a devastating blow for future
expected to decline towards and below Rig demand is expected to decline production levels.
Figure 2.1.4: African offshore rig demand evolution, 2012-2025,

split by life cycle illustrating contingent resources Source: Rystad Energy RigCube August 2021
Rig years
Exploration rig demand
Contingent
resources
rig demand
Reserves rig demand

Breaking down cumulative offshore that rig demand in this particular area
rig demand from 2020 to 2025 per is sensitive to investment decisions
country reveals Egypt as the most ac- expected over the next years. Nigeria
tive country with about 55 rig years and Gabon show relatively robust rig
followed by Angola and Nigeria. Figure demand with only about 20% related
2.1.5 below provides the breakdown to contingent resources. Therefore, the
of the top 10 countries by rig demand Angolan regulatory authorities should
with associated split on what resource ensure that projects are expedited to
class is supporting the rig demand. For provide longer term visibility on future
Angola about 45% of the demand is re- production volumes and the associated
lated to contingent resources implying government take.
Figure 2.1.5: African cumulative offshore rig demand 2020-25, split by country, clustered columns
representing life cycle illustrating contingent resources Source: Rystad Energy RigCube August 2021
Rig years
34
Figure 2.1.6: African contingent expenditure per project type

Investments related to subsea tiebacks as the investments in these categories discoveries planned to be developed
is the single greatest category with in- are expected to be about US$8.7 billion as LNG projects, as can be seen in the
vestments reaching almost US$16 bil- each. Continued drilling of new wells list of major projects (Figures 2.1.7 and
lion across the period. Subsea tiebacks and other improvements are needed 2.1.8). From Mozambique and Tanzania
are likely to be much more common as to arrest production decline in the main the East to Mauritania and Senegal
it makes commercial sense to piggy- ture areas of African onshore produc- in the West, the emphasis remains on
back smaller hydrocarbon accumula- tion. Contingent investments in many LNG. Out to 2025, Nigeria is expected
tions on existing infrastructure. This is sub-Saharan African countries and to incur the highest expenditure levels
due to the very competitive breakeven Algeria, Libya and Egypt are the main followed by Mozambique, as can be
typically achieved from such a devel- drivers behind this spending. seen in figure 2.1.9. Just a year ago,
opment solution. The category also in- Mozambique would have taken the
cludes the offshore related part of LNG The third biggest category at US$3.7 first spot, but investments have been
developments which further boosts this billion relates to investments in FP- delayed as the country is impacted by
category, considering the mega-proj- SOs. It is the Ghanaian and Angolan the growing insurgency. TotalEnergies
ects expected in Mozambique. deep-water projects that are driving declared a force majeure on its Mo-
these investments. zambique LNG project during 2021 as
Investments related to onshore pro- attacks around the facilities increased.
duction and offshore platforms both Africa holds more gas potential in the
take the second biggest category spot medium term than oil, with vast gas

Figure 2.1.7: Upcoming Liquids projects in Africa and their timeline and recoverable reserves estimates
-up*
*Rystad Energy estimated timeline Source: Rystad Energy Ucube August 2021
Figure 2.1.8: Upcoming Natural gas projects in Africa and their timeline and recoverable reserves estimates
*Rystad Energy estimated timeline Source: Rystad Energy UCube
36
Figure 2.1.9: African upsream activity outlook

Contingent expenditure 2020-2025 per
country in Africa
19%
23%
Nigeria
Mozambique
Algeria
Angola 4%
Libya
Egypt
Ghana 8%
Others 13%
10%
Source: Rystad Energy UCube August 2021

13%
10%
Offshore Sub-Saharan African projects ture. In terms of a roundup of the key

constitute the majority of the upcom- projects, the TotalEnergies operated
ing major oil projects in the continent. Cameia - Golfinho offshore Angola, is
Such cost-intensive developments currently undergoing pre-FEED work.
have either picked up steam in recent Preowei will be tied back to Egina
months, like the Bonga SW - Aparo FPSO and Springfield operated Afina,
FPSO development offshore Nigeria which is in the middle of a unitization
and Pecan FPSO offshore Ghana or dispute with Eni’s Sankofa round off
have been granted tax cuts as in the the major upcoming offshore oil proj-
case of Palas - Astraea - Juno (PAJ) and ects in Africa. Tilenga and Kingfisher
Agogo offshore Angola. Operators in South operated by TotalEnergies and
the region have also focused on fast CNOOC respectively, both located in
tracking recent discoveries like Cuica the landlocked country of Uganda are
and Eban in the deep waters of Ango- now approved and will bring online
la and Ghana respectively, because of close to 1.2 billion barrels of oil within
their proximity to existing infrastruc- the next five years.

Figure 2.1.10: Libya’s short term production capacity outlook

Kbbl/d
Post break-out of civil war in 2011, Libya’s on the Libyan oil and gas industry than With Presidential election due in Dec-
oil and gas industry suffered to a great just loss of revenue for a year. Mature 21 and ongoing tussles between the
extent. Country’s crude oil production oil and gas facilities are taking too oil minister and the NOC chief the oil
fell from the highs of 1.6 million bpd in long to get back to pre-shut-in levels, production outlook for Q421 also looks
2010 to as low as 70,000 bpd in 2020, at the same time mature fields are very volatile. Although it is currently es-
as illustrated in Figure 2.1.10. Although facing technical difficulties due to the timated that crude oil production will
Libya was looking stable towards the prolonged shutdown. Libya’s NOC has average around 1.18 million bpd in 4Q21,
end of 2019 with crude oil production been trying hard to bring new invest- any resurgence of violence in the nation
reaching about 1.2 million bpd but a ments in the Libyan oil and gas industry could bring back the NOC to its knees
fresh counterattack staged by General but the volatile political scenario in the like 2020 and we could see severe pro-
Khalifa Haftar led LNA forces in Jan-20 country isn’t helping NOC’s campaign. duction impacts of 700,000 to 800,000
led to complete chocking of the oil and Exploration has also been muted due bpd. Slower but continued crude oil
gas industry in the country. Crude oil to this instability as the IOCs shy away production growth through 2022 is ex-
production from all the major IOCs and from risk. Post restart of oil fields in pected on the back of formation of a
NOC operated assets were shut for al- Oct-20, Libya’s crude oil production new stable government and allocation
most 10 months. After multiple rounds of has been able to cross 1.2 million bpd, of funds to the NOC for maintenance
negotiations between the warring sides, however these higher production lev- and refurbishment works. Libya’s crude
a peace treaty was signed and country’s els don’t look sustainable as every time oil production is estimated to average
crude oil production slowly started to the production crosses 1.2 million bpd around 1.22 million bpd in 2022, which
ramp-up towards 1.2 million bpd. mark there is resurgence of technical could go to as high 1.3 million bpd if suf-
issues with oil transportation pipelines ficient funds are allocated to major NOC
But this prolonged 10-months forced or there is strike by the Petroleum Fa- controlled operators like AGOCO and
shutdown in 2020 had deeper effects cility Guards. Sirte Oil Company.
38
2.2 Exploration poised for

resurgence in 2022
While 2020 witnessed the sec- Similar to project approvals and green-
ond lowest discovered volumes field investments, Africa upstream ex-
ploration also took a major hit due to
in the past decade, so far in 2021
COVID-19. The devastation was to such
much lower volumes have been extent that it led to offshore rigs left
discovered idle in Angola – something that even
years of civil war did not do. In 2020,
Only 1 high impact well has the second lowest volumes of resourc-
been drilled in 2021 which result- es were discovered in the last decade.
While 2019 saw discoveries in Angola,
ed in non-commercial oil flows; 3
South Africa, Ghana, Gabon, Egypt and
more are expected to be drilled so on, 2020 discovered volumes have
before the end of the year been largely supported by the Luipe-
rd gas-condensate discovery offshore
A much more encouraging South Africa. Despite the 75% decrease
year is anticipated in 2022 with in 2020 in overall discovered volumes
year-on-year, 2021 so far has been even
13 high impact wells expected to
worse with only a third of the volumes
be drilled discovered compared to 2020. Fig-
ure 2.2.1 shows the overall discovered
6 licensing rounds are expect- volumes in 2020 and 2021 (as of Sep-
ed to conclude before the end of tember) in different regions and supply
2021, with about 92 blocks on segments within Africa, along with the
hydrocarbon split.
offer. During 2022 14 rounds are
expected to close, although 7 of
these rounds remain uncertain

Figure 2.2.1: Discovered volumes in Africa in 2020 – 2021

Million boe Source: Rystad Energy UCube September 2021
Discovered resources by country Discovered resources by region
1200 Egypt Morocco South Africa

Ghana Nigeria Gabon
900 Angola 9%
23%
North Africa
600 995 South Africa
MMboe
300 West Africa
68%
0
2020 2021
Discovered resources by hydrocarbon Discovered resources by water depth
1200
Crude Oil Condensate NGL Gas
900 6%3%
600 995
MMboe
300
Onshore
91%
0
2020 2021
As exploration deteriorated further, the drilling of high impact wells was also affected. Only one high impact well has been
drilled so far in 2021 and three more such wells are expected to be drilled by the end of the year in Angola (offshore),
Guinea-Bissau (offshore) and Namibia (onshore). High impact well drilling is expected to pick up with drilling in all regions
of the continent, both onshore and offshore. Figure 2.2.2 shows the location and estimated timeline of drilling for the 2021
– 2022 high impact wells across the continent.
40
Figure 2.2.2: High impact wells in Africa

Source: Rystad Energy ECube September 2021
2022 –Sidi Moktar⁴Sidi Moktar4 2022 –Trelia¹

Onshore BlockSound Energy* 037, 038, 039 (Offshore Sirt)
(75%), ONHYM (25%) Eni* (42.5%), BP (42.5%), 2021 Ondjaba-1–⁵
2021 –Bambo-1² NOC Libya (15%) Block 48 (2017-reaward)
Block A2 TotalEnergies* (50%),
FAR Limited* (40%), MOROCCO Sonangol(50%)
Petronas (50%),
Erin Energy (10%) 2022 –Jaca¹
LIBYA
Block 6
Galp* (45%), Shell (45%),
ANP (10%)
GUINEA-BISSAU
GHANA
2022 –Formosa⁴
Block 5B (Becuda)
Trace Atlantic* (58.5%), GABON
CAP Energy (27%), TANZANIA
Petroguin(10%),
Sphere Petroleum (4.5%)
ANGOLA
MOZAMBIQUE
2022 –Kusia–1²
Central Tano Block
AMNI* (90%), GNPC (10%) ZIMBABWE
NAMIBIA
2022 –Jove Marine³-

Block F13 (Meboun) SOUTH 2022 –ER 236¹
Petronas* (100%) AFRICA
ER 236
Eni* (40%),
Sasol (60%)
2021 –6-2¹
Block 1719
2022 –Osprey²
Reconnaissance 2022 –Welwitschia Deep²
Block 2012A
Energy* (90%), Block 2011A (2018-reaward)
Eco Atlantic Oil & Gas*
Namcor(10%) Global Petroleum* (68%),
(57.5%),
Namcor(27%),
Azinam(32.5%),
Aloe Investments (5%)
Namcor(10%) *Operator

2022 Kito–³ An uptick in licensing activity was

Kilosa-KilomberoBlock- observed in 2019 and the same or
SwalaEnergy* (75%), higher level of license awards was
InvenireEnergy (25%) estimated in 2020. Licensing rounds
were opened in the countries – Ango-
la, Egypt, Equatorial Guinea, Ghana,
Gabon, and Congo, in 2019. But many
such rounds were either delayed or
2022 –Mzarabani¹ cancelled eventually due to the indus-
SG 4571 try downturn. Some licensing rounds
Invictus Energy* (80%), which opened before 2020 and
One Gas Resources (20%) were expected to close in 2020, also
spilled into 2021. Overall, 6 rounds are
expected to close before the end of
this year including rounds that actually
opened in 2018 and 2019, two rounds
2022 –A5-B that opened last year and two more
A5-B (AngocheBasin) which were announced this year. The
Cuvette licensing round in Congo,
ExxonMobil* (40%),
which opened in 2019, is expected to
Rosneft (20%), ENH (20%),
close in 2022 now along with 6 more
Eni (10%), rounds that were opened in 2021 so
Qatar Petroleum (10%) far. South Sudan also launched its first High impact well reason
ever licensing round for 5 blocks. Sev-
en more licensing rounds across the 1Frontier basin:
continent are expected to be opened The basin with little or no exploration
2021 –Gazania-1³
next year, but this would be highly de-
Block 2B (A-J1) pendent on the direction the pandem- 2Large prospective resources:
Azinam* (50%), ic takes and its subsequent impact on The pre-drill estimates by the compa-
Africa Energy (27.5%), the oil and gas industry. Highly struc- ny are quite significant.
Panoro(12.5%), tured, well organized licensing rounds
Crown Energy (10%) utilizing digital solutions could be a 3Focus for Company:
breakthrough for increasing explora- The wells which are highly talked
tion on the continent. However, this and strategically important for com-
requires the release of as much data panies.
as possible and therefore relies upon
2022 –Venus –1²
the integration of digital solutions into 4Emerging Basin:
processes traditionally weighed down The basins where some significant
Block 2913B by paperwork and bureaucracy. Whilst recent exploration has taken place.
TotalEnergies* (40%), requiring an upfront investment, the
Qatar Petroleum (30%), potential rewards could far outweigh 5Play Opening:
Impact Oil & Gas (20%), the costs and represent the catalyst The well targeting a new play or area
Namcor(10%) required to ignite exploration activity within the province or basin.
on the continent.
42
Figure 2.2.3: 2021 – 2022 Lease Rounds in Africa

Source: Rystad Energy ECube September 2021

Algeria Tunisia –2021

Licensing RoundPlanned but un- Licensing RoundPlannedAssumed
certain Award Year –2022
Senegal 2020 Egypt –2021

Licensing RoundBids under eval- International Bidding Round (EGPC
uation–Assumed Award Year 2021 & EGAS)Open for biddingAssumed
Award Year –2021
Senegal
AGC Shallow Block Round- Sudan –2021
Planned–Assumed Award Year Bid RoundPlannedAssumed Award
2022 Year 2022–
Liberia Sudan
Direct Negotiation RoundOpen for 1st Licensing RoundPlanned
bidding–Assumed Award Year 2022 Assumed Award Year –2022
Cote d’Ivoire –2021 Somalia –2020

Offshore RoundPlanned but Offshore Licensing RoundOpen for
uncertain biddingAssumed Award Year –2021
Equatorial Guinea Uganda

EG Ronda 2022Planned but Second Oil Licensing RoundBids
uncertain under evaluationAssumed Award
Year –2021
Gabon
12th Licensing RoundBids under Kenya
evaluation–Assumed Award Year Offshore RoundPlanned but
2021 uncertain
Congo Tanzania –2022

Cuvette Licence Round Open for Offshore Round (Zanzibar)Planned
biddingAssumed Award Year –2022 but uncertain
Democratic Republic of Congo Mozambique

2021 International tenderPlanne- 6th Licensing RoundPlanned
dAssumed Award Year –2022 but uncertain
Angola 2020 Angola 2021

Onshore Bid RoundBids under Limited Public TenderPlanned but
evaluation–Assumed Award Year uncertain
2021
44
2.3. LNG projects to boost

Africa’s oilfield services outlook
Figure 2.3.1: African OFS Outlook

African upstream capital expenditure per service segment- Billion USD Nominal
Internal and other
Seismic
EPCI
Subsea
Drilling Contractors
Well Services and Commodities
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Figure 2.3.1 shows the breakdown of up- Figure 2.3.2 compares the cumulative driven primarily by the recovery in on-
stream expenditure by service segment, expenditure for three 5-year periods, shore projects in Algeria and Libya as
which includes internal upstream spend 2011-2015, 2016-2020 and 2021-2025. the easing of OPEC quotas lift Algeria’s
that primarily relates to salaries. Last Out of all the segments, the EPCI seg- output, and more production comes
year was a difficult one for the service ment is expected to grow significantly online in Libya. The remaining seg-
industry which was once worth $80 bil- on the back of LNG project construc- ments are expected to decline over the
lion in 2014. It dropped to less than half tion awards while a marginal increase next 5 years. Historically, the worst hit
the value in 2020, however a recovery is expected from the maintenance segment is the drilling contractors and
is expected going forward as OPEC+ re- segment as well. LNG projects includ- well services segment, mainly due to
strictions ease out and new projects are ing both Coral FLNG and Mozambique volatile oil prices which are now been
sanctioned. The recovery is also driven LNG in Mozambique, NLNG seven plus well below 2014 levels. The outlook
by LNG projects in East Africa that have in Nigeria along with major onshore also remains poor for these segments
been delayed to later years; as such, it is oil projects in Uganda are driving the as more gas projects are being target-
estimated that 2019 levels of $43 billion increase in the EPCI segment. The in- ed which are less drilling intensive.
will be surpassed by 2025. crease in the maintenance segment is
Figure 2.3.2: African OFS Outlook

Cumulative capital expenditure per period- Billion USD Nominal
2011-2015
2015-2020
2021-2025
46
Chapter Three
As Majors Exit, Nocs Acquire
Majors are divesting carbon in- Figures 3.1 and 3.2 illustrate that in 2021 portfolios to accommodate major gas
tensive crude oil assets to meet Majors will account for 30% of total pro- producing fields. NOCs account for a
duction in Africa. However, Majors oper- larger proportion of total output at 42%
carbon neutral goals through
ating on the African continent are at an with Sonatrach, NOC (Libya) and NNPC
selling to NOCs and INOCs, inflection point as they aim to reduce leading production of both crude oil and
amid a changing player land- their carbon footprints and diversify gas.
scape
NOCs are acquiring majors

crude oil assets
Figure 3.1: Total Production split by Company Segment in 2021
European majors are expected Total African production in 2020 - %
to boost on gas output with the Source: Rystad Energy UCube August 2021
intention of tapping into global
markets through the production E%P
6%
of LNG
Independent
8%
NOC
42%
INOC
8%
Majors
30%

Chapter Three – As Majors Exit, Nocs Acquire
Figure 3.2: Majors are offloading oil assets in favour of gas

