Save for later Print Download Share LinkedIn Twitter Much of Africa looks unprepared for the energy transition. Producer states are still struggling to make their oil and gas sectors more competitive to investors, even as international oil companies (IOCs) allocate more capital toward new energy projects. The hope is that IOCs committed to decarbonization will clean up their operations in Africa and help the continent address the demands of the transition. But this could prove wishful thinking. For some IOCs, the only thing keeping them in countries like Nigeria is the lack of buyers to take assets off their hands (PIW Feb.5'21). Some African countries are better prepared than others for the transition. While governments in Morocco and Egypt are progressing toward meeting ambitious renewable energy targets, and Gabon is trying to diversify, others like Nigeria are treading water, still trying to draw investors to upstream sectors that are losing their shine. Morocco has built the world’s largest solar plant in the Noor Oarzazate Solar Power Station. Mauritania is courting investors for a $40 billion wind power and hydrogen project. Gabon, one of the few oil producers to be a net sequester of carbon because of its rainforests, is looking for payment from governments or international investors to preserve the forests. In Angola, Eni and Sonangol formed a joint venture that is developing industrial-scale solar power facilities. By contrast, Nigeria has still to enact the 13-year-old Petroleum Industry Bill to make its oil and gas sector more investable, a delay that could leave a sizable chunk of assets stranded (PIW Jul.9'21). To be sure, some IOCs had already started decarbonizing operations in places like Nigeria to head off environmental lawsuits and reputational risks. While that effort involved some divestments by Royal Dutch Shell, TotalEnergies, Eni and Chevron, these firms also claim to have cut operational spills. Shell started cleaning up operations more than a decade ago after a UN report on the impact of pipeline spills in Ogonil and caused reputational damage, with several lawsuits following (PIW Apr.21'14). Some 13,169 barrels were reported spilled at Shell sites in 2020 -- more than any other operator. Shell says it has slashed spills caused by operational factors, with 92% caused by theft and sabotage, although some locals and climate activists dispute the evidence. It has stepped up surveillance and installed more protective equipment around its wellheads and manifolds. Still, it seeks to sell its remaining onshore assets to reduce the risks altogether. IOCs have also cut routine gas flaring by investing in schemes to capture and reuse gas, although some of the reduction can be attributed to lower oil output. In Nigeria, production has declined by 1 million barrels per day since 2010, while output has dropped significantly in Angola in recent years, too (PIW Apr.23'21). In some cases, IOC efforts are offset by flaring by national oil companies (NOCs), while bad governance has undermined the investability of smaller-scale flare reduction projects in Nigeria. Flaring in Nigeria, which accounted for 25% of the country's carbon emissions in 2018, has fallen by 25% since 2012, but it has risen in Algeria by 23%, according to World Bank data. Algerian fields operated by NOC Sonatrach are largely responsible for the uptick. Chevron claims to have cut flaring from its Nigerian operations by 90% in the last 10 years. Shell is also cutting flaring through projects like the Southern Swamp Associated Gas Solutions, commissioned in 2019-20, and the Forcados Yokri gas gathering scheme, which should be completed this year. A Nigerian government scheme to auction rights to capture and sell gas at up to 48 gas flare sites has foundered due to inefficiency and cronyism, local analysts say. Bidders complained the Department of Petroleum Resources, the regulator, charged excessively for very basic information and then appeared to favor politically connected entities over the technically qualified during the auction. “It put off a lot of genuine investors,” one environmental activist said.
