In recent years, several Western banks and financial institutions have implemented policies aimed at reducing support for fossil fuel projects, especially in Africa. This has led to a sharp decline in investment in the continent’s oil and gas industry, a sector that is crucial for its economic future and energy needs. The African Energy Chamber (AEC) (https://EnergyChamber.org) argues that these institutions are practicing “financial apartheid,” arguing that while similar projects receive support in Europe, Africa’s high-cost energy projects are being neglected.
The decline in investment is already having a noticeable impact, exacerbated by global shifts towards cleaner energy and prioritizing of ESG practices. Major international oil companies are reducing their presence in Africa. For instance, Equinor has withdrawn from offshore exploration in South Africa and ExxonMobil has exited a deep-water oil prospect in Ghana. This decline is contributing to a bleak outlook for Africa’s energy sector.
“As the international community moves to boycott investments in the African energy sector, African people and African development stand to suffer,” says NJ Ayuk, Executive Chairman of the AEC. “The role of oil in Africa’s energy and economic future is apparent, and consequently, should be defended as Western elites move to disrupt African progress.”
The broader implications of financial divestment are profound. Many African governments rely on fossil fuels as a cost-effective means to alleviate energy poverty and boost state revenues. However, the increasing pressure on financial institutions to cut funding for high-carbon projects creates uncertainty about the future of Africa’s energy sector.
The International Energy Agency (IEA) has added to these challenges with its calls to cease funding for oil and gas projects, highlighting a disparity: while natural gas is considered a ‘green’ energy source for Europe, it does not receive the same treatment in Africa. According to Ayuk, “The IEA has lost its relevance and its authority.” Originally focused on managing oil supply disruptions, the IEA now prioritizes policies aimed at achieving net-zero emissions by 2050. Its 2019 projection that no new investments in oil, gas, or coal are needed if the world continues on this path has been particularly controversial.
Several key African projects are at risk due to the withdrawal of financial support. Significant initiatives like TotalEnergies’ Mozambique LNG project, ExxonMobil’s Rovuma LNG project, Nigeria’s Train 7 LNG expansion, Senegal’s Sangomar oil field, Uganda’s Tilenga project and the East African Crude Oil Pipeline (EACOP) require substantial financing to advance.
Despite these setbacks, some projects are progressing. TotalEnergies is advancing its $20 billion Mozambique LNG project, aiming to develop the Golfinho and Atum fields with a production capacity of 12.88 million tonnes per year. Eni’s Coral South FLNG project in Mozambique has achieved a production capacity of 3.4 million tonnes per year. Additionally, the Greater Tortue Ahmeyim (GTA) LNG project, which started gas production in November 2022, is being developed by bp, Kosmos Energy and the national oil companies of Senegal and Mauritania. This project includes an FLNG facility with an initial capacity of 2.5 million tonnes per year.
Meanwhile Nigeria’s Train 7 project, an expansion of the existing NLNG facility on Bonny Island, aims to boost production by 8 million tonnes per year, bringing the total to about 30 million tonnes per year. This development is crucial for Nigeria’s growing population and its ability to meet its energy needs.
However, delays persist. The Tanzania LNG project, involving Equinor and Shell, is stalled due to proposed government changes. UTM Offshore’s FLNG project in Nigeria, initially planned for 2023, has been postponed. Additionally, the EACOP faces significant criticism from financiers and environmental groups, complicating its development and financing.
Namibia, experiencing heightened interest from recent oil discoveries, is facing delays with the Kudu Conventional Gas Development. The Kudu Gas Project, an offshore initiative, has faced setbacks related to financing and project development challenges. As a result, the project is still pending FID and anticipated to commence production by 2026.
“Today, African Energy Poverty numbers are skyrocketing. Nine hundred million Africans lack access to clean cooking technologies, while 600 million lack access to electricity, most of them women. African families are facing high energy cost and inflation is going up,” Ayuk emphasizes. “It is shocking that financial institutions that do business in Africa continue to practice financial apartheid by cutting off capital and financing to oil and gas companies operating in Africa because of climate concerns. These same institutions fund gas development in Europe, where natural gas is deemed green and a fossil fuel for Africans.”
The disparity in financing not only undermines Africa’s ability to harness its natural resources for its development but also perpetuates a cycle of energy deprivation. The AEC urges a re-evaluation of this approach and calls on global financiers to support Africa’s energy projects, recognizing their critical role in advancing economic development, enhancing energy security, and improving living standards across the continent.
Distributed by APO Group on behalf of African Energy Chamber.