Total African production - Kbbld Source: Rystad Energy UCube August 2021
Other operators TotalEnergies ENI Chevron Shell BP ExxonMobil
14000
12,200
12,060
12000
11,300
10000
8000
6000
3,950
4000 3,580
2,970
2000
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
The shift away from crude oil is influ- favour of gas fields. Further justifica- growth, allowing for a reduction of
enced by historical regulatory chal- tion of such as shift can be observed energy imports, and greater access to
lenges and the growing influence of in the fact that natural gas accounts electricity. Overall Figure 3.3 projects
stakeholders in shaping future strat- for more than 75% of the hydrocar- that for crude oil, the Major’s contribu-
egy, related to the heavily publicized bons discovered in Africa over the tion from 2015 – 2025 falls from 33%
shift away from less clean fossil fuels. last 10 years. This puts Africa as a to 26%, whilst gas production rises
The shift is in line with current M&A gas driven industry, where said mon- from 28% to 31%.
activity, as oil fields are offloaded in etization can cause socio-economic
48
Figure 3.3: Major’s Contribution to oil production (top) and gas production (bottom)
Total African production – % oil, % gas Source: Rystad Energy UCube August 2021
100%
90%
80%
70% Total Crude Oil Production
60%
50%
40% 33%
29%
30% 26%
20%
Crude Oil
10%
0%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
100%
90%
80%
70% Total Gas Production
60%
50%
40% 31%
32%
30% 29%
20%
10% Gas
0%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
With the European governments im- disruptions in Africa, impacting poten- pandemic, and the uncertain future of
posing binding emission targets, and tial opportunities for sectoral and eco- fossil fuels, is causing gradual divest-
the European Investment Bank an- nomic growth. These organisations ment away for crude oil amongst the
nouncing an end to investment in Afri- commonly protest outside oil refiner- majors. On the other hand, natural gas
can oil and gas, the majors follow their ies, or events hosted by large oil pro- is central for the transition that Africa
footsteps. In addition, organizations ducers (e.g., Shell in 2018, Johannes- needs to power and progress sectoral
such as Greenpeace and Friends of burg in 2021). This coupled with the development with employment in new
the Earth continue to cause project fluctuating oil prices amidst the global forms.
Italy-headquartered ENI is in discus- drop in production of 33% will occur in of its Nigerian assets to move towards
sions with advisers to offload a set of the coming decade. Similarly, Exxon- cleaner energy, and avoid litigation aris-
its operated assets in Congo, following Mobil recently pulled out of a deep-wa- ing from oil spills. Its divestment could
the dip in oil prices. ENI also sold a pro- ter oil prospect offshore Ghana. deal a fresh blow to the fiscal plans of
duction sharing contract (PSC) to SNPC the Nigerian government, where about
(Congo), with projections that an overall Shell, meanwhile, will offload the last 90% of revenue comes from oil, as it

rebalances from the oil crash of 2020. er behind M&A activity. Ultimately, the sold to Lukoil. This should allow Wood-
Shell is currently under examination majors may be looking to monetise the side Petroleum to start production in
of the Dutch court, which announced gas in the form of LNG. One example Africa in 2024. However, despite this,
that it must reduce its greenhouse gas is Shell, TotalEnergies and Eni selling the independents productive outlook
emissions by 45% by 2030. Low in- 45% interest in OML 17, valued at $1.1 in Africa for oil and gas is similar to the
vestment levels threaten currently pro- billion. The large onshore license con- majors. Production is expected to de-
ducing oil fields in Angola, which face sists of 15 oil and gas fields, allowing crease slightly in 2022, following by a
a sharp decline in production as fields the majors to pivot their investments to gradual but consistent decrease in the
mature, threatening the nation’s ability assets offshore the nation. The CEO of coming years.
to meet Opec+ allowances. TotalEnergies in Nigeria – Mike Sang-
ster – tells The Africa Report that go- With majors selling large crude oil as-
In the past, the African market present- ing forward, the company is focusing sets in Nigeria, Angola, Algeria, and
ed challenges due to policies that bar- more on gas and oil projects with a ‘low Ghana, despite there being large po-
ricade entry into the market, with high break-even point’. This could shift fo- tential for growth, NOCs and INOCs are
tariffs, and political tension. As of late, cus towards gas production, as stated acquiring the largest proportion. To-
there has been a drive for amended by chairman and CEO of Total, Patrick gether, NOCs and INOCs are expected
policies, restructured regulatory frame- Pouyanné, claiming it as the “transition to produce 51% of Africa’s oil and gas
works and investor attractive initiatives, energy”. in 2021, 43% coming from NOCs with
making it easier to do business. This leading companies Sonatrach, NOC
restructuring has been led by Nigeria, The independents operating in Afri- (Libya) and NNPC. Exemplifying the Ma-
Republic of Congo, Angola, and Sene- ca, including APA Cooperation, Cono- jors view, BP’s Africa new ventures vice
gal. Unfortunately, the majors have low- coPhillips and Perenco, showcase tran- president, Jonathan Evans, stated BP
ered their view of investment prospects sitioning, like the majors. Cairn Energy, would limit its oil extraction projects on
despite it being easier, with the current recently sold its Sangomar assets to the continent going forward, in view of
shift towards LNG being the main driv- Woodside Petroleum, previously being carbon reduction requirements.
Figure 3.4: High level Summary of 2019 - to date Majors M&A activity in Africa as Sellers
Deal
Buyer Seller Title Date value Country Field type category
(MUSD)
Oil Gas
SNPC (Congo) takesover PSC in
17/04/2020 235 Congo
Congo from Enion contract expiry 64% 36%
Qatar Petroleum acquires stake in 3

04/07/2021 Unknown SouthA frica
licensesin South Africa 44% 56%
Conoi lacquires operating stake in 20/08/2020 43 Nigeria

OMLs86 and 88 in Nigeria 67%3 3%
Dragon Oil acquired BP

29/05/2019 600 Egypt
soil concessions in Egypt 60% 40%
TNOG acquired 45% stake in OML 17

15/01/2021 533 Nigeria
in Nigeria from Shell, Total, ENI 60% 40%
ExxonMobil announced to the

Ghanaian government that it was 17/06/2019 N/A Ghana
exiting the country’ supstream 75% 25%
petroleum sector
Source: Rystad Energy M&A Dashboard, annual reports and news articles
50
Figure 3.5: Analysis of likely operator “types” who will be willing to acquire assets in Africa
Major
NOC
Independant
INOC

The biggest acquirers of assets are projects towards low-carbon energy. that are anticipated for major projects.
SNPC (Congo) and TNOG, two NOCs In fact, ENI aim to spin off their oil and The top African projects by resources
operating in Congo and Nigeria, re- gas assets in West Africa and the Mid- that are expected to be sanctioned for
spectively. In fact, the largest acqui- dle East into new joint ventures with BP development in the 2020s include 12
sition in 2021 came from TNOG in and TotalEnergies. An example is ENI’s gas projects in Mozambique, Tanzania,
relation to the aforementioned OML current deal with Egyptian Electricity Mauritania, Senegal, Nigeria, and Libya.
17 license in Nigeria, acquiring a 45% Holding Company and the Egyptian The African Energy Chamber estimates
stake from ENI, Shell and Total. The Natural Gas Holding Company, for the that about 55% of the African resources
field has the potential to double pro- production of green hydrogen in Egypt expected to be sanctioned for devel-
duction in the short to medium term using renewables, with the aim of ex- opment in the next 10 years will be gas
through enhanced production initia- tending this project to the North African projects, with a further 13% being con-
tives and workovers. SNPC purchased powerhouse Algeria. ENI and BP’s joint densate and natural gas liquids, com-
a PSC in Congo for $600 million from venture in the Nour and Shorouk fields pared to just 38% for crude oil.
ENI, Qatar petroleum (QP) and Total, in Egypt, along with ENI’s Coral South
where approximately 95% of its total project in Mozambique, are all initiation The NOCs could engage in new envi-
production is oil. Another notable ac- points in the LNG market. ronments via diversification, realloca-
quisition of assets in 2021 occurred in tion of resources to enable increased
Egypt, where Chevron Petroleum and Shell acquired stakes in assets offshore competitiveness in the market. The
Cairn acquired Shell’s 13 onshore con- in São Tomé & Príncipe, Suriname, north African companies, including
cessions and 50% stake in Badr El-Din Namibia, and South Africa from Kos- Sonatrach, Sonangol, SNPC etc., have
Petroleum Co. for $646 million with ad- mos energy for $128 million, with the all shown interest and commitment to
ditional payments of up to $280 million intention to start drilling in 2021. De- allocating investments towards carbon
between 2021 and 2024. spite this, current production in these capture and storage. In fact, Eni and
countries altogether is low, however it Sonatrach signed a series of agree-
QP is responsible for purchasing $91 is expected to observe large growth ments in March 2021 for the upstream,
million of equity and assets from the in coming years, especially in Surina- research and development and decar-
leading majors ENI, Total and Shell. me and South Africa. Gas production bonization sectors. This should allow
Forecasts display QP remaining in oil, is expected to grow seven times the NOCs to shift from volume to value, by
and slowly increasing exposure to gas current production from 2020 to 2030. focusing on high-value projects, which
post 2023. Since 55% of QP’s annual Moreover, in 2019, TotalEnergies made are socially acceptable through the re-
output is gas in 2021 (excluding natu- the Brulpadda gas-condensate discov- duction of carbon emissions. Ramping
ral gas liquids and condensate), with ery in South Africa, containing approxi- up downstream activities is a diversifi-
oil only accounting for 19%, diversifying mately 500 million barrels of oil equiva- cation route that can be lucrative; ven-
with more oil fields could be expected. lent (mmboe). Partners are considering turing into petrochemicals and refining
Perenco, also purchased assets from a fixed platform development for the could generate new revenue streams
TotalEnergies in Gabon, with the am- project, with TotalEnergies claiming from potentially higher margin prod-
bition of maintaining gas production it as “world-class…offshore gas play”. ucts.
levels amidst currently falling oil pro- ExxonMobil also acquired assets in São
duction. Tomé & Príncipe, with production com- Global pressure mounts to divest from
mencing in the coming years. fossil fuels with greenfield oil develop-
Spending cuts from the majors in crude ments becoming less attractive in the
has caused oil dependant countries In Nigeria, Chevron Nigeria Limited media, forcing majors to explore op-
like Angola to suffer from declining pro- (CNL) acquired the Escravos gas-to-liq- portunities in renewables. Majors’ in-
duction levels, expected to achieve 1.2 uid (GTL) asset. According to Chevron, vestment strategies involve “prioritising
mbbl/d in 2021, a 35% decline in the “with the expected rise in demand for near-term capital spend on the most
past decade. However, the largest ma- diesel, GTL technology provides an advantaged assets with the lowest cost
jor in Africa, ENI, is interested in invest- option to make a fuel with qualities that of supply in the portfolio”, as per Pre-
ment in Angola through a joint venture make significant reductions in emis- ba Arkaah, a spokesman for Exxon in
with BP. Both companies are looking to sions possible.” With similar motives Ghana. Many Majors now have targets
restructure hydrocarbon portfolios (and for lower emissions, TotalEnergies ex- for Zero routine flaring by 2030, as illus-
increase renewable energy output) to panded in Algeria by acquiring a stake trated in Figure 3.6. This opens oppor-
achieve greater efficiency in their op- in a wet gas field from Repsol, support- tunities for local companies to exploit,
erations and to create synergies aiming the shift towards a cleaner natural either specializing in reducing flaring,
ing to reduce costs. Such a strategic gas source. This renewed focus on nat- or processing gas into hydrogen pro-
move fits neatly into ENI’s reported ural gas in Africa is observed by look- duction to add to continents renew-
plan to cut debt and fund transitional ing at the final investment decisions ables portfolio.
52
Figure 3.6: Flaring reduction targets by majors
Flaring intensity and reduction targets, selected companies
Equity flaring intensity 2020 Flaring reduction

Company Quote
(kg co2/boe) target
“Eni has committed to eliminate process flaring by 2025,

10 Zero routine flaring by
five years ahead of the Global Gas Flaring Reduction 2030
2025
initiative”
Zero routine flaring by “Total was the first company to join up the Zero Routing
6 2030 Flaring initiative”
“BP participates in a number of World Bank’s flaring reduc-

5 Zero routine flaring by
tion initiatives, including the Global Gas Flaring reduction
2030
partnership”
Expects to reduce “Our Upstream Flaring and Venting Reduction Environ-

5 flaring by 25% by mental Standard for Projects has a goal of avoiding routing
2020 flaring in new Upstream projects”
3 Zero routine flaring by “We are working to reduce flaring, which wastes valuable
2030 %
resources and contributes to climate change”
“We have developed internal country specific plans to

3 Reduce flaring by 25-
minimize gas flaring and we are a member of the World
30% by 2023
Flaring Reduction Partnership”
“In Norway we do not have routine flaring in our opera-

3 Zero routine flaring by tions. Our aim is to stop routine flaring in our operations by
2030 2030 at the latest”
“Although post combustion flaring emissions represent

3 No clear target less than 7% of our GHG emissions, flare reductions con-
tinues to be a priority”
Source: Company reports, Rystad Energy research and analysis *Relative to 2017 **Relative to 2016

In the short term, the Majors plan on re- has 150 MW of installed capacity in Afri- en investors to finance renewable en-
ducing carbon intensity by increasing ca, currently in operation in Egypt (2 x 63 ergy in sub-Saharan Africa. TotalEner-
efficiency measures, eliminating flaring, MW), Burkina Faso (15 MW) and Uganda gies also announced an investment of
and optimising operations to minimise (10 MW), with the aim of further expan- about $60 billion in renewable energy
their carbon footprint. The current and sion. ENI, has the “Adam” photovoltaic projects between now and 2030. Geo-
future joint ventures between the ma- plant, in Tataouine Governate, producing thermal energy projects in East Africa,
jors, and the synergy that can arise from 5 MW, reducing gas consumption and have seen a $95 million investment
streamlined operational excellence, can saving the equivalent of 6,500 tonnes from the European Investment Bank
go a long way towards reducing carbon of CO2 emissions each year. In fact, ENI (EIB). This shift can see further invest-
intensity. Investment in renewables is the and Sonatrach, the Algerian state oil and ment from the majors, as currently all
next step in a carbon neutral future, and gas company, inaugurated a photovolta- of them are engaged in the geothermal
reliance on lower carbon intensity LNG ic plant at Bir Rebaa North (BRN). It also activities. However, these projects have
projects with the key projects outlined in teamed up with Sonangol, forming a joint high room for error, and profits are thin.
Figure 3.7. venture to develop a PV plant with a total Without interest from the majors “geo-
(phased) capacity of 50 MW in Angola. thermal is a pricier lottery ticket than oil,
Photovoltaic solar power plants are cur- without much of a jackpot”, as per Doug
rently the most prominent renewables The Africa Renewable Energy Fund II Hollett, a geologist, and former US De-
energy source in Africa. TotalEnergies (AREF II) raised €130 million from sev- partment of Energy official.
54
Figure 3.7: Major Oil Companies Divestment Strategies for the Energy Transition
Operator Divestment Plan

Algeria &
Angola Reduce oil exploration projects in Algeria & Angola
BP’s Exploration Capex Algeria & Angola (million USD)
500
0
2000 2005 2010 2015 2020
Nigeria Focus on Nigerian gas & offshore oil assets
Shell onshore liquids production (kbbl/d)
0
2000 2005 2010 2015 2020 2025
Gabon Divest non-operated portfolio of mature assets with high BE’s
Total breakeven oil price for sanctioned non-operated assets globally (USD/bbl)
Gabon c.48 USD/bbl
Congo Potentially offload flaring intensive assets in the Congo
ENI upstream CO2 emissions from operated assets (CO2 emissions per boe)
Congo
50
RoW
0
2000 2005 2010 2015 2020 2025
Ghana Exit exploration assets, prioritize low cost of supply
Exxon’s African Exploration Capex (million USD)
500
0
2000 2005 2010 2015 2020 2025

Source: Rystad Energy UCube, GasMarketCube, RenewableCube August 2021
Operator Energy Transition Strategy
Potential merger with ENI for improved capital allocation, cost & business
Angola
synergies to de-risk exposure
Combined ENI & BP portfolio production in Angola (kbbl/d)
500
0
2000 2005 2010 2015 2020 2025
Nigeria NLNG train 7 (T7) FID to increase cleaner LNG output
NLNG LNG production capacity (BCM)
500 T7
T4 T5&T6
onstream
0
2000 2005 2010 2015 2020 2025 2030
Africa Invest $1.5 - 2 billion USD in lowcarbon electricity
Total Solar PV installed plant capacity split by development status, Africa (MW)
200
0
2010 2015 2020 2025 2030
Africa Build out solar capacity to produce and export green hydrogen
ENI Solar PV installed plant capacity split by development status, Africa (MW)
1,000
0
2018 2023 2028
Global Focus on building out further LNG capacity i.e. Rovuma
Exxon equity LNG production capacity (BCM)
50
0
2000 2005 2010 2015 2020 2025 2030
56
In African countries, Cameroon brought In Nigeria, Shell and TotalEnergies, 22 million tonnes per annum (tpa) by
the continent’s first floating liquefied are in partnership with the semi-public at least 35%. BP and Kosmos Energy
natural gas (FLNG) project on stream joint venture Nigeria LNG (NLNG), each meanwhile jointly develop the Greater
in 2018. Senegal and Mauritania are to- holding a 25% and 15% interest in a $4 Tortue Ahmeyim (GTA) offshore LNG
gether building a new LNG export hub billion LNG processing unit, known as project in Senegal and Mauritania, with
with a capacity of approximately 30 mil- Train 7, on Bonny Island. The plant will expected production to come in 2023.
lion tonnes per annum (tpa). increase its current LNG capacity of
Figure 3.8: Majors LNG Production Source: M&A Dashboard, annual reports, and news articles
1 2
Sonangol has partnered with Chevron, BP, ENI, and Eni signs deals with BP, including stake sales in Nour and
Total,todevelop a $12 billion offshore LNGproject. Shorouk fields in Egypt
Has a big commercial contract for LNG from Eni’s Coral South
project in Mozambique.
Rovuma LNG, second-biggest project, is led by Eni and backed

by ExxonMobil, is still awaiting a final green light.
.
ExxonMobil BP Shell Chevron Eni TotalEnergies

9
8
7
6
5
4
3
2
1
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
3 4
Chevron runs the Angola Liquefied Natural Gas (ALNG) Project, Shell invests in the Tema LNG terminal which will make the
one of the first and largest energy projects on the African conti- country the very first south of the Sahara to import LNG . This
nent and in Angola should bridge the current energy gap for millions . Total, aims to
follow a similar path in Côte d’Ivoire and Benin

Mozambique is home to three megaproj- 4, is awaiting approval. Addressing one cent interest in the Angolan LNG plant,
ects, representing a total investment of of the critical elements affected growth discusses the benefits of its associated
$55 billion. Although, TotalEnergies re- across the African continent, energy gas, which is natural gas produced as
cently suspended its largest project in poverty, the project in Mozambique as a by-product of crude oil production. In
the country, Mozambique LNG, due to well as in Senegal, will fuel power plants, Equatorial Guinea, the government is un-
attacks on the nearby town of Palma. rather than being exported to demand dergoing discussions with companies for
Small and medium-sized local enterpris- centres in Asia. the development of offshore and strand-
es have already lost $90 million since ed gas reserves for production of LNG.
the attack on Palma, a huge financial set- In Angola, the government has formed
back for a continent already experienc- a consortium with five international oil NOCs are intrigued by the LNG market,
ing declining investment. This highlights companies including Eni and Chevron since currently none of Nigeria’s LNG
the importance of risk factors such as and is discussing an investment of $2 (the largest producer) goes to Africa.
security, as attacks on African oil and gas billion, in the Soyo terminal. This plant Their main objective would be gas-to-
pipelines (e.g., Nigeria, Libya, Mozam- will produce 5.2 million tons per annum power infrastructure to assist Africa’s
bique) do not give international investors’ capacity and supply natural gas to a 750 energy requirements. The majors focus
confidence to finance large economical- MW power plant, a step in electrifying is on monetizing gas and reducing their
ly impactful projects. The second big- the African continent. The consortium carbon footprint, which will require es-
gest LNG project, Rovuma LNG, led by aims to start production from this project tablishing infrastructure and reducing
Eni and backed by ExxonMobil in Area by 2022. Chevron who has 36% per- flaring.
Figure 3.9: LNG Production in Africa

Unit: Million Tonnes LNG Source: Rystad Energy UCube August 2021
120
Total LNG Production Majors
100
80
60
40
20
0
40
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
58
Chapter Four
African E&P Financing Could
Become More Reliant Upon Asia
G20 governments allocates Figure 4.1: to Africa and the Middle East, 2013-19
US$ 123 billion in public sector Public energy finance* issued by G20 governments**
financing to Africa and Middle USD billion
East from 2013-2019
Fossil fuels Clean energy
European finance institutions China 32.4 12,8

demonstrate strongest reluc-
tance to invest in fossil fuel Japan 23.6 4,2
related projects Korea 22 0,5
Asian financing institutions like- Saudi Arabia 11.7 0,9

ly to remain as key sources of
United States 8.3 1,8
financing for fossil fuel projects
in Africa Germany 6.5 2,4
Italy 5.9 1,5
UK 5.6 1,2
Canada 1,9 0,2
South Africa 1,5 1,3
Russia 1,5 0
India 1,2 0,4
*Includes payments from export credit agen-

