Delivering A Uniquely African Dividend
By Kola Karim
An Emerging opportunity
African producer nations are uniquely positioned to benefit as security and energy challenges in Europe ramp up pressures on global energy supply and alter the contours of European Energy Security. The US, for instance, has imposed an immediate ban on Russian Oil and Gas. The UK intends to stop oil imports by the end of 2022. The European Union plans to cut Russian gas imports by two-thirds by the end of 2022 and recently announced its aim to fully eliminate oil imports by 2022. This European plan is particularly significant given that Russia is responsible for 25% of the EU’s oil imports and 45% of its gas imports.
Europe needs new, reliable energy partnerships and it is looking across the globe to find build them. Africa is a near shore opportunity that presents a unique opportunity for European nations. An energy partnership with African producer nations exhibits some clear challenges that need to be tackled but ultimately represents an opportunity that European governments cannot ignore. These Emerging Partnerships must be ambitious in delivering a uniquely African Dividend
Bold ideas, Bold Investment
An Afro-Euro partnership will require a combination of bold ideas and bold investment in new infrastructure. The African continent has abundant oil and gas reserves. In 2017, Africa reportedly had 148.6 trillion cubic meters of proven gas reserves — more than 7% of the global reserves. Two projects in development serve to illustrate the unique position Africa is in to replace Russian supply and the bold ideas and investment being contemplated. The planned Tran Sahara $13bn pipeline will link Warri in Nigeria to Hassi R’Mel in Algeria via Niger. The aim is to transport 30 billion cubic meters of natural gas to Europe per year. Additionally, Worley parsons has recently been awarded the contract for the FEED Phase 2 of the 7000km gas pipeline that links Nigeria’s vast reserves to Morocco and onwards to Europe.
While higher prices due to the current market displacement have bolstered the potential appetite for investment it is going to be critical to attract long term state led investment into its gas infrastructure. Clearly, for African producers, a lack of infrastructure, not capacity, could hurt the ambitions for a Partnership as It has historically often taken longer than initially predicted by governments and companies for projects to materialise. We are seeing increasing revenues for existing producers like Nigeria and Angola and increased appetite from newer entrants like Senegal and Mauritania, but to meet the challenge of partnering Europe for Gas supply these projects will require an appetite for investment that persists long after markets and prices settle to more sustainable levels or as economic cycles inevitably move to the downside. State actors on both sides of the partnership must therefore be prepared to build financing models that are resilient to the impact of economic stresses and are built with an eye to the broader security considerations that are the foundation of these partnerships
Security, Security, Security
Security Is the principal motivation for the Partnership and to be a credible long-term partner for European markets, African producers will also need to significantly improve the existential challenges to supply across the continent. Delays and the insecurity of supply created by these challenges threaten a European partnership. There are trillions of cubit feet of gas stranded in regions where insecurity prevails. Mozambique for instance holds roughly 100 trillion cubic feet (2.8 trillion cubic metres) of proven natural gas reserves, accounting for approximately 1 percent of the world’s total reserves, but an ongoing armed uprising in the northern Mozambican province of Cabo Delgado, a gas-rich area that borders Tanzania, has hampered activity on a planned $50bn project. Security threats from armed groups and sabotage has affected oil and gas infrastructure in Nigeria’s Niger Delta.
These security challenges are rooted in cross cutting issues such as poverty and good governance, issues that have been African challenges for decades. An Afro-Euro partnership will need to be focused on developing holistic investment programs that tackle these challenges within producer nations so there is a ‘licence to operate’ that captures the host community needs and builds a consensus led security platform for their operations. European Nations with their decade’s long investment in development programs and institutions are well placed to work within partner countries to build an arc of support that delivers an energy and development dividend.
A Third dividend
Beyond the already attractive dividends of energy security and developmental impact, there is a third dividend that can be derived with investment in an Afro-Euro partnership for energy security. The energy infrastructure gap discussed earlier and its attendant need for investment within the context of a development led arc of support can be a powerful vehicle to build an energy supply that is more climate friendly than the historical development model within the fossil fuel industry. Europe has declared an intention to move away from fossil fuels for good, and there is no better burning platform for change than the present energy security crisis. Partnership with African producers will allow Europe the opportunity to develop climate friendly African upstream and mid-stream solutions for European markets and importantly provide downstream solutions for African energy consumers within the producer nations themselves. The West African market dominated by Nigeria for instance is a market with over 300 million souls who would benefit from downstream climate friendly solutions that are driven the from upstream investment to serve the needs of European Energy Eecurity.
Europe’s current energy security challenges can create longer term positive outcomes that will benefit the Africa’s producer nations and its European partners. These benefits build on a combination of capital investment in bold new ideas and a responsible approach to Energy investment that can meet the needs of consumers on both continents within a responsible governance and development framework.
This approach will deliver a Commercial, Community and Climate dividend that is uniquely African.
By Kola Karim
Kola Karim is the Chairman of the Board of Directors of Shoreline Natural Resources Ltd. He has a proven ability to start companies from scratch and nurture them to success, an aptitude for spotting new business and creating new opportunities and is also adept at building and nurturing business partnerships with leading international companies. His current portfolio consists of businesses in the Construction, Commodity Trading, Oil and Gas, Engineering and Power sectors.
Kola Karim is also the current Chairman of the Board of Directors of Costain (West Africa) plc, Nigerian Ropes plc, and serves as director in seven other companies including Shoreline Power Company Ltd, Shoreline Energy International Ltd, Ecobank Nigeria plc, Schlumberger Testing & Production Services Nigeria Ltd, Trans Amadi Facilities Ltd, grange Education Ltd and African Eagles plc.