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Lessons from Europe: Africans must go to COP26 Glasgow; The rush to ban fossil fuels will backfire on Africa. African Energy Chamber to Release Africa Energy Outlook 2022 (By NJ Ayuk)

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Lessons from Europe: Africans must go to COP26 Glasgow;  The rush to ban fossil fuels will backfire on Africa.  African Energy Chamber to Release Africa Energy Outlook 2022 (By NJ Ayuk)

Make no mistake, we are going to Glasgow and will proudly support the African energy sector and demand a just transition

JOHANNESBURG, South Africa, October 18, 2021 / APO Group / –

By NJ Ayuk, Executive Chairman of the African Energy Chamber (www.EnergyChamber.org)

Lessons from Europe: Africans must go to COP26 Glasgow;  The rush to ban fossil fuels will backfire on Africa.  African Energy Chamber to Release Africa Energy Outlook 2022 (By NJ Ayuk)

Make no mistake, we are going to Glasgow and will proudly support the African energy sector and demand a just transition. We have just received our winter jackets and gloves.

Despite all the signs of global warming, Europeans are bracing for the overwhelming effect a colder-than-normal winter could have on their wallets. This year they have faced one natural gas price shock after another, with mainland gas prices hitting multi-level highs and futures contracts trading at € 73.150 ($ 85.69) per megawatt hour towards the end of September.

Lessons from Europe: Africans must go to COP26 Glasgow;  The rush to ban fossil fuels will backfire on Africa.  African Energy Chamber to Release Africa Energy Outlook 2022 (By NJ Ayuk)

If the winter months bring anything other than the mildest temperatures, Europeans are likely to struggle to pay their bills or shiver in the dark.

There is no single reason for the substantial rise in natural gas prices. Instead, the recovery reflects the confluence of climate change awareness, reduced investment in fossil fuels, and humanity’s inability to control the weather. As Europe finds out, a funny thing can happen in the way of well-meaning plans for net zero emissions. When an unusually cold winter depletes the already limited gas reserves and is followed by a summer where there is not much wind to convert to electricity, the only choice is to reconsider using coal.

Yes, that’s what a rushed shift to renewables can do – a switch back to the most carbon-intensive fuel in the world.

Lessons from Europe: Africans must go to COP26 Glasgow;  The rush to ban fossil fuels will backfire on Africa.  African Energy Chamber to Release Africa Energy Outlook 2022 (By NJ Ayuk)

Yet the prospect of burning coal this winter hasn’t stopped Europe from trying to impose its climate change agenda on Africa. Either way, Europe expects Africa, which produces the smallest fraction of global greenhouse gas emissions, to accept an equal burden to eliminate them, even if it does. means giving up the economic potential of its vast hydrocarbon resources.

Oh, and they want Africa to get on the renewable energy train now.

At the same time, Europe itself is taking a giant step backwards.

Lessons from Europe: Africans must go to COP26 Glasgow;  The rush to ban fossil fuels will backfire on Africa.  African Energy Chamber to Release Africa Energy Outlook 2022 (By NJ Ayuk)

What Europe forgets is that for the energy transition to be fair, Africa must first overcome significant obstacles, including those that the African Energy Chamber describes in its Africa Energy Outlook 2022. , (“The State of Energy in Africa 2022”) which will be published this month. and available at African Energy Week in Cape Town, South Africa.

Here are some of the issues discussed in the report.

The effect of COVID-19 on Africa’s energy development: Africa is still reeling from the economic hardships caused by COVID-19. While the rest of global GDP has largely returned to pre-pandemic levels, sub-Saharan Africa’s recovery is expected to take until 2023.

Lessons from Europe: Africans must go to COP26 Glasgow;  The rush to ban fossil fuels will backfire on Africa.  African Energy Chamber to Release Africa Energy Outlook 2022 (By NJ Ayuk)

The difference may lie in the force with which the effects of the pandemic have hit Africa’s oil-exporting countries. It could be described as a one-two punch.

Together, the continent’s four major oil exporters – Nigeria, Libya, Angola and Algeria – produce more than 4.5 million barrels of oil per day, much of which is imported by the EU and Asia. (Yes, the irony that Europe is trying to cut off its own source of energy is not wasted on anyone.) For these countries, and a handful of others that have entered the oil production market more recently, oil revenues make a significant or growing contribution. to public treasures; in some cases, such as in Nigeria, the economy is centered on oil exports, which account for up to 70% of government revenue.

As energy demand fell and prices bottomed out amid the lockdowns, oil revenues declined rapidly, making it harder for oil-producing countries to maintain government-funded programs and even meet demands. the pandemic. Nigeria and Angola have cut production by up to 30% compared to 2019. As the African Energy Chamber’s Outlook report in 2022 notes, COVID-19 has done what years of civil war in Angola could not, by stopping offshore drilling and reducing the total number of wells drilled to half of what it was in 2014.

Lessons from Europe: Africans must go to COP26 Glasgow;  The rush to ban fossil fuels will backfire on Africa.  African Energy Chamber to Release Africa Energy Outlook 2022 (By NJ Ayuk)

At the same time, the low prices have forced international E&P companies operating in Africa to cut their development budgets and delay final decisions to invest and sanction projects. According to the Energy Outlook 2022, this alone would have eliminated up to $ 150 billion in exploration and development spending in Africa between 2020 and 2025.