France 1
cies or development finance institutions
**Excludes Argentina, Brazil, EU, Indonesia
and Turkey as no payments were observed Australia 0 0
Source: Oil Change International, April 2021

Chapter Four – African E&P Financing Could Become More Reliant Upon Asia
Despite the international forum of G20 was directed towards fossil fuel proj- vides sufficient confidence for addition-
governments making commitments to ects whilst $30 billion was spent on al institutions to finance projects.
limit average global temperature in- clean energy. Clean energy is defined
creases to 1.5°C above pre-industrial as any payment supporting renewable When taking a more holistic view of the
levels, billions has been invested in fos- energy in the form of biofuels, geother- global financing industry and the asso-
sil fuel projects between 2013 to 2019. mal, hydropower, hydrogen, solar and ciated appetite for funding fossil fuels,
Africa and the Middle East (MENA) has wind. The only country to fund more the past two years have witnessed a
been on the receiving end of such fi- clean energy projects than fossil fuel pivot in mentality across the financial
nancing from the G20 nations, as il- was France with $2.7 billion allocated. industry, with institutions on mass mak-
lustrated in Figure 4.1 compiled by Oil ing commitments towards restricting
Change International. The financing Overwhelmingly, the large Asian eco- finance for fossil fuel projects and re-
illustrated represents trade and devel- nomic centers contributed in excess ducing overall exposure levels. No con-
opment financing, verified as directly of 60% of the financing towards fossil tinent exhibited such a shift like Europe.
related to fossil fuels. The funding is fuel projects, led by China. Such ar- Figure 4.2 outlines the number of glob-
associated with export credit agen- rangements enable countries to se- ally significant institutions per commit-
cies (ECAs) and development finance cure access to fossil fuel reserves, of- ment category split by continent, rep-
institutions (DFIs), rather than private ten hedging themselves against future resenting currently active policies. In
institutions. Examples include the Chi- volatility in commodity y prices, which terms of financial restrictions, the major-
na Development Bank funding a $6.6 is of heightened importance for the ity of institutions imposing restrictions
billion loan to Sonangol in 2016 and a primary hydrocarbon importing coun- applied them to oil sands and arctic
$5 billion export credit loan from the tries, where GDP is more exposed to drilling, rather than an absolute ban of
US Export-Import Bank related to a fluctuations. Hydrocarbon demand oil & gas financing. However, amongst
Mozambique LNG liquefaction terminal associated with manufacturing and in the European institutions this picture
in 2020. ECAs and DFIs often offer ei- particular petrochemicals is very high may soon shift as COVID-19 acceler-
ther very competitive or non-commer- in such countries, amplifying the im- ates the green agenda. The European
cial based terms and as such provide portance of protecting established in- Investment Bank announced the com-
substantial support for raising further dustries to keep feedstock costs low, mitment to banning fossil fuel funding
financing from additional sources, such enabling them to remain competitive. from the end of 2021, a policy that the
as from banks or asset managers, by Furthermore, through providing inter- UK also pledged to follow. Following
reducing project risk and boosting in- national funding, institutions aim to suit, France announced they will end
vestor confidence. support domestic job creation related export financing for oil exploration and
to the projects that are being financed. production by 2025 and gas explora-
In order to contextualize the spending It is therefore likely that the Asian nation production by 2035. Additionally,
levels, it’s useful to compare fossil fuel tions, primarily associated with the G20, the Biden administration also indicated
financing related to clean energy proj- will provide the pivotal sums of public the ongoing development of a plan for
ects in MENA over the same period. finance via ECAs or DFIs that form the ending international financing of fossil
Overall, out of the G20 US$123 billion larger portions of debt that often pro- fuel projects with public funds.
60
Figure 4.2: African E&P financing trends – Overview

Globally significant banks, insurers* and asset managers** restricting fossil fuel funding
Number of institutions per commitment category Source: IEEFA, August 2021
*IEEFA defines globally significant financial institutions as banks and insurers / reinsurers with AUM>US$10billion.
**IEEFA defines globally significant asset managers / owners as having assets under management (AuM) greater than US$50 billion.
Overall, fossil fuel financing restrictions manage the risks inherent with climate the ability to service debt, or by the
are centred on European institutions change a variety of policies aiming to extent of provisions required to insure
as recognition of the potential financial limit exposure have been adopted. In- high liability assets. For the public enti-
impact of climate change is reflected stitution types include insurers, asset ties, net zero commitments spearhead-
in the risk appetite of various lenders managers and banks, where concern ed by governments push funds to be
in the continent. In order to optimally lies in the risk to future cashflows and directed towards clean energy.


Growth in bank financing for fossil fuels (2016-2020 CAGR, x-axis); Total fossil fuel policy
score* (y-axis) each dot represents a bank, colored by continent Banking on climate chaos, 2021
*Internal policy score towards reducing fossil fuel financing, Banking on climate chaos report, 2021
In order to provide insight into where are likely to be the sources of ECA and financing directed towards fossil fuel
African E&Ps may be able to secure DFI related public financing, Figure 4.3 projects from 2016-2020 whilst the
project financing from in the future, it outlines the picture from the perspec- y-axis represents the total fossil fuel
is important to analyse the trajectory tive of the wider banking sector. The policy score as provided by the Bank-
of historical financing from different data illustrated is sourced from the ing on Climate Chaos report. The scor-
regions, where government and fiscal Banking on Climate Chaos report 2021 ing is largely related to the extent of
policy ultimately shapes the decisions and includes the 60 largest relevant exclusion imposed across the different
made by financial institutions. Whilst it banks by assets. The x-axis represents fossil fuels within the policies of the var-
is clear that key Asian financial centres the annual compound growth rate in ious banks.
62
On average, European banks were scoring. Overall, this indicates that the parts as a risk mitigation strategy. In ad-
broadly flat in terms of growth in fos- fossil fuel financing in the future and dition to this, increasing pressure from
sil fuel financing from 2016-2020 and for Africa is likely to be at least in part shareholders resulted in an increase in
scored the highest in terms of overall supported by Asian financial institu- the relative weighting of gas in Majors’
policy. This mirrors the conclusion of tions. Historically, China has played an portfolios. One example of this is the
the public funding analysis, where Eu- important role in Africa’s energy indus- recent divestment by Shell, Total and
ropean institutions are the least likely to try through providing significant invest- ENI of 45% interest in Nigerian oil min-
be involved in future fossil fuel projects. ment and loans across various energy ing lease 17 to Heirs holdings. The deal
North American and Australian banks infrastructure projects. Such financing serves as a prime example for how
as a whole were in line with Europe in generated economic, social and envi- innovative financing structures can be
terms of growth in financing, however ronmental impacts across the various utilized to de-risk investments and at-
scored much lower in terms of policies countries and communities. tract investment from a range of insti-
towards reducing fossil fuel financing. tutions, including multi-lateral financing
Lastly Asia is the standout continent In Sub-Saharan Africa over the past institutions, national and international
both in terms of growth in fossil fuel fi- decade, Majors have divested onshore banks, and asset managers of various
nancing and in terms of lowest policy assets in favour of offshore counter- forms.
As a background to the license, the agreement with Shell and Total pro- more capital into new areas, albeit on a
mature fields contributing to production vides security of payment, which can case-by-case basis. Overall, the OML 17
have been in decline after producing also be utilized as an additional facili- transaction can largely be summarized
for decades. However, with significant ty from which further financing can be as a mature project, de-risked from an
volumes of reserves remaining, in ad- raised. Lastly, a gas handling sale and export, payment, and technical per-
dition to exploration upside, further po- purchase agreement is in place for a spective, hence representing a prime
tential exists in the block. The license portion of the production from the asset example of the kinds of assets that can
also boasts a comprehensive infra- providing further visibility on revenues. be expected to be financed in Africa.
structure network, facilitating export of
crude and natural gas. The result of the innovative agreements As conventional financing for fossil fuel
is enhanced confidence in project projects in Africa becomes harder to
Four key innovative agreements are in cashflows for financing institutions, en- come by the door opens for alternative
place that have enabled the transaction abling tranches of debt to be portioned sources of capital and adjusted deal
to take place. Firstly, a technical agree- off to various institutions, allocated in structuring to account for higher per-
ment with Schlumberger provides ac- line with internally accepted risk toler- ceived risk. In general, larger numbers
cess to the highest level of technical ances. With the reduced appetite from of financers involved in individual proj-
competence, ensuring execution of an European and American financing insti- ects will distribute risk, however this
expedited field development plan and tutions for funding fossil fuel projects, it comes with increased complexity when
accelerated revenue generation re- is likely that the use of hybrid financing creating agreements as the various
quired to service debt. Schlumberger that maximises and incentivises perfor- parties seek to maximize potential re-
will also provide a facility for working mance whilst de-risking the investment turns and strike the optimal risk-reward
capital, further de-risking production across the spectrum of counterparties balance. Ultimately this will increase
expansion – this represents the capital will become more prevalent. Such a the cost of capital for E&Ps through
solutions offerings now available from movement is supported further by the higher interest rates, reduced repay-
major OFS companies. An agreement ongoing hunt for yield by asset man- ment periods and reduced capture of
has been struck with the Trans-Niger agers in an economic environment upside opportunities. Nevertheless,
pipeline and Bonny crude oil terminal shrouded in inflation fears due to mon- this will encourage project financing,
on a fixed tariff basis, offering further etary policies resulting from the glob- facilitating new developments to take
cost visibility required for financing al recession. The higher yield offered place and for redevelopments to be
arrangements. A long-term offtake by emerging markets will likely attract support.


Production from assets contained within Nigerian license OML 17
Kbbld Source: Rystad Energy UCube, August 2021
64
Figure 4.5: African E&P financing trends – OML 17 case study

An outline of the agreements employed to secure project financing in Africa
OML 17 Agrements Details
Strategic cooperation & working capital

Technical services Access to adequate finance
Infrastructure Fixed tariff for pipeline & terminal
Crude offtake Long -term agreement for agreed volume
Gas offtake Sale & purchase agreement for agreed volume
Facilitates
financing from…
Banks Traders Hedge funds Debt funds
Potential Exposure
Low Risk Appetite
Senior debt Junior debt

i.e. Reserve based lending i.e. Working capital facilities
Total Project Financing

Source:Rystad Energy research and analysis; Acquisition Financing In An

Era Of Energy Transition, Project Finance International
Party
De - risks project
from export,
payment and
technical
factors
Not disclosed
Alt. fund managers Private investor
Potential Exposure
High
Subordinated debt
i.e. High
66
Chapter Five
Power & Minerals
Key Highlights strong economic growth, foster indus-

trialisation, and safeguard livelihoods.
• Solar PVs are currently the largest re-
newable energy source in Africa and
Natural gas has a proven track record generation is expected to grow even
• Total electricity generation in Africa in Africa of enabling access and should larger. From 2010 – 2019, 320 assets
declined by 2.5% in 2020 from 863 ter- continue to be the main instrument were constructed with 14 GW of elec-
awatt-hours (TWh) in 2019 to 844 TWh. against energy poverty. tricity added. However, between 2020
This decline in electricity generation – 2030, 648 assets are forecast to be
was mainly attributable to the ongoing • Africa’s abundant natural gas re- constructed generating 77 GW of elec-
COVID-19 pandemic, which caused a serves, with discovered volumes stand- tricity.
dip in electricity demand across the ing at around 600 tcf, can help satisfy
board. In 2021, Africa is on track to pro- continent’s future energy demand • Rapid moves to attain net-zero at all
duce 900 TWh as economic recovery and play a key part in electrification of costs will severely negatively impact
has picked up momentum. sub-Saharan regions due to its accessi- Africa’s energy sectors, which are a
bility. Development of untapped natural critical source of employment and for-
• Conventional fuels such as coal, oil, gas potential of sub-Saharan regions eign exchange earnings. Africa remains
and natural gas collectively accounted will bring the security of supply and in- among the least CO2 — and other
for three-quarters (75%) of Africa’s pow- dependence to countries with econom- greenhouse gases — emitters globally.
er generation between 2019 and 2021. ic hardship. The transition is less about technolog-
A deeper dive into Africa’s regional ical and fuel choices than sustainable
electricity generation mix, however, • Gas-to-power generation will help to livelihoods for the millions of people
reveals the need for extreme caution move away from more polluting fossil who live on the African continent
not to paint the picture that the whole fuels and assist in fueling the energy
continent needs to decarbonise. Many transition. Clear regulations are essen- • The increase in demand for battery
countries on the continent are using tial to achieve a widespread distribu- metals will disrupt global supply chains
the energy resources at their disposal tion of natural gas and construction of and open new market opportunities for
and should not be punished for doing gas-to-power facilities. countries worldwide, particularly Africa.
so Over half of countries in Africa have at
• Under IEAs Net Zero Emission (NZE) least one of the critical metals needed
• Conventional fuels will continue to scenario, oil & gas production could for the energy transition. Africa retains
play a significant role in reducing the drop by 67% in Africa by 2050 only 10% of the total value chain leaving
energy access deficit on the continent other countries such as China and the
in 2022. Africa needs to make concert- • Oil & gas sector employment could United States as the primary beneficia-
ed efforts in harnessing its massive hy- fall by over 60% in IEAs NZE scenario ries. The Africa Energy Chamber advo-
drocarbon reserves — particularly natu- cates for an increase to at least 50% by
ral gas. This needs to go alongside new • Africa’s renewable power generation 2030 and 75% by 2040.
hydropower and renewables. expanded noticeably in 2020 and 2021,
with wind and solar PV installed capac- • Finally, deepening Africa’s critical min-
• Over 580 million (almost 46%) of the ity growing by 12.2% and 14.5%, reach- erals value chain linkages calls for some
continent’s population lack access to ing 6,491 megawatts (MW) and 9,505 radical changes: (1) improve infrastruc-
electricity. To “make energy poverty MW, respectively. This trend of growing ture and stimulate investments further
history by 2030”, Africa’s electricity renewable energy supply during the downstream in the value chain, and (2)
generation capacity needs to expand pandemic is also the case globally and provide reliable and cheap electricity
rapidly by over 6% a year to support expected to continue in 2022. for EV deployment, among others.

Chapter Five – Power & Minerals
5.1. A challenging year

for Africa’s economy and
power industry
Total electricity generation in The past one and half years (and count- a result, the continent remains in danger
Africa declined by 2.5% in 2020 ing) have been particularly challenging of losing a decade’s worth of progress in
for many countries worldwide, more so poverty reduction , including increasing
from 863 terawatt-hours (TWh)
in Africa. Several African economies energy access.
in 2019 to 844 TWh. This de- saw a sharp slowdown in economic ac-
cline in electricity generation tivity in 2020, with the continent’s first The economic policy responses to the
was mainly attributable to the recession in decades. According to IMF COVID-19 pandemic by several gov-
ongoing COVID-19 pandemic, estimates, overall real GDP growth on ernments, including those in Africa, en-
which caused a dip in electric- the continent in 2020 was negative 1.9%, compassed two dimensions: firstly, on
one of the worst on record. Although the the fiscal front, which included provid-
ity demand across the board.
continent has seen a rebound in eco- ing credit/financial policies and support
In 2021, Africa is on track to nomic activity to 3.4% real GDP growth in packages for people and businesses;
produce 900 TWh as economic 2021 as well as a forecast of 4% real GDP tax policies such as reduction in VAT, CIT,
recovery has picked up momen- growth in 2022, this renewed growth among others; and redirecting savings to
tum. momentum still lags other regions such COVID-19 related spending such as food
as Emerging and Developing Asia (8.6% stamps, electricity, and water subsidies,
and 6% real GDP growth 2021 and 2022) among others. Second is the monetary
The pandemic slashed FDI in-
and the United States (6.4% and 3.5% in and macro-financial dimension, which
flows into Africa by 16%, signifi- 2021 and 2022). included reductions in policy rates, lower-
cantly affecting energy value ing the primary reserve requirement and
chain infrastructure projects, Also, estimates from various agencies capital conservation buffers of banks,
which were either deferred or indicate that per capita output is not and REPO arrangements to support ex-
cancelled. expected to return to 2019 levels until change rate and balance of payments.
after 2022, as Figure 5.1.1 below shows.
Reasons for the relatively modest growth Additionally, most countries received
Rapid moves to attain net-ze- projections on the continent include COVID-19 emergency financing from
ro at all costs will have severe continued lack of access to vaccines multilaterals such as the IMF, World Bank
impacts on Africa’s oil and gas (vaccine inequity) and the weaker fiscal and Africa Development Bank (AfDB) as
and power sectors, which are a position of most governments on the well as debt relief through schemes as
critical source of employment, continent. So far, less than 5% of the con- the Debt Service Suspension Initiative
tinent’s adult population have received (DSSI) , the G20 Common Framework for
foreign exchange earnings, and
either one vaccine dose or been fully Debt Treatments beyond the DSSI and
are key to providing affordable vaccinated, according to Africa CDC and the new allocation of US$650 billion in
and reliable power to the entire World Health Organisation data , . While IMF Special Drawing Rights (SDRs). De-
economy. the African continent has recorded rela- spite these interventions, the impact of
tively lower cases of the virus (including COVID-19 is likely to linger for longer on
deaths), the unintended socio-economic the continent as these flows are unlike-
consequences remain dire. Several stud- ly to plug the large financing deficit. IMF
ies indicate that people living in extreme estimates indicate that Africa requires
poverty globally increased by 120 million US$290 billion (11.16% of the continent’s
during the pandemic. Between 40-50 2019 GDP) of additional financing be-
million or a third of this number, most of tween 2021 to 2023 just to provide an
them under 18 years were in Africa. As adequate COVID response.
68
Figure 5.1.1 Real GDP growth rate (2017-2023 Forecast, %)

Source: IMF World Economic Outlook (April 2021)
10
-5
-10
2017 2018 2019 2020 2021F2 022F 2023F
World Major advanced economies (G7) Emerging and dev eloping Asia
Latin America and the Ca ribbean Sub-Saharan Africa
The pandemic not only shocked the at between 3-5% per annum. Howev- ties for cooking, according to IEA and
region but also exposed its fragile er, access to reliable power continues World Bank statistics.
energy systems and energy poverty to rank as one of the most significant
issues. Africa’s rapid economic devel- constraints to doing business on the The regional picture is, however, var-
opment is directly linked to the reliable continent, as captured in the World ied: North Africa has a 99% electrici-
modern energy services provision, Bank’s Doing Business Surveys. Fur- ty access rate with West Africa (52%),
primarily electricity. The continent’s thermore, despite the continent’s vast Southern Africa (48%), East Africa
rapid economic growth since 2010 energy resources, access to modern (37%) and Central Africa (27%). This
has been driven by the expansion of energy services in Africa remains lim- lack of access to clean fuels and facili-
the services and extractives sectors. ited. Over 580 million (almost 46%) of ties became more pronounced during
Statistics show that this development the continent’s population lack access the COVID-19 pandemic: multidimen-
has been catalysed by rising electrici- to electricity, and about 730 million sional energy poverty increasing in
ty demand, which is estimated to grow lack access to clean fuels and facili- several households.

