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Africa After Covid

Africa’s oil producers eye energy independence after Covid-19

A female truck drivers checks her truck's oil level before the start of the workday in Takoradi, western Ghana, on April 3, 2019
A female truck drivers checks her truck's oil level before the start of the workday in Takoradi, western Ghana, on April 3, 2019 AFP - CRISTINA ALDEHUELA

Plummeting oil prices, exacerbated by the coronavirus pandemic, have left Africa’s oil and gas producers staring at the bottom of the barrel. Renewables could offer them a way out.

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Months before Covid-19 triggered a historic oil price crash, there were signs that the market was already in ill-health.

In December 2019, Nigeria’s environment minister warned that the days of fossil fuels were numbered amid worries about climate change, which had spooked investors.

Then a brawl between Saudi Arabia and Russia in March saw oil prices tumble to around $20 per barrel, forcing Africa’s largest oil producer Nigeria, and others, to sell at a loss.

When Covid-19 broke out, it hammered global demand for transport, stopping people and goods from travelling. This dealt a further blow to African economies heavily reliant on oil.

“Africa has definitely been affected,” says Elizabeth Rogo, president for East Africa at the Africa Energy Chamber, a specialist network that follows the African energy industry.

“We've seen substantial cuts to state budgets, as well as public funding and mounting job losses,” she told RFI. 

Overstretched

The loss in oil revenue has stretched governments’ resources and complicated their fight against Covid-19.

“If you look at the big African producers like Nigeria, you are seeing a huge loss and contracts being put on hold across the continent,” explains Rogo, whose company released a report calling for action to shield producers from Covid-19 and the oil price war.

The oil slump has derailed drilling and offshore projects not only in Nigeria but in places such as Senegal, Mozambique, Ghana and Angola, the continent’s second largest oil producer. 

A group of men walk past a petrol station of Sonangol, the national fuel society of Angola, in Luanda on November 12, 2018. Many citizens are still waiting for the economic miracle promised by the oil-rich nation.
A group of men walk past a petrol station of Sonangol, the national fuel society of Angola, in Luanda on November 12, 2018. Many citizens are still waiting for the economic miracle promised by the oil-rich nation. AFP - RODGER BOSCH

There was cautious optimism last Wednesday, when oil prices climbed to $35 per barrel on the back of loosened lockdown restrictions in several countries.

But while some market experts may be rejoicing, others are saying it is time for African governments to look beyond oil to renewables.

Lights on

Awash with water, sun and wind, the African continent has "more resources than it even needs,” says Eddy Njoroge, former Director of KenGen, Kenya’s largest energy company, and in charge of overseeing its renewable transition.

“If you just look at hydropower, the potential within the continent is huge,” he told RFI.

Major dam projects such as Ethiopia’s Grand Renaissance Dam could quadruple the country’s electricity-generating capacity from about 2,200 MW to 8,700 MW when it is finished. While the Congo river, if it is ever built, could generate 40,000 MW, enough power to light up South Africa.

“But when it comes to the non-traditional renewables like solar energy, that is where there is a lot more potential,” Njoroge reckons.

The Senegalese village of Niomoune
The Senegalese village of Niomoune © ©Florian Coat

African countries are increasingly turning to solar photovoltaic technology to bolster energy supply in a continent where some 620 million people, mostly in villages and farms, still live without electricity, according to the Africa Progress Panel.

Renewable path

“We have solar irradiations which are much higher than anywhere in Europe,” continues Njoroge. 

“Compared to Germany, which has 1,500 kilowatts per square meter, in Africa most places are well above 2,000,” he tells RFI.

Added to that, the price of renewables has dropped, making them as competitive as oil and gas. And with no fuel costs, renewables have weathered the pandemic slightly better than their dirtier counterparts despite some disruptions to supply chains.

“The major challenge is storage,” cautions Njoroge, referring to the difficulty of storing sunlight. “You need huge, huge batteries… Once we resolve this issue, I see solar becoming the main supply across African countries.”

For the Africa Energy Chamber’s Elizabeth Rogo, the transition will take time.

“We can’t just throw away oil and gas and go into solar or wind or geothermal,” she comments. 

“None of these renewables by themselves are able to sustain the growth ofan economy. It hasn't happened, it will happen in the long run, but while we still have oil and gas, let's look at how we can improve,” she says, suggesting that technology from fossil fuels could be transferred to renewables.

Regional integration

Such comments are unlikely to go down well with climate activists who have urged for 2020 to be the year of action against climate change, and for fossil fuels to be left out of the picture.

While climate change may not be the immediate priority for African governments recovering from disruptions to the oil market, experts agree that energy independence post-Covid should be top of the agenda.

“There needs to be a major shift,” comments renewable specialist Eddy Njoroge.

“Instead of exporting so much gas and crude, African producers need to ask themselves, ‘What is it that we can do with this crude, this gas, internally to make sure that we help our own industries within the continent?'” he says.

One way is through regional integration reckons Rogo.

A general view of a Total petrol station in Kampala Uganda, on January 28, 2020. -The French firm is in talks with the government to begin exploiting its crude oil deposits that were discovered in 2006. But 14 years later, talks are still ongoing.
A general view of a Total petrol station in Kampala Uganda, on January 28, 2020. -The French firm is in talks with the government to begin exploiting its crude oil deposits that were discovered in 2006. But 14 years later, talks are still ongoing. AFP - YASUYOSHI CHIBA

She says emerging players like Uganda, which is hoping to extract its first drops of black gold in the coming months, needs its neighbours.

Uganda is landlocked and therefore all the equipment that's required will have to come through the ports of Mombasa in Kenya, the port of Tanga in Tanzania and taken by road into Uganda,” she explains.

Lessons learned 

Fortunately, African governments have already started doing business together under the African Continental Free Trade Area, making further cooperation feasible. 

“You're looking at what would be the longest electrically heated pipeline in the world, known as the East Africa crude oil pipeline,” continues Rogo. “So, by the project’s nature, there is going to be a lot of regional interaction.”

And, Njoroge hopes, more independence.

“One of the lessons that we have learnt, that we are learning is that we need to stop being too dependent. We were very dependent on China in a lot of things,” he says.

The volume of trade between China and Africa reached a record $208.7 billion last year, leaving many African economies in the lurch when the coronavirus shrunk Beijing's economy.

Going forward, Njoroge says: "There needs to be a shift for people to say, 'It is time to start moving towards local industries and local manufacturing within the continent.'”

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