Photo: Shell's Graff-1 was spudded using the Valaris-owned DS-10 drillship; Source: Valaris

Africa turning into hotspot for oil & gas exploration as investments reach $5.1 bln in 2022

A recent report, analysing Rystad Energy data, which was published by environmental research group Urgewald, in partnership with multiple organisations across Africa and Europe, has shown that total capital expenditures (capex) for oil and gas exploration in Africa rose from $3.4 billion in 2020 to $5.1 billion in 2022.

During COP27 in Sharm El-Sheikh, Urgewald, Stop EACOP, Oilwatch Africa, Africa Coal Network and 33 other African NGOs released a report called Who is Financing Fossil Fuel Expansion in Africa? which uses an analysis of Rystad Energy data to point out that the total capex for oil and gas exploration activities in Africa reached $5.1 billion in 2022. However, African companies accounted for less than one-third of this sum as the bulk of exploration for new oil and gas resources is carried out and financed by foreign companies.

Furthermore, the report identifies 200 companies that are exploring or developing new fossil fuel reserves or developing new fossil infrastructure such as liquefied natural gas (LNG) terminals, pipelines or gas and coal-fired power plants in Africa. Based on the NGOs’ report, these companies are pursuing fossil expansion projects in 48 out of 55 African countries.

Areas covering 886,000 km2 – larger than France and Italy combined – have been licensed since 2017 for new oil and gas exploration in Africa and out of the 45 African countries, where the oil and gas industry is currently looking for new finds, 18 are – what the industry calls – “frontier countries,” which includes countries like Namibia, Uganda and Somalia that have little or no existing oil or gas production.

When it comes to Namibia it is worth reminding that its Orange Basin was made even more popular after Shell made its Graff-1 light oil discovery in Block 2913A, and TotalEnergies made its Venus-1 discovery in Block 2913B. While Shell and TotalEnergies have initiated further activity on their respective blocks off Namibia, BW Energy is also developing the Kudu gas field and Galp secured an extension in June 2022 for an exploration licence located offshore Namibia close to these discoveries.

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Three biggest oil & gas players in Africa

Using data from Urgewald’s Global Oil and Gas Exit List (GOGEL), the report highlights the companies that are planning to bring the largest amount of new oil and gas resources into production before 2030. According to this, the largest developer of new upstream oil and gas resources in Africa is TotalEnergies, which 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.

Moreover, the second and third largest upstream developers in Africa are the state-owned Algerian oil and gas company, Sonatrach, with 1.75 billion barrels of oil equivalent and the Italian oil major, Eni, with 1.32 billion barrels of oil equivalent. The report indicates that oil and gas companies are preparing to add at least 15.8 billion barrels of oil equivalent to their production portfolios in Africa before 2030.

Courtesy of Urgewald
Courtesy of Urgewald

The report underscores that fossil fuel infrastructure such as pipelines and LNG terminals are expensive to build, and their intended operational lifetime spans decades. In line with this, TotalEnergies’ and CNOOC’s East African Crude Oil Pipeline (EACOP) will cost over $5 billion and is expected to operate for at least 20 years. ExxonMobil’s and Eni’s Rovuma LNG project in Mozambique and Equinor’s Tanzania LNG project are each estimated to cost $30 billion and would operate for more than 30 years.

Oil and gas players are developing new LNG terminals with a combined capacity of over 87 million tons per annum, which will increase Africa’s existing LNG terminal capacity by 116 per cent. The report emphasises that 89 per cent of the new LNG infrastructure is being built for export, mainly to Europe and Asia.

Anabela Lemos, director of Justiça Ambiental (Friends of the Earth Mozambique), stated: “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.”

Environmentalists opposed to “dirty energy projects”

The environmental research group outlined that the extraction and combustion of additional 2.27 billion barrels of oil equivalent, which TotalEnergies plans to add to its resources, would equal three years of France’s annual greenhouse gas emissions.

Fisher communities and activists protest against offshore oil and gas exploration in South Africa; Credit: The Green Connection

Omar Elmawi, a coordinator of the Stop EACOP Campaign and Executive Director of Muslims for Human Rights, commented: “Fossil fuels are at the root of the climate crisis and Africa is harder hit by this crisis than any other continent. 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 the 1.5°C limit.”

On the other hand, the extraction and combustion of 15.8 billion barrels of oil equivalent that companies intend to add to their African portfolios before 2030 would release 8 gigatons of CO2 into the atmosphere, which is more than twice the amount the EU emits each year.

Courtesy of Urgewald
Source: Urgewald

Heffa Schuecking, director of Urgewald, remarked: “Every dollar spent on new oil and gas exploration goes against the 1.5°C roadmap laid out by the International Energy Agency in 2021. Financial institutions need to drop clients that are still searching for new oil and gas resources we can’t afford to burn.”

The new LNG projects are expected to lock in fossil emissions over decades and lock out host countries’ opportunity to build a renewable future, based on the report. Previously, the International Energy Agency reported that “achieving full access to modern energy in Africa by 2030 would require investments of $25 billion per year,” a sum that is comparable to the cost of just one large LNG project, according to Urgewald.

Bankrolling Africa’s fossil fuel expansion

Meanwhile, the report underlined that over 5,000 institutional investors held shares and bonds totalling $109 billion in companies developing Africa’s new fossil fuel projects in July 2022. Out of the top 23 investors – accounting for 50 per cent of this sum – 14 are headquartered in the U.S., six in Europe, one in Canada, one in India and one in South Africa.

Bobby Peek, Life After Coal Campaign in South Africa, said: “Africa has 39 per cent of the world’s total renewable potential, yet foreign investors continue to bankroll a fossil future for our continent.”

Africa’s largest institutional investor in fossil fuel expansion is the U.S.-based investment giant BlackRock with holdings of over $12 billion while the next in line is Vanguard with $8.4 billion and the Norwegian Government Pension Fund with $3.7 billion.

In addition, commercial banks channelled over $98 billion to companies developing new fossil projects in Africa between January 2019 and July 2022 with $44 billion provided through loans and $54 billion through the underwriting of new share and bond issuances. The report claims that the number one banker of Africa’s fossil fuel developers is Citigroup with $5.6 billion, followed by JPMorgan Chase with $5.1 billion and BNP Paribas with $4.6 billion.

Courtesy of Urgewald
Courtesy of Urgewald

“It is time for financial institutions to step back from companies that are blowing up the world’s carbon budget and locking Africa into the dirty energy sources of the past. Civil society organisations all across Africa are calling for a green renewable energy future that provides energy access to all,” urged Elmawi on behalf of the 36 African co-publishers of the report.

The NGOs’ report underscored that 72 per cent of bank support for fossil fuel developers in Africa came from banks that are members of the Net Zero Banking Alliance.

“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°C need to stop supporting clients who are driving us towards 2.8°C,” added Schuecking.