This lack of access to clean fuels and facilities became more pertinent during the COVID-19 pandemic,
with multidimensional energy poverty increasing in several households.
An IEA study indicates a 2% increase inequalities. Further compounding all fossil-based sources decreased in
or an additional 13 million people this was that the COVID-19 pandem- 2020 (gas: -4.99%; coal: -7.73% y/y;
on the continent did not have elec- ic slashed FDI inflows into Africa by oil -9.12% y/y) compared to 2019, re-
tricity during the pandemic in 2020. 16%, with the continent’s commodi- newables grew by 0.79% during the
This percentage of the population in ty-dependent countries such as An- pandemic. Moreover, during the pan-
sub-Saharan Africa who hitherto al- gola, Nigeria and Zambia being more demic, the IEA and other influential
ready had electricity access could not severely impacted than the non-re- international organisations released
afford basic electricity services during source-based economies. Some of various reports calling for a total ban
2020. Citizens in Nigeria, the Dem- these were investments into various on oil and gas activities if net-zero
ocratic Republic of the Congo and greenfield and brownfield energy val- is to be attained by 2050. Likewise,
Niger were amongst the hardest hit, ue chain infrastructure projects that various Western nations provided
IEA data shows. This was due to the were deferred or cancelled. support for their post-pandemic re-
reprioritisation of financial resourc- covery anchored on a “green transi-
es, some of which were for network Interestingly, there was a 28% in- tion”. For example, U.S. President Joe
expansion and rural electrification crease in international project fi- Biden in April 2021 hosted a virtual
programmes, to address the public nance for renewable energy deals summit of world leaders to stimulate
health emergencies of the pandemic. from USD9.1 billion in 2019 to USD11 global action to reduce carbon emis-
As such, most of the estimated 70% billion in 2020, UNCTAD data sions. The U.S. Government also
of the rural population that do not shows. This increasing trend is con- announced that it would use part of
have electricity continued relying on sistent with the increasing global de- its fiscal stimulus to achieve a 50%-
traditional biomass and wood fuel for carbonisation push, especially in the 52% reduction in GHGs by 2030 from
meeting their domestic needs, deep- post-COVID-19 context. For example, 2005 levels under the ‘building back
ening energy poverty and health while primary energy demand from better’ theme.
These rapid moves to attain net-zero at all costs will have severe impacts on Africa’s oil and gas and power sec-
tors, which are a critical source of employment, foreign exchange earnings, and are key to providing affordable
and reliable power to the entire economy.
The Chamber is of the firm opinion ability of all forms of energy, including inclusive economic growth on the
that African governments and other oil and gas, and renewables. Howev- continent. To that extent, the African
stakeholders can and must doing ever, this must not be forced on the con- continent must leverage all its avail-
erything in their power to lift the many tinent as a binary choice as portrayed able energy resources to safeguard
people on the continent out of pov- by certain interest groups and some energy security and affordability and
erty by creating sustainable livelihood financiers. Energy poverty remains aggressively fight poverty.
opportunities, catalysed by the avail- one of the biggest impediments to
African governments and other stakeholders can and must doing everything in their power to lift the many peo-
ple on the continent out of poverty by creating sustainable livelihood opportunities, catalysed by the availability
of all forms of energy, including oil and gas, and renewables.
70
5.2. Market developments:

Africa’s electricity sector in 2020 and 2021
There is no one-size-fits-all approach to

the energy mix as different regions (and
the constituent countries) are using the
energy resources available at their dis- 5.2.1. Supply
posal to drive their economies.
Africa’s energy intensity must drastically Total electricity generation in Africa was 844 terawatt-hours
improve if the continent is to become a (TWh) in 2020, a 2.5% decline from the 2019 estimate of 863
TWh. This decline in electricity generation was mainly attribut-
major economic behemoth and lift many
able to the ongoing COVID-19 pandemic, which caused a dip in
people out of poverty. electricity demand across the board, meaning some dispatchable
power was not put on the grid based on the merit order. However,
For Africa to achieve its SDGs for electric- despite the disorder of the COVID-19 pandemic in 2020, Africa’s
ity access and clean energy, the region renewable power generation expanded noticeably with installed
would require annual power sector wind and solar capacity reaching 6,491 megawatts (MW) and 9,505
MW signifying a growth of 12.2% and 14.5%, respectively, over the
investments to more than double up to
previous year’s figures. This trend of growing renewable energy
2040. supply during the pandemic is also the case globally. For exam-
ple, whereas conventional fuels such as nuclear, oil, coal, and even
Africa’s abundant 600 trillion cubic gas recorded year-on-year declines in 2020 compared to 2019,
feet (Tcf) of natural gas reserves can renewable energy deployment recorded a 0.79% growth during
help meet the continent’s future energy the pandemic. This was catalysed by the 28% increase in inter-
national project finance for renewable energy deals from USD9.1
demand and play a key part in electrifica-
billion in 2019 to USD11 billion, as UNCTAD data show. In Africa’s
tion in various countries due to its acces- context, many of these new renewable energy additions to the mix
sibility. Development of untapped natural were projects that had already received final investment decisions
gas potential of sub-Saharan regions will pre-pandemic.
bring the security of supply and indepen-
dence to countries with economic hard- Conventional fuels will continue to make up the most share of
Africa’s power generation mix in 2022 as it did from 2020-21.
ship.
Natural gas (39%), coal (28%) and oil (8%) collectively account
for three-quarters of total power generation by fuel type (Figure
Gas-to-power generation will help to 5.2.1.1 and Table 5.2.1.1). Hydro accounted for 17% and nuclear (2%),
move away from other more polluting while renewables, principally solar, wind and geothermal, account-
conventional fuels and assist in the ed for the remaining 6%. However, it is helpful to stress the impor-
energy transition. Clear regulations are tance of the heterogeneity of electricity generation by source in
other regions. For example, North America’s electricity generation
essential to achieve a widespread distri-
is comprised of natural gas (38%), nuclear energy (18%), coal (17%),
bution of natural gas and construction of hydro (13%) and renewables (12%). In Europe, the mix is made up
gas-to-power facilities.

of renewables (24%), nuclear energy there is no one-size-fits-all approach to dominates in Asia Pacific, natural gas in
(22%), natural gas (20%), hydro (17%), and the energy mix as different regions (and Africa, the United States and the Middle
coal (15%). On the other hand, in Asia Pa- the constituent countries) are using the East, and hydro in South and Central
cific, coal dominates the electricity mix energy resources available at their dis- America. As noted, natural gas has a
at 57%, followed by hydro (14%), natural posal to drive their economies. While re- proven track record in Africa of enabling
gas (11%), renewables (10%) and nucle- newables account for the largest share access and should continue to be the
ar (5%). The data clearly illustrates that of the electricity mix in Europe, coal main instrument against energy poverty.
There is no one-size-fits-all approach to the energy mix; different regions (and the constituent countries)
are using the energy resources available at their disposal to drive their economies.
Natural gas has a proven track record in Africa of enabling access and should continue to be the main
instrument against energy poverty
Figure 5.2.1.1 Africa’s electricity compared to the world, and generation mix by fuel in 2020
Electricity generation by fuel (Terawatt-hours, TWh) Africa’s Electricity Generation Mix by Fuel, 2020-21
14.000
Other
Renewables
1%
12.000 5% Oil
8%
Hydro
10.000
electric
17%
8.000 15x 10x 3x
Natural Gas
6.000 39%
Coal
Nuclear 28%
4.000
energy
2%
2.000
-
Total Total Total S. Total Total Total Total
Africa Middle & Cent. CIS Europe North Asia
East America America Pacific
Source: BP Statistical Review 2021 Source: BP Statistical Review 2021
72
Table 5.2.1.1. World regional electricity generation by fuel (%)
Natural Nuclear Hydro

Region Oil Coal Renewables Other Total
Gas energy electric
Total North America 1% 38% 17% 18% 13% 12% 0% 100%
Total S. & Cent. 7% 18% 6% 2% 51% 15% 0% 100%

America
Total Europe 1% 20% 15% 22% 17% 24% 2% 100%
Total CIS 1% 47% 16% 16% 19% 1% 0% 100%
Total Middle East 28% 66% 2% 1% 2% 1% 0% 100%
Total Africa 8% 39% 28% 2% 17% 5% 1% 100%
Total Asia Pacific 1% 11% 57% 5% 14% 10% 1% 100%
Source: BP Statistical Review 2021
Again, a deep dive into Africa’s regional elec- mix in Central Africa. The story in East Africa
tricity generation mix reveals the need for , is however, slightly different when it comes
extreme caution not to paint the picture that to renewables – they constitute about 11% of
the whole continent needs to decarbonise its the mix, which is the highest in all the regions
electricity mix. For example, while 75% of elec- of the continent. This breaks down into solar,
tricity generated in West Africa comes from wind, tide, wave, and other sources (2%), biofu-
conventional fuels, this is principally resource els and waste (2%) and geothermal energy (7%).
driven. That is, it is based on an abundance of The remainder of the electricity mix is made up
environmentally friendly natural gas found in of conventional fuels (36%) and hydropower
the region (Figure 5.2.1.2). The remaining share (53%). Northern Africa’s electricity mix is also
of West Africa’s electricity mix are hydropower resource-driven, being heavily dominated by
(23%) and renewables (1%). In Central Africa , natural gas and oil (93%), hydropower (4%), and
again the share of the electricity mix is driven solar, wind, tide, wave, and other sources (3%).
by the fuel resource availability as hydropower Finally, 79% of the electricity mix in Southern
makes up the most significant share at 72%, fol- Africa is from conventional fuels (mostly coal)
lowed by conventional fuels (principally oil and followed by hydropower (14%), nuclear pow-
gas fired thermal power generation) at 28%. Re- er (5%), and solar, wind, tide, wave, and other
newables make up less than 1% of the power sources (2%).

Figure 5.2.1.2 Regional breakdown of mix
Regional electricity generation by mix (GWh) Regional electricity distribution % mix
400 100%
7% 4%
Thousands
350 80% 2% 14%

23%
300 60%
250 40% 72% 53%
200 20%
93%
150 75% 79%
100
50 36%
28%
- 0%
West Central East North Southern West Central East AfricaN orth Southern
Africa Africa Africa Africa Africa Africa Africa Africa Africa
Electricity generated from geothermal energy (GWh) Electricity generated from geothermal energy (GWh)
Electricity generated from biofuels and waste (GWh) Electricity generated from biofuels and waste ( GWh)
Electricity generated from solar, wind, tide, wave and other Electricity generated from solar, wind, tide, wave and other
sources (GWh) sources (GWh)
Electricity generated from hydropower (GWh) Electricity generated from hydropower (GWh)
Electricity generated from nuc lear power (GW h) Electricity generated from nuclear power (GWh)
Source: IRENA database, AFREC Database, Tracking SDG7/WBG Source: IRENA database, AFREC Database, Tracking SDG7/WBG
Regarding the diversification of the heterogeneity of Africa’s power mix and and other international commitments
mix, Southern Africa has the most di- any discussion of the energy transition such as the nationally determined
versified mix with electricity coming needs to take this into account, espe- contributions (NDCs) under the Paris
from six (6) sources. This is followed cially at regional and country levels. Ulti- Agreement. The Africa Energy Chamber
by East Africa with five (5) sources, and mately, changing the power mix remains strongly asserts that the two must not be
then West Central and North Africa with country level responsibilities subject to made to be mutually exclusive, as some
four (4) sources. This again highlights the their own developmental imperatives other organisations seek to do.
Ultimately, changing the power mix remains a country level responsibility subject their own developmental
imperatives and other international commitments such as the nationally determined contributions (NDCs) under
the Paris Agreement.
74
5.2.2. Demand
At a regional level, Sub-Saharan Africa’s per capita electricity consumption has barely increased during the last
decade and presently around 665 kWh per capita. The value is much lower in most parts Africa: below 100 kWh
per capita in Niger, Ethiopia, and Benin. Africa’s electricity demand is estimated to have fallen by over 2.5% in 2020
due to the impacts of the COVID-19 pandemic. Natural gas is set to become a mediator between the ambitious
energy transition targets set out by policymakers and the security of African energy supply. Comprehensive energy
access across the continent remains a central target, with some 600 million people without access to electricity
today. Moreover, households themselves, facing low and inadequate supply of electricity, often rely on highly pol-
luting traditional energy sources such as hard biomass which constitutes 45% of total primary energy demand in
Africa (Figure 5.2.2.1).
The bulk of electricity consumption comes from the Africa’s energy use per capita must drastically im-
North African economies (44%) and Southern Africa prove if the continent is to become a major econom-
economies (38%), accounting for over 80% the total. ic behemoth and lift many people out of poverty (Fig-
In comparative terms, Central Africa has the least ure 5.2.2.2). For example, Both Nigeria and Ghana’s
consumption followed by East Africa, West Africa, electricity consumption are a paltry 0.13 and 0.54
Southern Africa and finally Northern Africa. Overall, megawatt-hrs per capita (MWh/capita) whereas Ger-
the continent’s electricity demand is set to grow be- many, the industrial giant in Europe, is 6.77 MWh/cap-
tween 3%-5% annually over the next decade driven ita. Also, China and the United States are doing 5.12
by economic recovery, industrialisation, and renew- and 13.02 MWh/capita respectively. Thus, for Africa
able power scale-up – including hydropower, wind, to reduce poverty, access and thereby productive
geothermal and solar PV. uses of electricity must be priority. Hence, why we
have a clarion call to “Make Energy Poverty Histo-
Figure 5.2.2.1 Total primary energy demand ry” by 2030 and also advocated for “Africa’s Com-
in Africa 2019 mon Sense Energy Agenda”. Recent figures show
Renewables, that sub-Saharan Africa is recovering slower from
2% COVID-19 than the rest of the world . There are wor-
rying signs that the wealth gap is increasing as many
African nations don’t have the necessary economic
Coal, 14% cushioning to take on the hit of the global pandemic.
While the rest-of-the-world’s per capita GDP has al-
ready returned to its pre-pandemic levels, in sub-Sa-
haran Africa the recovery could last until 2023, with
Natural Gas, the gap further widening in the following years. Pro-
16%
viding power to the low-income countries can be
Biomass, crucial to speed up the revival of their economics
45% and battle unemployment rates.
Oil,
23%
Africa’s energy intensity must drastically
improve if the continent is to become a
major economic behemoth and lift many
people out of poverty.
Source: Africa Energy Outlook, IEA 2019

Establishing universal access to pow- in place. Several countries are taking to meet the energy demand in the fu-
er remains one of the strongest driv- swift actions to complete full electri- ture. The current electrification rates
ers for new energy projects. Only fication in the next 3-5 years (Table will have to be tripled, connecting
56% of the continent’s population 5.2.2.1). 60 million people each year to reach
has access to electricity today (Fig- a goal of universal access by 2030.
ure 5.2.2.3). Whilst North Africa has However, despite their best efforts, The African Single Electricity Market
succeeded in recent years to provide when taking into consideration Afri- (AfSEM) launched in June 2021 is a
security for its energy supply, it is still ca’s booming population growth, cur- significant first step towards universal
a heavy task for many sub-Saharan rent rates are not enough to reach full access. There must be further invest-
regions with lower income. In 13 coun- electrification. It is estimated that the ments into infrastructure to bridge
tries the share of the population with continent’s population will double in more interconnectors across different
access to electricity is below 40%. the next 30 years and two thirds of it power pools and allow higher elec-
National energy programmes (NEPs) will be urbanized . These growth num- tricity volumes to be exchanged be-
are crucial to set up a robust system bers possess an additional challenge tween the regions.
Figure 5.2.2.2 Electricity consumption per capita vs population size
Electricity consumption per capita vs population size
14 1.600
Electricity consumption per capita 2020
12 1.400
1.200
10
Population (million)
1.000
(MWh/capita)
8
800
6
600
4
400
2 200
0 0
United South GermanyC hina South IndiaG hana Nigeria
States Korea Africa
76
Figure 5.2.2.3 Population access to electricity, 2019 % of population
Source: The World Bank
Table 5.2 Selected country electrification programmes and timelines
Country State Programmes Target

Kenya Kenya National Electrification Strategy (2018): investment of $2.8 billion from 2018-22. Full access
Kenya Off-grid Solar Access Project: distribute 250 000 solar home systems to power
by 2022
households, schools, health facilities and agriculture by 2030.
Ethiopia Electrification Program (2017): geospatial least-cost roll-out plans, fast paced extension Full access
of the grid to reach 65% of the population with the grid and 35% with decentralized sys-
by 2025
tems by 2025; public-private off-grid programme for 6 million households.
Côte d’Ivoire Programme Electricité pour Tous: electrify 1 million households. Programme National Connect all
d’Electrification Rurale: connect all towns above 500 inhabitants by 2020, and all areas by areas by
2025. Tariff reductions for poor households.
2025
Rwanda Energy Sector Strategic Plan and Rural Electrification Strategy: connect 52% households Full access
to the grid and 48% to decentralized systems by 2024; connect all productive users; cut
by 2024
by half the duration and number of interruptions; introduction of appliance efficiency
standards.
Senegal National Rural Electrification Program (PNER), aiming to electrify 95% of rural clients Full access
through grid extension, 4% through solar only or solar-diesel hybrid mini-grids, and the
by 2025
rest through solar home systems.
Source: Modified from IEA

5.4. Investment climate and

projects pipeline
The economic downturn has The economic decline driven by the layed due to the pandemic. The Greater
negatively affected the progress COVID-19 pandemic had dramatic ef- Tortue Ahmeyim gas megaproject locat-
fects on investments in the economic ed in the maritime border of Mauritania
that had been made on electri-
sector in Africa into 2022. The eco- and Senegal, West Africa, which was
fication in Africa. For Africa to nomic downturn has negatively affected to be completed and commissioned in
achieve its SDGs for electricity the progress made on electrification in 2022, will not come on stream before
access and clean energy, the Africa, as utilities — working to improve 2023. FIDs on the gas project’s Yakaar
region would require annual electrification— also faced severe finan- and GTA Phase 2 satellite fields will like-
power sector investments to cial difficulties due to a freeze in invest- ly be postponed until 2023. The shift in
ments. Progress on several projects starting dates for energy projects is bad
more than double up to 2040.
stalled as firms re-evaluated the viability news for some of these countries that
of their project development plans due were looking forward to becoming sig-
Major projects in African coun- to the economic effects of the pandem- nificant producers in the long run. There
tries depend on FDI and foreign ic and resulting travel restrictions. Ex- is a further risk of outright cancellation
workers, which given the travel pected start dates for several projects for certain projects whose operating
restrictions, resulted in delays, have had to be changed due to the un- costs would be incompatible with oil
certainties of the pandemic, as seen in prices below US$40 per barrel resulting
and rescheduling of projects in
the case of Mozambique’s LNG project in portfolio reviews by many firms. Afri-
the region. in East Africa. Total’s Tilenga project on ca would require annual power sector
Lake Albert in Uganda has also expe- investments to more than double up to
rienced some delay. The commission- 2040 to achieve the Sustainable Devel-
ing of the PETN wind plant in Senegal, opment Goals on electricity access and
West Africa, due in 2020, had to be de- clean energy (SDGs 7 & 13).
The economic downturn has negatively affected the progress that had been made on electrification in Africa.
For Africa to achieve its SDGs for electricity access and clean energy, the region would require annual power
sector investments to more than double up to 2040
Nevertheless, some regional projects for the East African Power Pool intercon- al solar PV, wind plants and geothermal
progressed during 2020 and 2021: The nection project. The construction of 2GW projects were announced, and contracts
first filling of the lower section of Ethiopia’s 1,055 kilometre bipolar HVDC intercon- were signed in 2020 in Morocco, South
Grand Renaissance Dam was completed. nector between Ethiopia and Kenya is Africa, Togo, and Tunisia, among others.
The first two turbines of the 6 gigawatts expected to be completed in late 2020. Table 5.3 below shows some power
(GW) plant will likely be commissioned by Investments in Africa in 2020 was led by projects that have been affected by the
end-2021. The dam will be a major driver renewables, according to the IEA. Sever- COVID-19 pandemic in Africa.
Major projects in African countries depend on FDI and foreign workers, which given the travel restrictions, re-
sulted in delays, and rescheduling of projects in the region.
78
Table 5.3 Project announcements
Sub- Country Project Type of Project Mix Level of Project Development Project Backers
region project
East Ethiopia Grand Renais- Genera- Renewable First filling of the lower section
Africa sance Ethiopia tion (Hydro) of the dam
Dam
West Senegal Parc Eolien Taiba Generation Renewable Getting the final capacity online Lekela Power
Africa N’Diaye (PETN) (Wind) has had to wait for the effects of
wind plant the pandemic and the resulting
travel restrictions to ease. Was to
be commissioned in 2020.
West Border Greater Tortue Generation Conventional Will not come on stream before British Petroleum
Africa between Ahmeyim gas (LNG) 2023 (though its start-up date Company Limited
Mauritania & megaproject was originally 2022) because the (BP)
Senegal coronavirus outbreak prevent-
ed the company using 2020’s
weather window to build a
breakwater for the scheme.
East Seychelles Floating solar Generation Renewable Delayed tender process due to Qair
Africa power plant (Solar) travel restrictions in Seychelles.
Was to be commissioned in
2020.
East Mozambique Mozambique Generation Conventional Expected start date (2021) has Total
Africa LNG project (Natural Gas) been rescheduled for before
2025.
East Mozambique Rovuma LNG Generation Conventional ExxonMobil indefinitely post- ExxonMobil
Africa project (Natural Gas) poned its Final Investment
Decision (FID) on the project
East Uganda Tilenga project Generation Conventional Production start date has been Total
Africa on Lake Albert (Crude oil) moved from 2019 to 2022
North Egypt West Delta Deep Generation Conventional An outbreak among workers
Africa Marine project’s hampered efforts to take the BP-
10th phase led Raven gas field on stream.
The project was experiencing
significant delays and would not
come fully online as anticipated
Southern South Africa Brulpadda and Generation Conventional COVID-19 has delayed South Af-
Africa Luiperd gas (Gas) rica’s plans for a new upstream
discoveries bill. Media reports indicate that
Total postponed its application
for additional drilling in a South
African offshore gas block

