Why Africa needs to prioritise funding for oil, gas industry

The Secretary-General, African Petroleum Producers’ Organisation, (APPO), Dr. Omar Farouk Ibrahim, has said the continent needs to find ways of getting governments to commit a certain percentage of windfalls to a special fund for the sustenance of the oil and gas industry.

Ibrahim said a guaranteed source of revenue is the only way for the success of the new order APPO wants to see in Africa, adding that revenue cannot come from the private sector alone, not because it does not make economic sense to make the investment, but because it is a matter of national security for the powers that be.

He stated this, yesterday in Lagos at the maiden edition of the African Local Content Investment Forum (ALCIF) with the theme, “Evolving a pan-African strategy towards sustainable funding of Africa oil and gas projects” targeted at oil and gas practitioners, especially members’ nations of APPO.

Ibrahim said APPO believes that the salvation of Africa lies in cooperation and collaboration and it is prepared to work with institutions that share a concern for the development of the continent.

“If we see energy security as critical to our national security, we should enact laws that provide for a portion of windfalls from oil and gas sales to be re-invested in the industry; that being so, African governments have got to re-strategise, and think out of the box.

“Africa can still rectify its mistakes. In this respect, I would like to point out that a major study commissioned by APPO on the future of the oil and gas industry in Africa in the light of the energy transition has concluded that the oil and gas industry in Africa shall need a new development model in order to survive the energy transition.”

Ibrahim said if it fails to re-strategise and come up with a new model, it risks losing the 125 billion proven crude oil reserves and the hundreds of trillions of proven gas reserves as stranded assets.

The new model, according to him, sees greater cooperation and collaboration among African oil and gas producing countries as the only way to survive the challenges posed by the energy transition agenda.

He said the study sees the potential of a huge energy market in empowering the 900 million people of Africa who have no access to any form of modern energy.

Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB), Simbi Wabote, reiterated that there is a genuine battle for the soul of the hydrocarbon industry in Africa.

He said the continent needs to build on the good initiatives already in place to increase the pool of funds available for hydrocarbon projects and also motivate credible investors to pick interest in the industry.

Wabote said there must be a means of aggregating the various funds being projected by Development Finance Institutions (DFI’s), Banks, and other agencies so that big-ticket funding transactions can be carried out.

“While the activists are demonizing the oil and gas industry, our message must be consistent to the effect that fossil fuels will not disappear or be transited or shifted out of the energy mix so soon. Fossil fuels have largely contributed to the development we are witnessing today globally and must not be castigated to extinction.

“The business model for the oil and gas industry in Africa must change to one in which there is a deliberate in-country value addition to reduce or eliminate reliance on crude exports,” he said.

Minister of State for Petroleum Resources, Timipre Sylva, said, without doubt, the emerging trend where leading multinational financial institutions are factoring environmental, social, and corporate governance (ESG) in their lending decisions; and the seeming freezing of equity investment in upstream field development projects by International oil companies is a wakeup call for Africa to provide alternative funding to sustain hydrocarbon development and secure our energy future

Sylva, who was represented by Permanent Secretary of the Ministry of Petroleum Resources, Dr Nasir Gwarzo, elaborated on the reason why funding is very important to Africa.

He said a holistic outlook of the continent’s oil and gas infrastructure requirements include upstream field development projects, pipelines, depots, terminals, refineries, petrochemical plants, and oil and gas research and development and training institutions all of which require huge funding.

He noted that the local content programme for Africa can only be impactful in our various economies if there is a pipeline of projects that will sustain the utilization of capacities and capabilities developed or being developed in the industry.

In his remarks, Chief Executive Officer, Afreximbank, Dr. Benedict Oramah, represented Director and Global Head, Advisory and Capital Markets, Afreximbank, Ibrahim Sagna, said together the industry and players need to provide a long term path on financing the sector, while the bank would continue to provide funding for projects in the sector.

He said if concerted efforts are not made by African governments to manufacture refineries, it might be another challenge for the sector, stating that there is also the issue of energy poverty.

He said there is a genuine opportunity to leverage technology to promote the energy sector.