Planned projects will drive up Africa’s fossil fuel capacity by 116%
As many as 200 companies are exploring or developing new fossil fuel reserves or infrastructure in 48 out of 55 African countries, according to a new report.
These include liquefied natural gas (LNG) terminals, pipelines or gas- and coal-fired power plants, the report released at the 27th Conference of Parties (COP27) to the United Nations Framework Convention on Climate Change.
These projects will increase Africa’s fossil fuel capacity but only a negligible share of the electricity produced will be for domestic consumption, the analysts wrote.
Fossil fuels are at the root of the climate crisis and Africa is harder hit by this crisis than any other continent, said Omar Elmawi, coordinator of the Stop EACOP Campaign, one of the 37 African non-profits that worked on the report.
“Yet 200 coal, oil and gas companies are flooding the continent with dirty energy projects that are completely incompatible with the Paris Climate goals and 1.5 degree Celsius limit,” Elmawi, who is also the executive-director of Muslims for Human Rights, added.
Urgewald, Oilwatch Africa and Africa Coal Network are among the organisations that wrote the report Who is Financing Fossil Fuel Expansion in Africa?
Oil and gas companies are developing new LNG terminals with a combined capacity of over 87 million tonnes per annum, and these projects will increase Africa’s existing LNG terminal capacity by 116 per cent.
But around 89 per cent of the new LNG infrastructure is being built for export, mainly to Europe and Asia, the report highlighted.
Anabela Lemos, director of Justiça Ambiental, said:
Europe’s fossil fuel addiction is a major driver behind new LNG projects in Africa. The rush for Africa’s oil and gas has nothing to do with increasing energy access for Africans.
A total of 10,135 megawatts of new coal fired capacity are in the pipeline in 11 African countries. Over half of it is planned in Zimbabwe, the report noted.
These will largely power mining operations instead of providing power to the 47 per cent of the population that lacks access to power, it flagged.
“With the exception of South Africa, almost all of the new coal plants are being built to power mining operations and not to address energy poverty,” said Heffa Schuecking, director of Urgewald.
Currently 70 new coal mines or extensions are being developed in nine African countries. These include South Africa (49), Zimbabwe (6), Botswana (5) and Mozambique (4).
Projects like the Kusile coal power station in South Africa, which was supported by the World Bank and Germany’s KfW, have turned out to be awful investments on all counts.
With costs of over $9.4 billion, Kusile is likely the world’s most expensive coal power plant and suffers from so many design defects that it has done nothing to alleviate load shedding in South Africa, Schuecking noted. “South Africa should invest in renewables instead of sinking further funds into the completion of Kusile.”
Since 2017, 886,000 square kilometers — an area larger than France and Italy combined — have been licensed for new oil and gas exploration in Africa, according to the 2022 Regional Trends Report Africa by Rystad Energy, an independent energy research.
As many as 18 African countries are ‘frontier countries’ like Namibia, Somalia and Uganda that have little or no existing oil and gas production.
Capital expenditures for oil and gas exploration in Africa rose to $5.1 billion in 2022 from $3.4 billion in 2020, according to data by Rystad Energy. African companies had a share of less than a third of this amount, pointing that most of it is from foreign companies.
Every dollar spent on new oil and gas exploration goes against the 1.5 degree Celsius roadmap laid out by the International Energy Agency in 2021, said Schuecking. “Financial institutions need to drop clients that are still searching for new oil and gas resources we cannot afford to burn.”
The largest developer of upstream oil and gas resources in Africa is TotalEnergies, Urgewald’s Global Oil and Gas Exit list showed. The French company already sources 25 per cent of its hydrocarbon production from Africa and aims to add 2.27 billion barrels of oil equivalent to its African portfolio, the report stated.
It estimated that the extraction and combustion of these resources would equal three years of France’s annual greenhouse gas emissions.
The second and third largest upstream developers in Africa are the state-owned Algerian Sonatrach (1.75 billion barrels of oil equivalent) and the Italian oil major Eni (1.32 billion barrels of oil equivalent), the study found.
Overall, oil and gas companies are preparing to add 15.8 billion barrels of oil equivalent to their production portfolios in Africa before 2030, it added. The extraction and combustion of these resources would release 8 gigatonnes of carbon dioxide equivalent — twice the amount the European Union emits in a year.
Fossil fuel infrastructure like LNG terminals are very expensive and have a life span of decades. TotalEnergies and CNOOC’s East African Cruise OIL Pipeline (EACOP) will cost over $5 billion and is expected to operate for 20 years, the study illustrated.
ExxonMobil and Eni’s Rovuma LNG project in Mozambique and Equinor’s LNG project in Tanzania are each estimated to cost $30 billion and would operate for more than 30 years, the analysts found.
Such projects will stop the host African countries from transitioning to cleaner fuels for decades. “Achieving full access to modern energy in Africa by 2030 would require investments of $ 25 billion per year,” IEA said. The sum is close to the cost of a single large LNG project.
In July 2022, over 5,000 institutional investors held shares and bonds totaling $109 billion in companies developing fossil fuel projects in Africa, the report showed. The top 23 investors accounted for 50 per cent of this investment and out of these, 14 are headquartered in the United States, six in Europe as well as one each in Canada, India and South Africa.
The largest investor in fossil fuel expansion in Africa is the US-based investment giant Blackrock, followed by Vanguard.
In terms of country-wise bank financing for fossil fuel expansion in Africa, Europe contributed around 40 per cent, followed by the US (20 per cent) and India (3 per cent).
Commercial banks channeled over $98 billion to companies developing new fossil fuel projects in Africa between January 2019 and July 2022. The number one banker of fossil fuel developers in Africa is Citigroup ($5.6 billion), followed by JPMorgan Chase ($5.1 billion) and BNP Paribas ($4.6 billion).
Around 71 per cent of bank support for fossil fuel developers in Africa came from banks that are members of the Net Zero Banking Alliance.
Schuecking said:
Making Net Zero promises for tomorrow is meaningless if you are spending billions of dollars on fossil fuel expansion today.
“Financial institutions that claim to be lining up for 1.5 degree Celsius need to stop supporting clients who are driving us towards 2.8°C,” she added.
Indian companies also have a substantial presence in Africa in terms of investing in fossil fuel infrastructure, the expert said. “Jindal Steel is developing a 300 MW coal plant in Mmamabula and another in Botswana.” In Mozambique, the group is planning to develop a 150 MW coal power plant.
Another Indian company, International Coal Ventures, is planning to develop the Zambeze coal mine with an estimated production of 22 million tonnes per year, she shared.
The report also highlighted that the Oil and Natural Gas Corporation (ONGC) and Bharat Petroleum Corporation from India are among the top 12 upstream oil and gas developers in Africa.
Africa has 39 per cent of the world’s total renewable potential and yet foreign investors continue to bankroll a fossil future for our continent, said Bobby Peek, member of the Life after Coal Campaign in South Africa.
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