5.5. Scenarios of
electricity supply outlook
Three scenarios of electricity This section of the outlook offers using all forms of energy without any
production outlook and break- succinct scenario-based modelling climate constraints. Finally, Scenario
of different electricity production 3, encompassing a more ‘cleaner’
down by mix to 2040 are pre-
pathways, capturing primary fuels, electricity mix, examines the princi-
sented: technologies, cost, and generation pal role of expanding renewable en-
outlook spanning 2020 to 2040. ergy and efficiency in improving the
Scenario 1 - Business as Usual Three scenarios are analysed: firstly, electricity supply system in Africa.
(BAU); our Business as Usual (BAU) Scenar- Figure 5.5.1 and Figure 5.5.2 show
io 1 investigates the continuation of the electricity generation outlook
current electricity generation trends. and mix under the three various sce-
Scenario 2 - making energy pov-
Scenario 2 explores the possibility of narios. These are fully discussed in
erty history by 2030; eliminating energy poverty by 2030 the next section.
Scenario 3 - A ‘cleaner’ mix.
Figure 5.5.1 Electricity generation outlook and mix – various scenarios

Electricity generation by fuel type under various scenarios (TWh )
3.000
2.500
Terawatt-hours (TWh)
2.000
1.500
1.000
500
0
2020 2030F2 040F 2020 2030F2 040F 2020 2030F2 040F
Scenario 1: BA U Scenario Scenario 2: Making energy Scenario 3: A cleaner mix
poverty history by 2030
Oil Natural Gas Coal Nuclear
Historical data: BP Statistical Review (2021). Forecasts independently produced
80
Figure 5.5.2 Electricity generation by fuel type shares under various scenarios (% )
Electricity generation by fuel type shares under various scenarios (% )
100% 3% 3% 3% 3% 3% 8% 11%
17% 8% 9%
90% 17% 16% 17% 17% 7%
10%
80% 1% 1% 23% 1%
14% 19% 25% 22%
70% 1% 2% 30%
30% 1% 30% 2% 30%
60%
20% 14% 17% 13% 21%
50%
40% 1%
23%
12%
30% 41% 41% 41%
42% 44% 42% 42% 1%
20% 5%
25%
10% 18%
8% 6% 5% 8% 6% 6% 8% 4%
0% 2%
2020 2030F2 040F 2020 2030F2 040F 2020 2030F2 040F
Scenario 1: BA U Scenario Scenario 2: Making energy Scenario 3: A cleaner mix
Oil Natural Gas Coal Nuclear Hydro Renewables
Historical data: BP Statistical Review (2021). Forecasts independently produced
5.5.1. Scenario 1: BAU Scenario –

normal investment flows
In the BAU scenario, Africa’s elec- including 18 MW Gourbassi projects bution of nuclear power and other
tricity generation reaches 1,512 at Senegal-Mali border, 6,350 MW, sustainable and efficient sources
terawatt-hours (TWh) in 2040, de- Great Ethiopian Renaissance Dam increased slightly to maintain their
noting a 78% growth in electricity (GERD), Uganda’s 600 MW Karuma share of approximately 1% each by
supply over the next two decades. hydropower project coupled with 2040. Nonetheless, with United Na-
This raises the share of natural gas several others ongoing across the tions estimates that about 579 million
in total electricity generation from continent in countries ranging from people in sub- Saharan Africa lack
below 40% in 2020 to 44% in 2040. Nigeria and Mozambique to Zambia electricity access and overall popu-
Electricity generation from coal and and Morocco. lation predicted to double by 2050,
oil is progressively declining but still there exists a significant generation
significant to account for 14% and 5% The contribution of renewables, no- deficit under BAU scenario, thus un-
respectively of the region’s power mix tably solar, wind and geothermal, are derlining the crucial need for power
by 2040. Hydropower to continue as also expected to rapidly expand in generation capacity to be doubled by
the second major electricity source notable African countries endowed 2030 and possibly tripled by 2040 to
in Africa with utilisation increasing with high quality solar, wind and geo- the bridge access gap and acceler-
at an annual average rate of 5.0% to thermal resources, most especially ate the pace of electrification in rural/
reach almost 282 TWh in 2040, given South Africa, Namibia, Kenya, and remote communities of the region,
catalogue of ongoing hydro projects Senegal. Furthermore, the contri- particularly in Sub-Saharan Africa.

5.5.2. Scenario 2: Making energy

In the making energy poverty his- by 2030 and 1,587 TWh by 2040. mand for urbanisation, industrialisa-
tory by 2030 Scenario, Africa’s tion, population growth and sustain-
electricity generation capacity ex- The share of hydro in power gener- able economic growth.
pands rapidly by about 6% a year ation, about a quarter of the electric-
to support strong economic growth, ity supply in Africa, overtakes coal Africa is expected to become one
foster industrialisation, and safe- by 2040. Modern renewables: solar of the fastest growing continents
guard livelihoods. This results in a PV, wind and geothermal together in the world by 2040. Fossil fuel still
sharp decline in poverty levels and provide 9%, to compensate for the dominates the power mix of leading
uses all forms of energy without sharp fall in coal-fired power gen- African economies, including Nige-
any climate constraints. The Cham- eration with a further 3% emanat- ria, South Africa, Ethiopia, Kenya,
ber estimates that Africa’s power ing from other sustainable energy and Ghana, supplying around 60%
generation capacity in 2020 needs sources and technological advance- of their electricity in 2020. Oil and
to be tripled, increasing by 209%, ment, including carbon capture, natural gas will account for around a
from 848.6TWh in 2020 and 2021 utilisation, and storage (CCUS) and quarter of the supply, and remainder
to 2,622 TWh in 2040 to develop its hydrogen fuel cells. Nuclear power from renewables, especially hydro
economy and lift its teeming popu- will continue to play a minute role in and solar PV. Given the urgency of
lation out of poverty. Based on this Africa’s electricity generation land- achieving universal access, Africa
scenario, conventional fuels, which scape due to technical constraints needs to make concerted efforts in
account for about 61% of total elec- and lack of know-how, and limit- harnessing its massive hydrocarbon
tricity generation, are expected to ed expertise in most countries. To reserves, particularly oil and natural
play a huge role in alleviating pov- achieve this lofty ambition of making gas in Nigeria, Algeria, Egypt, and
erty in Africa and can contribute to energy poverty history, the scenar- Libya, combined with coal consump-
energy access improvement across io calls for accelerated efforts and tion for industrial activities and pow-
a range of economies, sectors, and huge investment in fossil-powered er generation, particularly in South
communities. Conventional fuels generation (natural gas led) com- Africa and Morocco, alongside new
deployment scales from around 665 bined with renewable technologies hydropower development and high-
TWh in 2020 to more than 1,126 TWh to meet Africa’s rising power de- er penetration of variable renew-
82
5.5.3. Scenario 3:
A ‘cleaner’ mix
Under this scenario, electricity ca, electricity generation is expect- electricity needs of the continent’s
generation output from renewable ed to increase by 148% to 2,103 rapidly expanding population. As
sources is expected to increase TWh by 2040. As such, this clean- of 2020, only 55% of Africa’s popu-
exponentially owing to significant er portfolio of generation by 2040 lace had access to electricity – thus
potential, declining cost, low op- involves a wide range of technolo- requiring doubling the capacity to
erating costs and rising public gies, including modern renewables achieve 100% access by 2030 and
support for cleaner power sourc- – principally solar PV, wind and beyond. Given the rising global shift
es. In aggregate, this implies that geothermal, which collectively ac- towards energy transition and re-
cleaner energy sources will by far counts for 30%, followed by hydro newable energy, Africa could take
outstrip oil, coal, and gas-fired gen- (23%), gas (18%), other innovations advantage of the vast renewable
eration in Africa and continue to (11%), energy efficiency (10%) whilst energy potential, energy efficien-
expand beyond 2040. This path- the remaining 8% is supplied by cy and other minerals such as co-
way becomes feasible given that coal, oil and nuclear, thus making balt and platinum to fast-track the
all African countries have enor- the proposed generation mix well growth of clean energy industries.
mous potential (although in varying diversified and less susceptible to For instance, South Africa and the
magnitude) of biomass, geother- supply disruptions. Countries such Democratic Republic of the Congo
mal, hydropower, solar and wind as South Africa, Morocco and Sen- produce roughly 70% of cobalt and
resources with remarkable growth egal are envisaged to champion platinum, which constitutes integral
already witnessed in South Africa, the realisation of this goal, consid- component used batteries and hy-
Morocco, and an array of East Af- ering their records of aggressive drogen fuel cells production, re-
rica economies with escalating re- pursuant of storage projects and spectively. Overall, Africa can draw
newable energy project deals and other innovations to bolster gener- on rich energy mineral resources
ongoing constructions across the ation systems flexibility. and technological advancement to
continent. meet its 2040 electricity require-
As the generation capacity is less- ment expected to be three times
Based on recent expansion in er in 2030 in this scenario than it is larger than 2020 levels with ap-
cleaner energy and efficiency-mea- in Scenario 2 (making energy pov- propriate policies, planning, invest-
sures deployment to boost power erty history by 2030), this estimate ment, infrastructure, institutions,
supply (at affordable costs) in Afri- will not be enough to meet the and collaborations.

Chapter Six – The Energy Transition, Africa’s Energy Markets: Challenges And Opportunities
Chapter Six
The Energy Transition, Africa’s Energy
Markets: Challenges And Opportunities
Africa’s greenhouse gas emissions are among Oil & gas sector employment could fall by over
the lowest in the world, and a rapid transition as 60% in IEAs NZE scenario
being envisaged will have asymmetric effects on
the continent. Oil and gas, and other critical minerals such as
copper and lithium, must continue to play a key
The energy transition in Africa should not be just part in Africa’s transition story
about decarbonisation; instead, it should be about
using all forms of available energy resources to The increase in demand for battery metals will
diversify its economic base. disrupt global supply chains and open new market
Solar expected to represent the key renewable opportunities for countries worldwide, particularly
energy source after 2030. Africa.
Under IEAs Net Zero Emission (NZE) scenario, oil

& gas production could drop by 67% in Africa by
2050
6.20. Energy transition and The momentum behind the transition globally is driven by eco-
nomic, social, technological, and regulatory factors (Figure 6.1.1).
Africa’s energy markets On the economic side, supply and demand issues regarding
fossils and renewable energy are central. The well-known is-
sues around extreme fluctuations in the price of oil over the
The global energy system is under pressure to reform shaped last decades, including sustainability issues, have driven the
by the ever-growing energy transition narrative. The ener- demand for renewable energy, which in many places is in-
gy transition, often described as a transition from the current creasingly competitive. Social pressures from climate change
fossil fuel-based economy to one powered by cleaner, low or activists and communities in advanced economies are also a
no-carbon renewable energy sources, is considered critical strong driver to prioritise climate change in policy and set am-
to curbing the increase in global temperatures observed over bitious renewable energy targets. On the technology front,
the last decades due to the exploitation of fossil fuels for in- positive development in renewables and other supporting
dustrialisation mainly by developed nations. By and large, ef- technologies, including business models, moves renewables
forts are geared towards emission reduction strategies to limit from niche to mainstream and ensures that power solutions
global warming to well below 2 degrees Celsius, compared to can be deployed rapidly and at scale. Undoubtedly, technolog-
pre-industrial levels. Moreover, the energy transition continues ical challenges still exist on many fronts, but the horizon looks
to spur a rethink of how energy is extracted, converted, stored, promising considering innovation and ongoing research. Lastly,
transmitted, and distributed – the power sector, a key target regulation changes in reporting standards for various business-
due to its contribution to emissions growth. As such, decar- es and corporations where shareholders request identification
bonisation of the sector, particularly on the generation side, is and quantification of the financial impacts of climate-related
considered one of the most effective mitigation strategies to risks are increasing. A summary of these drivers is shown in
reducing CO2 levels and ultimately addressing climate change. the chart below.
84
Figure 6.1.1 Energy transition drivers
Economic factors
•Price volatility: Supply and demand issues regarding fossil fuels
•Issues of sustainability/SDGs compliance and net zero pledges
Social factors
•Climate activism – planetary crisis encompassing global warming, air pollution, loss of
ecosystems and new pandemics
•Socially driven ambitious targets for RE
•Energy access and energy security in especially developing countries
Technological factors
•Cost-competitiveness: significant drop in cost of RE technologies due to innovation
•Deployment of RE at scale
Regulatory factors
•Changing investor priorities: environmental, social and governance issues (ESG) by

stakeholders and investors
•Changes in reporting standards for various businesses – climate benchmarking and

reporting
Source: Author’s construct

Africa remains among the least the portfolios of the world’s big- prices still likely to hit peaks in the
CO2 (and other greenhouse gas- gest energy companies, whom future, however investment in O&G
es) emitters globally (Figure 6.1.2). are “screening assets for divest- projects is a risk, justifying the drop
The continent emitted 1,308 Million ment”, since oil price risks and in investment in the last few years.
tonnes of CO2 in 2019, represent- carbon neutral goals are shrinking The energy transition is observed
ing a 2% growth in the decade be- the pool of buyers for oil and gas in the projections of the renew-
tween 2008-18, representing only (O&G) assets. Rising energy de- ables energy sectors, as each one
2% of the global energy-stimulated mand in Africa, set to double by observed growth in the coming de-
CO2 emissions, as shown in the 2040 due to rising population, re- cade.
chart below. However, the impacts quires a broader portfolio than the
of climate change are being felt, currently declining O&G sector. Fo- The falling cost of renewable
and they are unevenly distributed cusing on renewables over fossil technology, coupled with fresh in-
across the continent in the form of fuels allows job creation, economic vestments, such as by the African
drought-induced conditions and growth, social and health benefits, Development Bank (AfDB), the Ko-
reduced rainfall for hydroelectric and climate change mitigation. In rean Ministry of Economy and Fi-
power generation, among others. fact, according to the IRENA, Afri- nance and the Export-Import Bank
Similar to the issues with O&G, ca’s estimated potential to gener- of Korea provision of $600 million
there are capacity issues in Afri- ate renewable energy from exist- on renewable energy solutions, is
ca due to weak sector planning ing technologies is 1,000 times the pushing this sector forward. The
and management. Regulatory and projected demand in 2040. They World Bank announced a $465
legal frameworks are often miss- also project that renewables would million fund to improve renewable
ing, making investments in renew- create 45 million jobs by 2050, and energy integration in West Africa,
ables more expensive. Above all global GDP would rise 2.4%. How- and $168 million financing towards
else, the electricity grids present ever, equal growth needs to be Burkina Faso’s efforts to increase
challenges, often suffering from observed in annual investments, access to electricity in rural areas
high loss rates, and limited capac- as the African energy system and support the country’s transi-
ity in addition to being financially must see double the investment tion to clean energy. Similarly, the
unsustainable with limited oppor- by 2030 to $40 – $65 billion. In International Finance Corporation
tunities for expansion or required 2021, 12% of Africa’s total primary (IFC) and The Rockefeller Founda-
maintenance. It’s important to note energy demand was met by re- tion (RF), a partnership which aims
that each country has different so- newables, with 42% of that being to mobilize $2 billion of private
cio-economic starting points and Solar, 38% onshore wind and 15% sector investment in distributed
political ambitions, which will take pumped storage. With this figure renewable energy solutions, in-
them down different paths in the on the rise, relatively higher emit- cluding scaling a mini-grid program
energy transition. The transitional ting countries, largely dependent and battery energy storage. Africa
pace is dictated by each country’s on their hydrocarbon resources for Renewable Energy Fund II (AREF
current dependence on fossil fuels, example, Angola, Equatorial Guin- II) raised €130 million to finance
existing industrial productivity, fu- ea, and South Sudan are vulnera- renewable energy in sub-Saharan
ture technology choices and depth/ ble to energy transition risks due Africa. The European Investment
diversity of domestic supply chains. to the carbon neutral goals of the Bank (EIB) also approved $95 mil-
world’s major companies. Demand lion for funding geothermal energy
Carbon emissions are shaping for O&G may still be growing, with projects in East Africa.
86
Figure 6.1.2 Global CO2 and Africa’s emissions

Global CO2 emissions (Million tonnes of carbon dioxide) Africa CO2 emissions (Million tonnes of carbon dioxide)
35.000 500
450
30.000
400
25.000 350
20.000 300
250
15.000
200
10.000 150
100
5.000
50
- -
2003
2007
2018
2019
2002
2011
2000
2014
2015
2006
2013
2017
2008
2009
2012
2001
2010
2004
2005
2016
2001
2010
2004
2005
2016
2003
2007
2018
2019
2002
2011
2000
2014
2015
2006
2013
2017
2008
2009
2012
Total North America Total S. & Cent. America Algeria Egypt
Total Europe Total CIS Morocco South Africa
Total Middle East Eastern Africa Middle Afric a
Total Africa Western Africa Other Northern Africa
Source: BP Energy Statistics 2020 Source: BP Energy Statistics 2020
6.21. The impact of IEAs Net Zero Emissions

scenario on Africa’s energy industry
The International Energy Agency falls 5% per annum, and post-2040 crease 5% on average post-2030,
(IEA) concludes that overall oil de- most natural gas will be used to pro- a higher decrease percentage than
mand under Net-Zero Emissions duce hydrogen in facilities with car- African Energy Chamber data. This
(NZE) falls by 4% annually between bon capture, utilisation and storage implies that after 2022, there will be
2020 – 2050. If capital investment (CCUS). Uses for coal also disappear, an oversupply of hydrocarbons, over
in oil stops altogether, supply falls as in 2020, 5,250 million tonnes of what is necessary to reach the NZE
by 8% per annum, meanwhile, if in- coal equivalent (Mtce) are reduced to conditions by 2050. The implication
vestment in discovering new fields 2,500 Mtce in 2030 and to less than of this for Africa is not significant for
stops, supply falls by 4.5% per an- 600 Mtce in 2050. This accounts for the near future; however, overall pro-
num. These dynamics reflect in the a 90% drop from 2020 to 2050, with duction of hydrocarbons decreases
price of oil, set to drop to $35/barrel oil falling 75% and natural gas 55% by 43% from 2021 to 2050 (Figure
by 2030, and $25/barrel by 2050. at the same time. Under NZE the IEA 6.2.1). In absolute terms this falls,
Similarly, global natural gas demand predicts the hydrocarbon use to de- from 13.8 mbbl/d to 7.0 mbbl/d. Under