Fortunately, the recovery has already started as oil prices have risen slightly. Activity is on the rise: Nigeria is expected to launch more than 25 new projects by 2026; the Libyan government has given the green light to 1.6 billion dollars for the development of oil fields and the maintenance of infrastructure; Angola encourages exploration; and the Algerian government is working to create a more favorable environment to reverse the decline in upstream investment by international energy companies.

This is all great news stemming from the dark days of the pandemic. But there is a very real risk that pressure from climate activists and ESG investors will dampen expansion in the region and cause a serious and prolonged financial setback for oil-producing Africa.

Lessons from Europe: Africans must go to COP26 Glasgow;  The rush to ban fossil fuels will backfire on Africa.  African Energy Chamber to Release Africa Energy Outlook 2022 (By NJ Ayuk)

Dangerous regulation of Forex in the Economic and Monetary Community of Central Africa (CEMAC).

As we face the challenges of the market, we also have to deal with the regulatory issues that will hold us back. There is also another risk led by the Bank of Central African States, the BEAC and the IMF, over their anti-investment Forex regulations, which will essentially prevent all international energy companies from investing in the region and put endanger current projects.

Countries like Gabon, Equatorial Guinea, Cameroon, Congo, Chad and CAR must repeal this dangerous regulation as it is no longer needed and will cripple the region’s energy sector, kill investments, create unemployment and will reduce government revenues. They should consider having new hydrocarbon regulations to individually exempt energy companies and service companies. Investors sit on the sidelines or travel to other African regions and avoid CEMAC given the uncertainty created by the IMF and BEAC.

Lessons from Europe: Africans must go to COP26 Glasgow;  The rush to ban fossil fuels will backfire on Africa.  African Energy Chamber to Release Africa Energy Outlook 2022 (By NJ Ayuk)

Energy companies operating in the Forex markets conduct international transactions and want liquidity to flow freely and quickly without going back and forth; significant transaction costs and delays which will only have an impact on the investment. The BEAC has given no assurances that it won’t mess up and their track record predicts that they will mess for sure. What is troubling for investors considering energy projects in CEMAC is that their investment will become more expensive, with additional significant transactional risks. There is no doubt that the CEMAC region will become less competitive, and all the data shows it except those of bureaucrats playing politics with the lives of Africans.

This regulation driven by the BEAC and the IMF will put a stop to investment in fossil fuels and increase energy poverty at a time when many want to see increased investment in energy. In the end, the countries of the regions will be forced to compensate energy companies at a time when they have no funds.

The threat of increased energy poverty for Africans

Lessons from Europe: Africans must go to COP26 Glasgow;  The rush to ban fossil fuels will backfire on Africa.  African Energy Chamber to Release Africa Energy Outlook 2022 (By NJ Ayuk)

The fact that Africa is struggling harder than the West to recover from the pandemic exposes the growing wealth gap in the world. There is no doubt that many African countries do not have the economic cushion to rebound easily or quickly.

Experts have long believed that one way to speed up the economies of impoverished countries is to provide electricity. Yet the pandemic has not only erased the progress many African countries have made towards reliable electrification, but it has also increased the number of people without access to electricity. As unemployment rose in 2020, even the most basic of services have become unaffordable for many.

There is no better example of how poverty and fuel poverty are intertwined.

Lessons from Europe: Africans must go to COP26 Glasgow;  The rush to ban fossil fuels will backfire on Africa.  African Energy Chamber to Release Africa Energy Outlook 2022 (By NJ Ayuk)

I don’t mean to say that there hasn’t been progress in electrifying Africa lately.

The percentage of Sub-Saharan Africans with access to electricity has indeed increased in recent years – the figure currently stands at 46%, down from 33% a decade ago. Yet Africa lags considerably behind the global average of 90%. If the percentages look bad, the raw numbers are astonishing: the United Nations estimates that 97 million people living in urban areas in Africa do not have access to electricity; in rural areas, the population without electricity is more than four times greater than 471 million.

Considering how Africa’s population is expected to double by 2050, current efforts are not enough to achieve full electrification. The 2022 energy outlook indicates that current electrification rates will need to be tripled, connecting 60 million people each year to achieve a universal access target by 2030.

Lessons from Europe: Africans must go to COP26 Glasgow;  The rush to ban fossil fuels will backfire on Africa.  African Energy Chamber to Release Africa Energy Outlook 2022 (By NJ Ayuk)

But if Africa is under pressure to meet external climate change timetables, cannot use its oil and gas resources domestically, and has to switch to renewables before it is ready, how will that play out? From today, at least, this type of energy transition will create an undue financial burden for Africa, in addition to its already significant economic difficulties. Things are made even worse by the fact that sub-Saharan countries are not receiving their fair share of international financing for renewable energy, and that financial flows to least developed countries were in fact lower in 2018 than they are. were a year earlier. In fact, reports the Brookings Institute, 46 of the least developed countries combined received only 20 percent of commitments.

So this is it. A rush to transition to renewables at Africa’s expense, with pressure to leave precious oil and gas in the ground and less financial support for companies extracting it.

It’s like a cold winter in Europe followed by calm winds: economically unmanageable and likely to leave people in the dark.

Lessons from Europe: Africans must go to COP26 Glasgow;  The rush to ban fossil fuels will backfire on Africa.  African Energy Chamber to Release Africa Energy Outlook 2022 (By NJ Ayuk)

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