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Webinar highlights renewable energy drive in Africa

The African Development Bank is keen to put money toward renewable energy, highlighted the attendees. (Image source: Africa Oil & Power Conference)

The ‘Closing Deals: Advancing FID During COVID-19’ webinar on 18 June addressed the prioritisation of energy projects in an environment of limited capital investment and explored the future of deal-making, following the unprecedented impact of COVID-19 on the sector

“We are in unchartered waters. The IMF is estimating a three per cent reduction in global GDP for 2020. The effect is almost triple to that of the 2008 financial crisis,” said Marcia Ashong, founder and executive director of TheBoardroom Africa and Brace Energy. “Africa remains largely a commodity-based economy, and raw materials make up one-third of the continent’s export income. The road to recovery will be extremely slow and arduous. The full effect of COVID-19 on our economies is not fully recognized yet. From the oil and gas perspective, it has derailed major projects. For example, the Aker decision in Ghana [to postpone FID] will postpone further work on its Pecan discovery.”

In terms of FIDs on the continent, only a few definitive delays have been encountered. In Mozambique, ExxonMobil has indefinitely delayed FID on its natural gas project in the Rovuma basin. In Uganda, FID taken by Total for the Tilenga project has been postponed until 2022, while initially planned for the end of 2019.

Shifting to renewable energy investments

“The African Development Bank is keen to put money toward renewable energy. Climate change has come into play as constraining financial capabilities of oil and gas companies,” said Arron Singhe, chief oil sector at the African Natural Resources Centre, African Development Bank. 

“COVID-19 is sending a significant message to the African oil and gas industry that the paradigm is changing. As an industry, we need to review the way in which we re-develop projects. When the fundamentals of a project are strong and the sponsors have the financial power and leverage from the market, the project has a higher chance of succeeding. It is very important for private investors to look at the environmental situation in the project. How much of your project is contributing to preserving the environment? Beyond COVID-19, this will influence the financial flow of the oil and gas industry in Africa.”

 

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