NZE, this effect is greater, indicating Paris Agreement temperature goal” Although valid for developed coun-
that Africa will need a 67% drop in oil according to Deborah Ramalope, for- tries, most African countries have
and gas production to 2.3 mbbl/d by mer member of the South African del- an energy deficiency, therefore, the
2050. egation to UN climate. An estimated importance of O&G for power gen-
$8 billion a year is needed to finance eration, and job creation cannot be
Declining O&G and coal markets the decarbonisation and adaptation ignored. Another major issue with
are trouble for sub-Saharan Africa efforts in South Africa. Also, South the energy transition for jobs are
countries, where 75% of the world’s African President Cyril Ramaphosa that some of skills are not directly
population lives without access to recently announced that Sub-Saha- transferable from the O&G sector to
electricity. However, according to ran Africa requires $240 billion (14% clean energy, again problematic for
the IEA, 45% of those lacking elec- of SSA’s 2019 GDP) for the sub-region African countries. Other major in-
tricity gain it “via connection to a to transition to clean energy forms. dustries which will observe a surge
main grid, while the rest are served in jobs are energy efficient applianc-
by mini‐grids (30%) and stand‐alone Employment in IEA’s Net Zero es, electric and fuel cell vehicles, PV
solutions (25%)”. These off-gird and Emissions outlook panels and so on. Under NZE, global
mini-grid rely on 100% renewable en- employment in solar and wind qua-
ergy sources, such as the ones listed Employment in oil, gas and coal will druples, certainly extending into Af-
above. All diesel generators used in drop significantly, due to the falling rica growing renewable industry. All
decentralised systems “are phased demand and the gradual shift away these jobs require technical exper-
out later and replaced with solar towards renewable, low carbon emit- tise, therefore a large investment in
storage systems”. If done with the ting sources. The IEA claims that education is expected to be seen
appropriate sources, the IEA deems around 5 million jobs will be lost in from the government and hiring cor-
that full electrification will only “add oil, gas and coal, between now and porations.
less than 0.2% to CO2 emissions”. 2030 globally. In the same period,
Africa is also home to 910 million in- few of those losses are expected One post-pandemic recovery strat-
habitants (in 2020) with no access to from Africa, due to the continual pro- egy would be to employ public em-
clean cooking options. Under NZE duction of oil and gas, and the low ployment programs (PEPs) to gener-
conditions, these individuals gain ac- likelihood of adopting NZE targets ate green jobs. PEPs specifically aim
cess using biomass cookstoves, “fu- until energy poverty is eradicated. at casual workers in informal sec-
elled by modern biomass, biogas or tors (e.g., underemployed, working
ethanol, 25% through the use of liq- However, under NZE target, the em- poor, elderly and youth) whom will
uefied petroleum gas (LPG) and 20% ployment in the O&G industry in Af- be most affected by the pandemic
via electric cooking solutions”. rica is set to decrease on average and energy shortage. Likewise, the
12.5% per year between now and International Labour Organization
Due to energy poverty in Africa, net 2030. The pace of this drop increas- (ILO) recommends focusing on (i)
zero targets are not at the forefront es, as it falls on average 30% per year labour intensive public works (e.g.,
of the minds of most countries, rather between 2030 and 2040. By 2040, maintenance, forestry, communal
providing sufficient energy to fulfil the approximately two thirds of employ- works and sanitation), and (ii) labour
basic requirements of the population ment in the O&G could be wiped out. intensive construction activities, rely-
is foremost. With the lack of invest- However, under NZE the millions in ing on labour, rather than machinery.
ment currently, any source of electric- rural Africa living with lacking elec- Overall, this is a manner of providing
ity will take priority over green ener- tricity and clean cooking options, a predictable and stable income,
gy production. According to the IEA will have a higher likelihood of em- while creating needed green public
and BP, in 2020, South Africa was re- ployment in new business ventures assets. This has previously worked,
sponsible for 1.3% of global emissions from clean energy technologies to with Ethiopia’s Productive Safety Net
mostly from its coal fired plants, and stimulate new industrial capacities. Program, which improves food se-
contributing to roughly half of Africa’s The IEA in coordination with the IMF curity via land restoration and refor-
total emissions (Figure 6.2.2). As a re- show a surge in job creation which estation. In South Africa, the Working
sult, it’s the only country with the goal arises from private and government for Water Program, has a similar influ-
of net zero by 2050, aiming to re- spending in clean energy, especially ence, supporting participants in ex-
duce its emissions by 28% by 2030, in engineering, manufacturing and change for protection of the natural
although it’s “still not aligned with the construction industries. river environments.
88
Figure 6.2.1 IEA Net Zero emissions scenario against Rystad Energy future production mmboe/d
Source: Rystad Energy UCube August 2021, IEA Net Zero Outlook
200
Africa Africa (NZE) IEA RE
180
163.1
160
140
Supply cut in NZE

120
conditions
100
80
60
40
20 13.8 12.3
7.0
Africa Africa (NZE) 2.3
0
2010 2015 2020 2025 2030 2035 2040 2045 2050
Figure 6.2.2 Africa energy employment with under IEA NZO, million jobs
Source: Rystad Energy research and analysis, IEA Net Zero Outlooks
4.0
Africa Employment IEA NZE
3.5
3.0
2.5
1.5
1.0
0.5

6.3. Outlook of renewable energy sources
Photovoltaics (PVs) electricity and offers scalability com- the largest micro-grid markets, ob-
Photovoltaics (PVs) are currently the bined with the possibility of tailored serving slight hiccups on manufactur-
largest renewable energy source in solutions”. With a large proportion of ing and logistics due to the pandemic.
Africa and generation is expected to African residents living in rural areas,
grow even larger. From 2010 – 2019, off-grid and mini-grid technologies PV has large potential in Africa, with
320 assets were constructed with 14 are crucial to combat energy poverty. even the majors (e.g., TotalEnergies,
GW of electricity added (Figure 6.3.1). According to Geoffrey Kaila, Chair- ENI) building large plants throughout
However, between 2020 – 2030, 648 man of the Solar Industry Association the continent. However, to further
assets are forecast to be constructed of Zambia, outside investors should this sector, efforts must be made to
generating 77 GW of electricity. This work with indigenous companies in extend national grids and strengthen
indicates the efficiency rise, as dou- unison, quoting that “we are looking transmission infrastructure, to improve
ble the assets generate roughly six for partnerships.” reserve margins of power systems.
times the energy. IRENA sees poten- For decentralised or distributed sys-
tial for 83 GW of solar installations in Mini/micro grid sector is attracting in- tems, the potential is immense, under
eastern Africa by 2040 and 62 GW vestment, e.g., Enel Green Power and favourable policy environments (e.g.,
in southern Africa. In West Africa, Power Hive partnered up to invest embedded generation, or the ability
the ECOWAS Power Generation & $12 Million for mini grids construction for individual electricity generation
Transmission Masterplan forecasts in 100 villages across Kenya. The East which is connected to the network)
36 GW in PV by 2033. According to African (EAC) records a third of all and stable grid connectivity. This must
José Donoso, chair-elect of the Glob- sales in solar systems, with Tanzania be coupled with minimum standards,
al Solar Council, “PV is the ideal” as and Kenya leading the market for so- and basic education for technicians to
it is “the cheapest way of producing lar lighting products and comprising allow for high customer satisfaction.
90
1200
1000
Total Energies
BP
2.6%
7.5%
800
Capacity by
600 Equity Owner
(MW) Equinor
400
ENI 8.8%
81.1%
200
0
t
ed
g
ep
io
io
tin
ov
at
ct
nc
ra
ic
tru
pr
Co
pe
pl
Ap
ns
O
Ap
Co
Wind South Africa, currently the largest requirement of land. Previous-

producer of wind energy. ly, wind projects were funded by
Wind turbines contribute the sec- governments and foreign donors.
ond largest amount of green en- Egypt is currently home to the Gulf However, private investors are
ergy at 8.3 GW in 2021, coming of  Suez Red  Sea Ph-I Project owned also moving into the African wind
mainly from South Africa, Egypt, by Siemens Gamesa, currently the market. Currently “over 50 percent
Morocco, Ethiopia and Kenya (Fig- largest wind project in Africa, set to of the projects being sponsored
ure 6.3.3). Between 2010 – 2030, produce 500 MW, consisting of 173 by the private sector,” according to
81 assets are set to be produced, wind turbines and a 33/220 kV sub- African Development Bank econo-
providing a total power output of station. Kenya, meanwhile, has the mist Emelly Mutambatsere. To pre-
9.357 GW, all of which is onshore, Lake Turakana Wind Farm, owned vent occupation of more and more
with 75% of these assets currently by LTWP, set to produce 310 MW, land for wind turbines, Africa can
operating. According to Energy Live and is the biggest Kenyan private explore offshore wind. Currently,
News, Africa is currently tapping investment at $858 million. It will most of wind farms are onshore as
only 0.01% of its wind energy poten- provide 16% of the electricity gen- “the land space is available, and it
tial, as its absolute limit is 59,000 erated in Kenya and offset 16 mil- is cost-competitive”. The continent
GW. It is a rapidly expanding sector, lion tonnes of CO² emissions. is likely to “see the first offshore
as in 2020 – 2021, 17 assets were development in 2030” accord-
added contributing approximately The large consequences of wind ing to Ntombifuthi Ntuli, CEO of
2.1 GW. 11 of these assets were in energy are the high costs, and the SAWEA.

Figure 6.3.2 Photovoltaic Capacity distribution across Africa, with major upcoming projects MW
Asset: Tataouine Solar PV Plant II, Tunisia

Capacity (MW): 15
Start up year: 2023 Asset: Eni_1GW -Phase-II, Egypt
Capacity (MW): 800
Start up year: 2027
Asset: Eni_1GW -Phase-I, Egypt

Capacity (MW): 200
Start up year: 2024
Asset: UNMISS, South Sudan

Capacity (MW): 0.3
Start up year: 2020
Asset: Zano, Burkina Faso

Capacity (MW): 10
Start up year: 2026
Asset: Guider, Cameroon

Capacity (MW): 0.5
Start up year: 2022 Asset: RumurutiS olar, Kenya
Capacity (MW): 1.8
Start up year: 2025
Asset: NamibeS olar Farm Stage 1 and 2, Angola

Capacity (MW): 12.5 x 2
Start up year: 2022
Asset: Scatec Solar Tender-1 amd -2, South Africa

Capacity (MW): 27 x 2
Start up year: 2025
92
Figure 6.3.3 Total African Wind Assets Production in 2021, MW
Hydropower power accounts for over 90% of na- er pools such as the East African
tional electricity generation. Further Power Pool play an important role
Hydropower is the primary renew- developments are expected to take promoting regional cooperation to
able source in Africa at over 38GW place, such as a 6GW Grand Ethio- establish cross-border transmission
of installed capacity and 17% of the pian Renaissance Dam (GERD) on lines. Large hydropower projects can
continent’s electricity generation. In the Blue Nile (Table 6.1). This project provide electricity across the whole
some eastern and southern African will help address energy poverty in region, with the countries benefiting
countries such as Ethiopia, Mozam- the region and satisfy the growing from lower costs of production and
bique, Namibia and Zambia hydro- electricity demand. Regional pow- increased electrification.

Table 6.1 Selected recent, ongoing and future hydropower projects
Project Capacity, MW Country Status

Lauca hydropower station 2,071 Angola Fully operational from December 2020
Souapiti project 225 and 450 Guinea Fully operational by end 2021
Grand Ethiopian Renaissance Dam 6,350 Ethiopia Reservoir to be filled between 2024-2027
Karuma project 600 Uganda Operational in May 2021
Kafue Gorge Lower project 750 Zambia To be commissioned in 2021
Batoka Gorge project 2,400 Zambia, Zimbabwe Began construction in 2021
Mambila project 3,050 Nigeria Began construction in 2021
Abdelmoumen project 350 Morocco To be commissioned in 2022
Development of hydropower proj- for the distribution of power to the developers have recovered their
ects come with significant so- countries with less fortunate eco- investments under the PPP arrange-
cio-economic impacts such as help- nomic and geographical opportu- ment.
ing address unemployment. For nities. Large-scale power projects
example, the Neckartal Dam locat- typically receive up to 30% of the Nevertheless, the increased hydro-
ed in southern Namibia has provid- capital required from private sector power in the energy mix of African
ed for 5,500 jobs in Keetmanshoop investors with the rest comprising countries could have adverse effects
and nearby areas. The dam is a key international and local financial insti- on the power system, putting secu-
piece of infrastructure in the region tutions and governments. Mambila rity of supply at risk. By 2030 70%
and is projected to irrigate 5,000 hydroelectric power station, which of total hydropower capacity in east-
hectares of land, promoting agricul- is set to become the largest source ern Africa will depend on areas with
ture and further employment. When of hydropower in Western Africa, is high rainfall variability according to a
the irrigation of the nearby areas will estimated to cost close to $6 billion. study by London School of Econom-
have reached its peak potential, an The Exim Bank of China has agreed ics. Prolonged wet and dry periods
additional 4,000 direct and indirect to lend 85% ($4.93 billion) towards can last several years, potentially
jobs are likely to be created. the construction, with the rest of leaving hydropower stations without
the costs covered by the Nigerian enough water to operate. Concen-
The outlook for hydropower in Af- government. Another large hydro- tration of dams in the same region
rica largely relies on the ability of power project – 2400MW Batoka can lead to their dependence on
the governments to attract private Gorge power station will be jointly the same climate variations, such
investments into the sector. With constructed by General Electric (GE) as drought. This makes it imperative
the help of private capital African of the United States and PowerChi- for governments to plan a system of
countries can bridge the ener- na at an estimated cost of $4.5 bil- hydropower plants that will be resil-
gy infrastructure gap, establishing lion. The ownership will be reverted ient to the rainfall patterns and geo-
cross-border connections crucial to Zambia and Zimbabwe after the graphical limitations.
94
Geothermal nations such as Tanzania, Uganda, arsenic, lithium, antimony, mercury,

Rwanda, Djibouti, Eritrea and Co- sulfur”. In most cases, these pipes
According to the African Develop- moros have undertaken preliminary do not interfere with the aquifers,
ment Bank, the continent has 15 GW exploration for geothermal poten- however, under leakages or poor
of geothermal energy available, tial. construction, it can pollute sources
and unlike solar, wind and hydro, of drinking water.
it is not influenced by geographi- Kenya’s Olkaria Geothermal Project,
cal factors such as droughts, low after its fifth extension Olkaria VI Zambia also produces geothermal
winds, and cloudy days. The Great (86 MW) will be “the largest single energy, and currently Kalahari Geo-
Rift Valley which extends from Dji- geothermal plant in the world”, at a Energy, the main geothermal op-
bouti to Mozambique is Africa’s total of 792 MW. KenGen, the para- erator in Zambia, continues on its
geologically active area, consisting statal company that operates Ol- Bweengwa River geothermal pow-
of 30 active volcanoes and count- karia, states that this plant produces er plant, after delays from the pan-
less hot springs. Kenya is current- 27% of all the energy in Kenya. Ad- demic. As per the Peter Vivian-Neal,
ly the largest geothermal energy ditionally, geothermal power plants the CEO of Kalahari GeoEnergy “the
producer in Africa, with 98% of the require less land that than wind, long-term goal is to have 50 MW of
annual 1.5 GW supply, through 403 solar or coal alterative. A conse- power generation capacity in eight
active wells in 2021 (Figure 6.3.4). quence of geothermal wells, how- to ten years.” However, since this
The United Nations Environment ever, is the reinjection of water to output is insufficient for large scale
Program (UNEP) has estimated a generate steam releases “high con- electrification, its current objective
potential of 20 GW of geothermal centrations of silica and salts and is to assist in agro-processing, fish
energy across Eastern Africa, and sometimes toxic elements, such as farming, and dairy processing.
Figure 6.3.4 Geothermal production and number of active wells, GW / MW / # geothermal wells
70 2500
Sum of Total Wells Energy (MW)
60
60
Ethiopia 53 2000
Zambia 52
1.1% 0.6% 49 49
50
43
41 1500
40
39
35 36
1.5 GW 30
1000
23
20
500
10
0 0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Kenya
98.4% Source: Rystad Energy RenewableEnergyCube August 2021

Chapter Seven – Our Strategy To Provide Power That Drives Economic Development For All
Chapter Seven
Our Strategy To Provide Power That Drives
Economic Development For All
GOAL: END ENERGY POVERTY BY 2030

Transitions tend to create winners ering the continent’s contribution to grid is the most likely source for de-
and losers, and the energy tran- global emissions, energy security livering high access tiers, although
sition can entrench inequalities if and energy equity remain critical a diesel generator or a large mini-
not pursued in a “just” manner. The to development. The energy equi- grid may do so as well”. Thus, long
idea of a just transition is generally ty dimension captures a “country’s term development-oriented access
understood as creating a lower car- ability to provide universal access solutions for Africa must be devel-
bon future that is equitable and just to reliable, affordable and abundant oped bearing this in mind. Although
– that is, one where there is access energy for domestic and commer- lower-tier access solutions like so-
to reliable energy, which leads to ho- cial use” while energy security mea- lar home systems and small-scale
listic development. In that sense, the sures a “nation’s capacity to meet mini-grids are critical to ensure that
transition is less about technological current and future energy demand no one is left behind, African strate-
and fuel choices but about sustain- reliably”. The two speak to the heart gies must centre around higher tier
able livelihoods for the millions of of the challenge in Africa, which access solutions. This is what the
people who live on the African con- is the “energy access challenge” Chamber ascribes to.
tinent. Thus, there will be trade-offs and “security”, which provides the
between competing needs and pri- springboard to industrialise and cre-
orities and, as such no one size fits ate continued/sustainable econom- A grid is the most likely source for
all approach. The question of what ic development. delivering high access tiers
is just and for whom must be consid-
ered within contexts with equity and To achieve universal access by
justice as a guiding framework. 2030 and enhance the security of As highlighted earlier, about 600
supply, governments must work million people in Africa still lack
with key stakeholders, especially access to electricity, highlights
The transition is less so about the private sector, to design and the huge investment need in vir-
technological and fuel choices but implement effective tailored re- tually all segments of the sector
about sustainable livelihoods for sponses to the challenge of ener- ranging from generation capac-
the millions of people that live on gy access. Energy access is mea- ity (through microgrids and mini
the African continent sured on a spectrum as shown in grids), T&D infrastructure, and me-
the Multi-Tier Framework spanning tering over the next few decades.
Tier 1 (lowest level of access) to Tier As we estimate, attaining universal
Balancing the inherent tensions 5 (highest level of access). Higher access goal by 2030 requires over
brought on by the energy transi- tiers (4 and 5) of access are asso- several gigawatts of new genera-
tion complicates the quest to man- ciated with higher power capacity tion capacity. According to a report
age the competing demands of the and longer duration of supply, which published by the Northeast Group,
energy trilemma, which is energy should be the target for access ef- Sub-Saharan Africa’s power sector
security, energy equity, and envi- forts as this hold the ability to deploy would need a massive investment
ronmental sustainability. Consid- productive uses of energy for devel- of about USD141 billion between by
opment. According to ESMAP , “a 2028.
96
7.1. Providing Power That

Drives Economic Development For All
Technical & Market-Based

• Investment in grid infrastructure The grid infrastructure will play a crucial
to reduce transmission and distri- role in maintaining service as well as ex-
bution losses and accommodate tending access. In many countries, the
greater integration of variable re- grid infrastructure can be described as
newable energy. Infrastructure weak, or ailing requiring upgrades to func-
should prioritise flexibility and must tion properly and integrate more variable
take into consideration long term renewable energy. Thus, investment in
plans both at the country and re- grid infrastructure to reduce losses and
gional level. accommodate greater integration of vari-
able renewable energy. Additionally, un-
• Strengthening of regional infra- even resources and demand suggest that
structure and interconnections strengthening regional and continental
between regional and continental power pools will ensure a unified market
power pools for electricity trading at competitive prices
for countries. Lastly, with many renewable
• Investment in energy storage as energy mini grids planned for installation
prices become competitive could in Africa over the next few years, energy
improve the attractiveness of re- storage can prove effective in contexts
newable energy mini grids are where hybrid mini grids are unavailable.
these in some cases show the least The costs of storage, although remain
cost alternative to provide access in high shows promise of falling costs over
some settings the coming years.
Regulatory Based
• Setting realistic tariffs to enable Regulatory risks due to unstable to attract the necessary private cap-
cost recovery and competitiveness regulatory environments can pose a ital. With mini grids forming a critical
of utilities challenge to attracting the needed part of achieving access, clear policy
financing required for energy invest- on mini grid development is required
• Formulate clear policy for mini grid ments to bridge access. Many state- where absent and this must address
development including measures to owned utilities on the continent are grid arrival risk which many mini grid
address grid arrival in a weak financial position due to a developers highlight as a strong con-
mix of factors, key amongst them be- cern. Additionally, some countries
• Setting technical standards (regu- ing the under recovery of costs due to may have to undergo some reform to
lations) for quality and consumer low tariffs and inefficiencies. Setting enable private sector participation in
protection realistic tariffs will ensure the com- their power markets. Finally, regula-
petitiveness of utilities and enhance tion must aid in the setting technical
• Reforms that attract private sector capability to invest in grid expansion standards for product or equipment
investment (IPPs or PPPs) and other related activities. In some in the off-grid market to ensure safety
countries, sector reform is necessary and consumer protection.

7.2. Spotlight on gas: Aggressively

promoting natural gas for Africa’s
industrialisation drive
Gas as the main source of power pro- in the renewable sector through the their own domestic gas production,
duction. Recent changes to the global 310 MW Lake Turkana wind farm and 50 two rely on pipeline imports (Togo and
energy landscape aimed at battling MW Garissa solar PV station. However, Benin) and one uses a combination of
climate change could represent a turn- Variable Renewable Energy (VRE) has domestic supply and pipeline imports
ing point for Africa’s natural gas. To created unprecedented challenges in (Ghana). The abundance of gas re-
meet the climate targets set out in the power system operations, a problem serves can help African nations satisfy
Paris agreement Africa must radically that will worsen as more VRE sources future electricity demand, which is pro-
change its energy landscape, moving come online. Better system manage- jected to grow from 700 terawatt-hours
away from coal, which together make ment and upgraded infrastructure is (TWh) in 2019 to 1600-2300 TWh in
up over 40% of primary energy demand necessary, but for now, without a long- 2040 according to our forecasts and
today, towards cleaner solutions. How- term power storage technology, com- those from other organisations . Popu-
ever, the phase out of coal is unlikely plimentary fuels such as natural gas are lation growth and urbanization are the
to be rushed due to the potential eco- crucial to satisfy the growing demand dominant factors responsible for the
nomic risks inherent relating to security for electricity. additional demand in the coming de-
of energy supply. Even though renew- cades. Currently, 86% of gas-to-power
ables are integral to reduce green- The continent is estimated to have production is concentrated in Northern
house emissions, other energy sourc- around 600 trillion cubic feet (Tcf) of Africa, 10% in Western Africa and the
es must be considered to ensure the gas at the end of 2020. This makes remaining 4% split between other re-
security of supply across the continent Africa the fourth-largest gas reserves gions (Figure 7.2.1). Egypt, Algeria, and
and to meet the additional energy de- holder globally after North America, ac- Libya largely rely on the output of their
mand, which is set to triple in the next cording to the African Energy Chamber. hydrocarbon resources, which are uti-
20 years. For underdeveloped power Over 25 countries have proven natural lized both for domestic supply and also
grids the intermittency of renewables gas reserves on the African continent. to bring in export revenue, with high
can put the stability of the systems at This represents strong potential for an volumes flowing to Europe. Recent gas
risk. At 15% of installed capacity from increasing role of natural gas in the Afri- discoveries in sub-Saharan countries
solar and wind Kenya is already suffer- can energy mix. There are 13 countries such as Tanzania and Mozambique put
ing from severe voltage instability. The in sub-Saharan Africa currently con- the Eastern African region in a favour-
country is at the epicentre of Africa’s suming gas for power generation. Ten able position to start developing their
energy transition, building momentum of those countries generate power from own gas-to-power infrastructure.
98
Figure 6.3.4 Geothermal production and number of active wells, GW / MW / # geothermal wells
Figure: 7.2.2 Natural gas reserves and gas-to-power capacity per capita by region

When considering both the gas reserve can open employment opportunities. LNG sector provide a strong foundation
volumes and gas-to-power generation for resilient, low-emission power infra-
per capita there is an opportunity for Af- Africa Energy Chamber believes these structure across the continent. Projects
rican countries in bridging the gap be- changes highlight a potential new age such as Ghana’s floating regasification
tween the resources they possess, and for gas supply diversification in Africa as unit will pave the way for the supply of
the power generated from natural gas. several new producers come on board. 1.7 million tons of LNG per year for pow-
Tanzania has been particularly active in Gas supply on the continent comes er generation, showcasing the potential
developing its gas-to-power infrastruc- mainly from domestic sources and via impact of such investments on reducing
ture. The country has 600MW, or 45% pipeline imports from other countries energy poverty. Countries must coop-
of country’s total installed capacity from within the region. Angola, Nigeria, and erate to build more comprehensive en-
gas sources. There are further projects Equatorial Guinea mainly export LNG, ergy systems such as the Nigeria-Mo-
such as the extension of Kinyerezi com- and there is the potential for Senegal rocco Gas Pipeline, which is set to run
plex to a total of 1,625MW, aimed to and Mozambique to join this trend. Ex- along the west coast of Africa and give
satisfy the annual electricity demand ports via pipeline are mostly in Con- gas access to nations where the share
growth of 10-15% and provide full elec- go, Nigeria, and Mozambique, which of the population with access to elec-
trification of the country by 2030. Mo- account for significant gas exports to tricity doesn’t rise above 40%. Creating
zambique – another sub-Saharan coun- South Africa. Pipeline Gas importers a liquid power market across the whole
try with enormous natural gas resources are mainly South Africa, Ghana, Benin, continent will facilitate a more even dis-
– plans to harness its recent discover- Togo, and DR Congo importing from tribution of electricity supply between
ies for electricity generation to boost Congo. Although the continent’s ‘old countries.
domestic access, exports, and trade in guards’ like Algeria (159 Tcf), Egypt (78
Eastern Africa. It is currently developing Tcf), Libya (53 Tcf) and Nigeria (203Tcf) The market opportunities for natural
the 400MW Temane power plant, which still account for significant (89%) gas gas on the continent are primarily for
is set to come online in early 2023. reserves, it is worth noting that dis- gas-to-power and other industrial uses.
Another project, delivered by GL Afri- coveries from the new entrants (‘new Much like the 2020 situation, primary
ca Energy (UK), will develop a 250MW guards’) would potentially account for a consumption sectors in 2040 will be
gas power plant, which will source its more significant share of actual usage industry (52% from 47% in 2020), oth-
feedstock from Mozambique’s Rovuma by 2030. For example, Mozambique is er non-energy use (26% from 23% in
basin. Construction of gas-to-power positioning itself as the worlds next gas 2020), and residential (20% from 19%
facilities can also deliver a strong eco- export country - it has about 99 Tcf of in 2020) (Figure 7.2.3). Transportation,
nomic boost. Almost 80% of East Af- discovered resources. It is planning on commercial and public services, and
rican young people are unemployed; exporting gas to neighbouring South Af- agriculture will account for the remain-
increased industrialization of the region rica via pipeline. ing 6% of natural gas final consumption
and widespread access to electricity Recent developments in the African in 2040.
100
Figure 7.2.3 Natural gas final consumption by sector, Africa 2000-2040F (TJ-gross)
Natural gas final consumption by sector, Africa 2000-2040F (TJ-gross)
3.000.000
Forecast
2.500.000
2.000.000
1.500.000
1.000.000
500.000
0
2000 2005 2010 2015 2020 2025 2030 2035 2040
Industry Transport Residential

Commerci al and public services Non-energy use
Agriculture / forestry
Data source: IEA 2020. Forecast independently produced
Selected case studies

1. LNG-to-power in Ghana
floating regasification unit arrived from China in January 2021 and it will be able to
deliver 1.7 million tons of natural gas per year for power generation. Ghana’s elec-
tricity consumption remains lower than the average over the sub-Saharan region
and far below that of developed countries. Bridge Power project in Tema will have
the capacity to produce 400MW of electricity from liquefied natural gas. This is
equivalent to the power consumption of 1.6 million average Ghanaian homes. The
construction of the terminal gives Ghana independency over its own energy supply
making it less reliant on the West African Gas Pipeline. Demand for LNG in the West
African region is expected to nearly double in the next decade as countries start
to invest in further gas-to-power generation amid the transition from dirtier fuels.

2. Transition from coal in South Africa
South Africa’s power sector is the 12th opportunity to rejuvenate the coun- currently bogged down in legal proce-
biggest producer of greenhouse gas- try’s energy system with cleaner solu- dures over environmental disputes.
es worldwide. This is due to its pre- tions. Even though the government is
dominant use of coal as the main en- ambitious in committing to renewable OCGT power plants in South Africa cur-
ergy source. The government aims sources, many doubt that solar and rently generate around 3.5GW, howev-
to shift away from the dirtier fossil fuel wind projects can happen fast enough er they resort to running on expensive
and decommission 34GW of coal-fired to replace the fading coal industry. and polluting diesel fuel during natu-
power capacity by 2050. The country With the recent gas discoveries in the ral gas shortages. Recent discoveries
is currently experiencing its worst en- neighbouring Mozambique, construc- such as Brulpadda and Luiperd can
ergy crisis following multiple power tion of gas power plants could be a provide the necessary security of sup-
station breakdowns. This resulted in game changer. ply for Eskom and other power produc-
level 4 load-shedding meaning that ers to run their OCGTs on natural gas.
25% of grid users are without power Current developments include an off- There is a potential to increase the rev-
at any given time. Many of the South shore project offering 1,220 MW in enue from domestic supply if South Af-
Africa’s power stations are nearing the gas-fired capacity, which is set to be rica can guarantee an offtake of power
end of their lives. An average of about delivered by Karpowership, a Turkish under a sufficient load factor by build-
1,000 megawatts of capacity is set to construction company. The company ing further transmission infrastructure
be decommissioned annually over the aims to provide 800,000 households from the plants to the high demand ar-
next decade. This presents a fitting with electricity; however, the project is eas (Figure 7.2.4).
102
Figure 7.2.4 Schematic map of South Africa’s gas-to-power sector
Data source: Rystad Energy research and analysis
3. Gas infrastructure in Nigeria
Nigeria is an economic powerhouse of proper maintenance of the infra- the national grid with further potential
of sub-Saharan Africa. Its hydrocarbon structure and major planning shortfalls to revitalize the country’s textile indus-
industry is also one of the most devel- are a few of the reasons why Nigerian try, which alone boasts over 3 million
oped. Nigeria has the 3rd most proven power sector has produced sub-opti- jobs. Domestic utilization of natural
reserves of natural gas after Tanzania mal electricity. gas can spur socio-economic develop-
and Mozambique and by far exceeds ment of Nigeria’s rural regions, provid-
other countries in gas-to-power in- The government aims to shake up the ing clean cooking fuel and energy for
stalled capacity at 12 GW, or 73% of the country’s industry sector by building productive uses. There are currently
total power mix. On most days, howev- Ajaokuta-Kaduna-Kano (AKK) gas pipe- 3 lead developments of independent
er, it is only able to dispatch around 4 line, which is set to connect the eastern, power plants along the AKK pipeline
GW of electricity, which is largely insuf- western and northern regions of Nige- in Abuja, Kaduna and Kano. The AKK
ficient for a country of over 200 million ria. The main goal is to create a steady pipeline project forms part of a larger
people. Current access rate stands at gas supply network between different Trans-Nigeria gas pipeline, which is de-
60% with only 34% for rural areas. This parts of the country. The project broke signed to transport between 385 and
could come as a surprise considering ground in August 2020 and is expect- 840 million cf per day of natural gas.
Nigeria’s possession of rich hydrocar- ed to take 24 months to complete. The
bon reserves. In fact, Nigeria has one new pipeline will de-bottleneck ap-
of the highest rates of gas flaring in the proximately 2.2 billion cf of gas to the
world. Transmission constraints, lack domestic market and add 3,600MW to

Chapter Eight – Energy Transition, And Africa’s Minerals Value Chains
Chapter Eight
Energy Transition,
And Africa’s Minerals Value Chains
8.1. The growing demand
Electric vehicles sales reached a tipping point last year, according to research by McKinsey, after Europe took over from
China as the fastest-growing market for the vehicle segment . The International Energy Forecasts that global electric ve-
hicle stock will reach about 125 million cars by 2030, a significant increase from 2020 levels (Figure 8.1.1). The key factors
driving this adoption are lithium-ion batteries getting cheaper, 89% drop since 2010 and an increasing number of countries,
cities and regions announcing internal combustion phase out targets . Currently, 15 countries have announced a target to
phase out internal combustion engines, in addition to 31 cities and regions.
Figure 8.1.1 Global electric vehicle stock for cars by 2030 under IEA’s stated policies scenario
Global electric vehicle stock for cars by 2030 Data Source: IEA 2021
140
Millions
120
100
80
60
40
20
0
2015 2016 2017 2018 2019 2020 2025 2030
Plug-in hybrid electric vehicles (PHEV) Fuel cell electric vehicles (FCEV)
Battery electric vehicles (BEV)
As battery demand for electric vehicles increases, annual metals demand from lithium-ion batteries will exceed 13 million
tons by 2030. Copper and aluminium used in lithium-ion batteries will reach 3.9m tons and 3.1 million tons, respectively. Co-
balt demand from batteries will be about 200,000 metric tons. Lithium demand will exceed 1.7 million tons lithium carbonate
equivalent by 2030 and nickel about 1.4Mt, according to BloombergNEF and World Bank data (Figure 8.1.2). The increase
in demand for battery metals will disrupt global supply chains and open new market opportunities for countries around the
world, particularly Africa. Over a US$100 billion must be invested in green and brownfield mining as well as new refineries
to ensure there is enough supply to meet the exponential demand from battery metals.
104
Figure 8.1.2 Expected change and SSA share of mineral energy materials (MEMs
Source: World Bank (2021)
1.200 70
Sub-Saharan Africa share of world production

1.000 60
Expected change, 2050 (%)
50
800
40
600
(2017)
30
400
20
200
10
- 0
Cobalt ManganeseV anadiumC opperN ickelG ra phiteL ithium
Sub-Saharan Africa share of world production (2017) Expected change, 2050 (%)
8.2 Africa’s Share of Global Supply
Over half of countries in Africa host at and processes all of it in China into fin- China and the United States as the pri-
least one of the key metals needed ished products such as cobalt sulfate mary beneficiaries. The Africa Energy
for lithium-ion batteries. These include used in batteries. South Africa mines Chamber advocates for an increase
South Africa, Ghana, the Democratic about 40% of global manganese, but to at least 50% by 2030 and 75% by
Republic of Congo (DRC), and Moroc- almost all are refined into finished 2040. Africa currently has no lithium
co (Table 8.1). Despite Africa’s mineral products such as manganese sulfate production capacity, but significant
endowment in battery metals, majority used in the battery industry. With a resources have been discovered in
of them are exported to other coun- significant focus on the upstream, Af- Ghana and the DRC, which could lead
tries to be refined. For example, the rica retains only 10% of the total value to the continent’s first production this
DRC mines about 70% of global cobalt chain leaving other countries such as decade .

Table 8.1 Some selected minerals
Cobalt
In 2020, Africa produced about 92,000 tonnes of cobalt out of
the global production of 127,700 tonnes. In addition to the DRC,
countries such as Morocco, Zambia, South Africa, and Madagas-
car also contributed to the production. About 10% of global pro-
duction comes from artisanal sources located in the DRC.
Graphite
Africa has two main graphite producers across the continent:
Madagascar and Mozambique. In 2019, Mozambique produced
14,000 tonnes of global graphite supply. However, in 2020, the
country’s only mine shut down its operations after the first quarter
as a result of COVID-19 and low commodity prices. This led to a
drop in Africa’s market share of 2020 production down to 3%.
Manganese
South Africa is the leading producer of manganese globally with
about 40% of production coming from the country. Gabon is the
second largest producer followed by Australia. In addition to
these African countries, Ivory Coast and Ghana also produce sig-
nificant amount of manganese for export into the Chinese market.
106
8.3 Deepening Africa’s critical minerals value chain linkages
Policy that drives adoption, improve stream investments by the private

infrastructure, and stimulate invest- sector. To achieve that, governments
ments will be the key driver for Af- must have a defined policy that stimu-
rica’s growth to move further down- lates downstream demand since auto-
stream in the value chain. Europe makers and cell manufacturers natural-
currently has the regulatory framework ly move closer to their demand market.
that encourages high electric vehicle Another policy initiative will be to form
adoption and cell manufacturing. Its industrial parks or exclusive zones
market is currently the fastest grow- closer to sources of raw materials with
ing in terms of electric vehicle market reliable transport infrastructure to ports
share. It is expected to be in the global and innovation centres to create an
leader of vehicle electrification by the ecosystem for automakers and battery
end of the decade, overtaking China. manufacturers to thrive. Furthermore,
as countries such as Ghana formulate
African countries can emulate EV auto manufacturing policies to attract
policies adopted by countries like In- investment on the continent, it will be
donesia in Southeast Asia, where a imperative for such policies to enable
strong focus has been on leveraging automakers invest next-generation
its raw materials to encourage down- technologies such as electric vehicles.
Asia, where a strong focus has been on leveraging its raw materials to
encourage downstream investments by the private sector
Reliable and cheap electricity is criti- costs. Developing reliable electrici-

cal for the success of electric vehicle ty generation capacity at competitive
deployment across the continent. In costs will improve Africa’s chances of
the manufacturing of cells, electricity attracting a bigger portion of the value
cost is one of the highest operational chain across the continent.
Reliable and cheap electricity is critical for the success of electric vehi-
cle deployment across the continent.
The industry has attracted more than demand coupled with the right policy
US$400 billion in investments over framework that safeguards and grows
the last decade—with about US$100 invested capital. Africa can seize this
billion of that coming since the begin- opportunity to ensure it plays a key
ning of 2020, according to McKinsey. role in a just energy transition where
The next decade will witness more new opportunities are created as the
capital deployed into the sector. A key world transitions towards low emis-
strategy to attract these investments sions technologies such as gas, solar,
into Africa will be based on a growing batteries and wind.

v
1.
H.E. MACKY SALL
President
Republic of Sengal
As in-coming AU Chair, this President,

who has been the MD of the National
Oil Company and Minister of Petroleum,
will be seen as a rational and conciliato-
ry voice for the battle on fossil fuels be-
tween Africa and the developed world.
Domestically, a bigger push on first Oil
on SNE woodside and Sangomar with
BP is going to be on the radar of ev-
ery industry player, especially given the
Movers proximity of the projects to developed

western markets. How the President
& Shakers to Watch

navigates that will be looked upon by all
of Africa. Success on these projects will
open the MSGBC basin.
108
2.
H.E. GWEDE
3.
HU XIAOLIAN
4.
PATRICK
MANTASHE Chairman POUYANNÉ
Minister of Mineral Export-Import CEO
Resources and Energy Bank of China
TotalEnergies
TotalEnergies
South Africa
H.E. Minister Mantashe has been laser focused on Chinese lending to Africa, including to African re- TotalEnergies’ likely resumption of its multibillion
creating the right legal framework for gas resources lated energy projects, continues to be on the de- USD LNG project offshore Mozambique in Q1
offshore South Africa to be developed in order to cline since its peak in 2013, however, China Exim 2022 puts Mr Pouyanné in charge of arguably the
provide much needed energy in South Africa since bank continues to be the single largest lender most important energy project on the continent in
Total discovered significant quantities of gas in Feb- or underwriter of debt to Africa, in line with the
2020. Total’s Mozambique LNG project is expect-
ruary 2019. In 2022, we expect Minister Mantashe to Chinese government’s long-term initiatives.
ed to attract USD 20 Billion in investment and will
finalise the long awaited new oil and gas law that will Loans to African projects from China Exim bank
give clarity to investors, push it through parliament continue to be competitive in cost and therefore lead to multiple years of double digit growth for
and get it signed into law. We also expect him to fi- attractive, however, they are increasingly only Mozambique once completed. Total continues to
nalise the ongoing retrsucturing of oil and gas State available to commercially viable projects with holds the largest individual share of oil and gas
Owned Enetrprises in the oil and gas sector, in order Chinese involvement. China Exim is also a major resources in Africa. Following up from the recent
to make them more efficient and viable entities go- provider of credit lines to African infrastructure success like the completion of the Egina project
ing forward. Minister Mantashe is likely to strengthen focused lenders like the Afreximbank and the in Nigeria, the oil major is flexing its muscles by
his advocacy for positioning south Africa as a major African Finance Corporation. lining up additional ventures for 2020 in Nigeria,
gas player in 2022. He is a voice of reason on cli- Angola, and Uganda. Developing and operating
mate concerns around decarbonization. Backed by close over USD 800 Billion in assets,
these assets in 2022, in addition to other projects
Ms Hu XiaoLian is expected to wield significant
like OML99 Block (Nigeria) expected to produce
He is also in charge of developing South Africa’s influence in Africa’s energy sector in 2022, by
capacity to increase value creation from battery min- deciding on the financing and refinancing of 60,000 bpd, deploying USD 1.2 billion to develop
erals which will only grow in importance as demand multibillion dollar deals in Africa, from strategic Zinia 2 in Angola’s block 17 will make Patrick Pouy-
for batteries increases globally. mineral projects in the DRC and Zambia, to oil anné yet again the most active IOC major CEO in
backed loans in Angola and hydropower proj- Africa in 2022.
ects in Nigeria.
5. 6.
ANDRÉ
7.
H.E. MOHAMMED
TONY ELUMELU DE RUYTER BARKINDO
Chairman CEO SG
Heirs Holdings Eskom OPEC
Mr Elumelu’s Heirs Holding is likely to solidi- Mr De Ruyter heads South Africa’s and Africa’s H.E. Mohammed Barkindo might have left
fy its position as a rising star amongst African biggest utility company Eskom which has a plan Africa for the world stage when he joined
energy sector players, as it puts into action to end power generation with coal by 2050, in a OPEC in 2016, however he continues to be
plans to increase the output of its recently country whose power is predominantly generat- a flag bearer for the industry in Africa. OPEC
ed using coal. Eskom is a top 10 global emitter of
purchased 27,000 barrels per day OML 17 under Barkindo has seen African countries
carbon, with 90% of the power it produces com-
asset from divesting IOCs. The market is like Equatorial Guinea and the Republic of
ing from Coal. Mr De Ruyter has led the company
watching Heirs Holding, to see if it will be to embark on a major transformation to renew-
Congo join the exclusive club, giving those
successful in operating such an asset. Upon ables, at a time when Eskom is unable to meet countries access to the organisations clout
success, it is very likely that this will not be existing demand even with conventional fuels like and technical knowhow that is key for run-
Heirs Holdings last deal with exiting majors. coal and gas. Eskom is currently in the market to ning their oil sector. OPEC is scheduled to
secure USD 10 Billion dollars as part of the mul- increase its activities on the continent in
Mr Elumelu’s control over the 2,000 MW of tibillion USD investment needed to finance such 2020 with an array of roadshows, techni-
installed capacity of power in Nigeria via re- a transition cal workshops and meetings that are set to
cent acquisitions also makes him a force to also include non-OPEC oil producers. This
recon in the power space, not only in Nige- Given the strategic importance of Eskom to South will make Mohammed Barkindo the go-
Africa and to the entire Southern African Power
ria, but also in the entire region where the to person in 2020 for most ministers and
Pool, the energy sector will be watching Mr De
demand for power continues to grow and presidents on the continent when seeking
Ruyter’s stewardship of Eskom to access the true
seems insatiable. for public policy advise on the sector.

Top 25 Movers & Shakers to Watch 2021
8.
H.E.BRUNO
9.
CLAUDIO
10.
H.E. GABRIEL
JEAN-RICHARD DESCALZI OBIANG LIMA
ITOUA CEO Minister of Mines and
Minister of Eni Hydrocarbons
Hydrocarbons Equatorial Guinea
Republic of Congo
Congo will takeover the Organization of the Eni’s recent discovery offshore ivory H.E. Minister Gabriel Obiang Lima heads
Petroleum Exporting Countries (OPEC’s) ro- coast, which it estimates at 2 billion barrels the sector of one of Africa’s OPEC mem-
tating presidency in 2022, giving minister of oil and 2.4 Tcf of gas shows that it re- bers. Credited with leading the industry in
Itoua a key role in cordinating the activities mains one of the most active IOCs on the Africa on many fronts, he will be judged in
of the world’s major oil producers. An astute 2022 on his ability to bring in policies that
continent, despite an overall reduction in
politician, with long experience in the sec- will see Equatorial Guinea attract new en-
exploration activity on the continent. M&A
tor and internationally, Minister Itoua is likely trants into its prolific waters for new explo-
to seek consensus that will keep produc-
activity and additional field developments ration and development projects. A strong
tion increases and restrictions cordinated in in Angola and Nigeria are likkely to in- proponent of the monetisation of gas in
a manner that keeps markets and ultimately crease its prtfolio, rather than reduce it as Africa, it is expected that minister Lima will
prices stable. is the case with other IOCs. expand the network of his LNG2Africa ini-
tiative in order to bring more countries and
It is likely that he will seek to strengthen co- ENI has also announced, that it is on track organisations on board and by creating
operation between African OPEC and Non and will start the production and exporta- a natural market for Equato Guinean gas.
OPEC producers in an effort to keep prices tion of gas from its USD 7 billion LNG Ru- Many eyes are also set on the minister to
upwards of USD 60 dollars per barrel . In- voma project offshore Mozambique. This see how he will manage the exit of willing
ternally, it is likely, that Mr Itoua will continue seller IOCs from his country. His actions
will be the first step in Mozambique’s path
on a path of reforms to increase investment are likely to serve as a blue print for many
to become a major LNG exporter and will
into Congo’s oil and gas sector, in the face other regulators seeking to manage the
of proposed divestments from IOCs.
give much needed confedence for Total’s exit of IOCs in Africa
much larger project to resume.
11.
FLEETWOOD
12.
HE CHIEF TIMIPRE
13.
SEBASTIÃO GASPAR
GROBLER SYLVA MARTINS
CEO Minister of State CEO
SASOL for Petroleum Sonangol
Resources
Nigeria
South Africa’s government has turned H.E.Minister Sylva is credited with achiev- Since his appointment in 2019 to lead
to the Johannesburg based Petro- ing the passing of the much awaited Africa’s second largest crude produc-
chemical giant to lead its efforts to de- Petroleum Industry Bill in Ngeria, which er – Angola’s- NOC, Mr Gaspar Martins
velop a hydrogen economy in South broadly improves the operating envi- has been in charge of Sonangol’s re-
Africa. Backed by numberous MoUs ronment in the industry and is expected structuring, which has consisted primar-
with state backed enterprises and local to unloch multiple billions of dollars for ily of reducing the company’s exposure
governments, professing their availabil- projects in the industry. Minister Sylva’s to non core E&P functions in order to
ity as offtakers of hydrogen, especially challenge now remains guiding the im- focus on Exploration and Production. In
as a clean fuel for power generation, plementation of the PIB in 2022 in order 2022, Mr Gaspar Martins will be lead-
Sasol is expected to invest millions of to fast track those projects that are al- ing sonangol to the market in order to
USD in feasibility studies in 2022 to de- ready shovel ready. Minister Sylva is also refinance significant amounts of debt,
velop a business plan for Hydrogen in expected to use his influence in 2022 to and raise fresh funds for new E&P proj-
Africa that works. This, if successful, will push for the creation of an african energy ects, as the company seeks to stem a
define the age of hydrogen powered bank that will be able to provide fmuch decline in production below current
energy on the continent for decades to needed financing for energy projects. levels of 1,1 Million barrels of oil per day.
come.
110
14.
H.E. DR.
15.
ROLAKE
16.
MUSTAFA
MATTHEW OPOKU AKINKUGBE FILANI SANALLA
Minister of Energy Chief Commercial Chairman
Ghana Officer Libya National
Mixta Africa Oil Corporation
H.E.Dr Opoku oversees an industry An astute energy banker and current Libya’s all-important oil sector has strug-
which despite its shortcomings, is seen Chief Commercial Officer at Mixta Af- gled to maintain previous levels of pro-
as one to the most advanced on the con- rica, one of Africa’s leading infrastruc- duction and attract the investment that
tinent with a clear framework that allows ture developers, Ms Akinkugbe Filani is a 1.3 million bpd economy would usually
for investors and service companies to an authority and well sought counselor command. Current levels stand at un-
operate seemlessly without impairing the on energy transition in Africa. She is a der 800,000 barrels per day. However,
benefits that accrue to Ghanians. Com- trusted advisor to DFI’s, who play an plans by Mustafa Sanalla, Chairman of
pared to its peers, most of them produc- important role in financing green ener- Libya’s National Oil Company, to ramp
ers with a longer history in the industry, gy projects in Africa, hence giving her a up production in the near term to over
Ghana has been able to promote strong voice of influence in Africa’s energy in- 1 million barrels per day in 2022 make
and common sense local content regula- dustry in 2022. Ms Akinkugbe Filani sits him one of the most important figures in
tions. Dr Opuku is expected to continue on the board of several funds, inclduing the industry in 2022.
in the same vein in 2022, promoting ini- Africa-focused climate and renewable
tiatives like gas to power and advocating energy fund Persistent which runs a Seen as a steady hand even in times of
for a stronger participation of women in $120mn Energy Fund. turmoil, it is unlikely, that Mr Sanalla will
the industry. He is also expected to be a leave his position, no matter who wins
strong voice on eradicating energy pow- the presidential and parliamentary elec-
tions scheduled for December 2022.
17.
PROSCOVIA
18.
VIVIENNE YEDA
19.
MAJ GEN INNOCENT
NABBANJA Chairman / Director KABANDANA
General Commander of
CEO
Kenya Power / Rwandan troops in
Uganda National East African Mozambique
Oil Company Development Bank Rwanda
As CEO of Uganda’s National Oil Compa- As head of the East African Development Can the joint task force commander of
ny, Ms Nabbanja oversees UNOC, which Bank’s management team and Chairman Rwandan troops in Mozambique’s north-
is involved in and has the power to in- of Kenya’s power distributor, Ms Yeda is at ernmost province of Cabo Delgado quick-
fluence every step of the development the centre of the restructuring of Kenya’s ly stabilize the area and pave the way for
of Uganda’s nascent oil and gas sector, power sector. She was nominated to the Total to deliver on Mozambique LNG?
from upstream through to midstream and Kenya Power Chairmanship in November That is the question which is on the mind
downstream. From the Tilenga and King- in 2020 with the brief to steer the restruc- of everyday Mozambicans and Africa at
fisher South projects, which together are turing of the troubled state enterprise. Her large. The gas projects off the coast of
expected at peak to produce 210,000 long years of experience at the regional Cabo Delgado are of critical importance
Barrels per day, to the building of the development finance institution also gives not only to Mozambique, but to the whole
EACOP pipeline and a planned 60,000 her a prime seat at the table when deci- region. It is very likely, that Gen Kaban-
barrel per day refinery, UNOC is set to be sions are being made of financing energy dana and his men, as well as other forces
at the heart of major investments in East deals in the region. from the SADC region who are in country
Africa. Ms Nabbanja will be tested on her will in 2022 provide the necessary securi-
ability to represent the state in the JV with ty for TotalEnergies and other contractors
IOCs to ensure that developments are working on gas projects.
fast tracked, whilst at the same time safe-
guarding the interests of the Ugandan
state. Overall investments needed to de-
110 the Ugandan
velop Africanprojects
EnergyareChamber
expected
Top 25 Movers & Shakers to Watch 2021
20.
MAIXENT RAOUL
21.
TOUFIK HAKKAR
22.
DR KK SARPONG
OMINGA CEO CEO
CEO Sonatrach GNPC
SNPC
Mr Ominga is head of the Republic of Con- As head of Algeria’s National Oil Compa- An agreement by GNPC and Kosmos
go’s National Oil Company and hence will ny, which is also one of the world’s larg- Energy to buy out Occidental energy’s
play a major role in the re-allocation of as- est gas producers’ Mr Hakkar, a Sona- share of the Jubilee and TEN fields in
sets in the country that IOCs are expected trach veteran prior to his appointment Ghana strengthen GNPC’s position in
to drop, as they rebalance their portfolios. in February 2020 shall play a major role the sector and shows that the Nation-
It is likely, that some of these assets will be in the sanctioning of new gas projects al oil company is willing to put skin in
passed on to SNPC to operate, hence rais- in Algeria in 2022, especially in light of the game and build capacity to take on
ing SNPC’s profile as an operator. This will the recent increase in the demand for projects of their own in the near future.
also give Mr Ominga significant leverage to gas globally and the resulting increase It also shows that GNPC under Dr Sar-
transform the industry in Congo, by using in prices. Given the position Sonatrach pong is a deal maker and capable of
his increased leverage to increase congo- takes in the market, Mr Hakkar will be in making the tough calls needed to build
lese content and government take from charge of sanctioning services contracts GNPC’s productive asset base. As Oil
production. in the industry in 2022 worth more than prices stay at a relatively high levels, it
10 billions of dollars, hence giving him a is likely that we will see GNPC embark
key role in the industry in Africa in 2022. on several projects in 2022, that will
aslo help increase overall Ghanian con-
tent in the sector.
23.
OLAKUNLE
24.
SCOTT EVANS
25.
ANN NORMAN
OLALEKAN CEO President
ReconAFRICA Saqara Energy
WILLIAMS
CEO, QSL Gas &
Power Limited
Nigeria and Africa as a whole is betting As head of Africa focused explorer ex- As CEO of SAQARA Energy, Ms Nor-
big on gas to power in the next stage of plorer in a basin that has been attested man’s primary goal is to assist oil and
its development and achieve energy se- much potential but yet to be confirmed, gas companies eliminate and mone-
curity. QSL Gas and Power Limited and its questions are being asked if Mr Cowan tize their associated gas flares through
CEO Mr Kunle Williams, have positioned and his team can meet expectations. So the advent and introduction of Mid-
themselves as faciltators of this growth far, initial evaluations from early explora- stream on Demand to African markets.
by establishing themselves in a relatively tion work has been positive. However, The lack of midstream options for
short time as registered and reliable sup- can he maintain a thick skin and his cool offtake of products led her to found
pliers of gas to industrial complexes an amidst a radical onslaught by activist to Midstream Africa.
power stations. Mr Williams has led the continue in his quest to deliver Namibia
company to develop a combined sup- an oil promise? His success is also likely Additionally, Ms. Norman has signifi-
ply and trading capacity of over 120mcf to mean an opening of Namibia and oth- cant experience directing investments
of gas daily and growing. They plan to er yet to be expoited acreages in neigh- into sub-Saharan African economies
increase this significantly by developing bouring Angola. The Canadian-based across various sectors which include
the infrastructure needed to get off-gas independent has emerged as a major not only oil and gas (midstream and
grid energy users connected to their sup- exploration player, particularly in frontier upstream), but agriculture, infrastruc-
plies. This will not only give them a strong markets such as Namibia and Botswana. ture, banking, hotels, the airline indus-
market position in 2022, it will enable Just this year, the company’s exploratory try and renewable energy. With the
them to raise the funds or atleast part of it
for a continent wide expansion. www.energychamber.org 111
Suite 43 Katherine & West
114 West Street
Sandton, Johannesburg, South Africa

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The State

2 African Energy Chamber

Senior Vice President

Marketing & Communication Manager

Digital Marketing Specialist

Content Management, Analysis & Editing

Concept and Senior Designer

2.1. State of African energy industry in 2022 29

5.1. A challenging year for Africa’s economy and power industry 67

4 African Energy Chamber

6.1. Energy transition and Africa’s energy markets 83

7.1. Providing Power That Drives Economic Development For All 96

8.1. The growing demand 103

This year’s report on The State of African Energy 2022

Reasons for the modest growth projections on the

6 African Energy Chamber

8 African Energy Chamber

1.1. Market Overview. FCF generation

10 African Energy Chamber

Figure 1.1.1: Industry in review – Market overview

30 Australia Asia Middle East

Africa America S America N

The exploration activity in the region is

Figure 1.1.3: Industry in review – Market overview

also makes it to the list in 2022..

12 African Energy Chamber

Figure 1.1.5: Industry in review – Market overview

14 African Energy Chamber

We draw on the experience,

1.2. Oil Market. Covid causes unprecedented

Short term outlook suggests a Figure 1.2.1: Oil price outlook

reference prices from 2022+ if

16 African Energy Chamber

Implied Stock Change Products Demand

-11.1 Impact of structural decline vs pre-virus* Impact of structural growth vs pre-virus**

-15.0 Aviation Trucks

-15.8 Vehicles Maritime

18 African Energy Chamber

Source: Rystad research and analysis

2.0 2.2 2.3

the market. Figure 1.2.4 compares the communi-

Before the downturn, the majority of E&P companies had long-term

65 Equinor: $64 (2021-2050)

Shell, Eni: $60 (2023+)

1.3. Gas Market:

20 African Energy Chamber

Figure 1.3.1: Gas Market

Figure 1.3.2: Gas Market

East Asia LNG oil indexed

East Asia Spot

22 African Energy Chamber

Figure 1.3.3: Gas Market

Figure 1.3.4: Gas Market

24 African Energy Chamber

Figure 1.4.1: Contraction in African investment outlook

Oct 2020 forecast Current forecast

26 African Energy Chamber

Figure 1.4.3 below further breaks on projects developed using various

Oct 2020 forecast Current forecast