John Kerry warns firms against African gas investments

Africa’s quest for renewed investments in hydrocarbon energy suffered a setback weekend with insistence by the United States that energy transition vigorously pursued by the industrialized nations of the world will start pulling demand from gas in the next eight years.

The country which is home to world’s biggest oil companies including ExxonMobil, Chevron and ConocoPhillips warns firms against staking huge investments in long term fossil projects in Africa.

The climate envoy for the United States, John Kerry, who was in Africa for a conference on climate change, called on energy firms to resist the temptation of long term investments in the development of the continent’s gas resources.

The Oracle Today reports that the advice of John Kerry is considered a major stoke to the worsening investment apathy of some big multinational oil companies that have practically halted exploration activities in Nigeria and some other countries in Africa.

Loss of long-term investments in oil and gas projects will inevitably impact growth projections of the continent where governments have decided to continue driving economic and social development with available and affordable energy. And energy transition comes at a time of new hydrocarbon provinces are being discovered in the continents sedentary basins.

Governments rely on commercial investments from mainly deep pocket multinational firms for resource exploration, development and production.

With impoverished populations, most African countries cannot afford the cost of green energy in powering the level of industrial growth needed to drive economic development. And governments in the African Petroleum Producers Organization (APPO) have since resolved to continue use of petroleum resources for internal energy in the event of rapid energy transition.

Besides, the continent is still not in the front line of petroleum production in the world.

United States remains global oil and gas producers’ champion, followed by Saudi Arabia and Russia; and shrinking demand will entail smaller market share for producers with limited numbers.

The country is also the leading liquefied natural gas (LNG) supplier to Europe in the face of the prevailing supply cuts from Russia which is under western trade and diplomatic sanctions over the war in Ukraine.

For commercial investors, signals from the demand side of the market serves as important business intelligence in determining the gestation of projects that justify investments.

John Kerry who attended a conference of African ministers on environment in Dakar, Senegal, made it clear that the United States considers gas as transition fuel which might face demand destruction by 2030.

He said the energy transition plan was to use gas to displace emissions from oil and coal in the immediate term, and then use green energy to ultimately displace gas and rein emissions from 2030, according to agency reports.

Continued financing of oil and gas projects in Africa has become a key issue for the countries, which they plan to push during a United Nations climate summit in Egypt in November.

Senegal and other countries in the region aim to start producing oil and gas, which they hope will help boost their electricity production, power industries and curb energy poverty.

Over 600 million people, or 43% of Africa’s population, lack access to electricity, most of them in sub-Saharan Africa, according to the International Energy Agency.

African countries argue that they need investments to develop their energy resources, including oil and gas, and a pledge by developed nations including the United States last year to curb investments in fossil fuels, was unjust.

Kerry said the question now is how to help the nations, which account for only a small amount of carbon emissions, develop without making mistakes that others made, enabling them to be as green as possible without creating more problems.

He said the viability of long-term gas projects could become a problem beyond 2030, the target date many developed nations have set to move to mostly renewable and curb the need for gas.

Kerry said such long-term projects likely would not recoup their investments within 10 years, adding that some countries are talking of projects with lifespan as long as 40 years, which was not necessary.

“We do not have to rush to go backward, we need to be very careful about exactly how much we are going to deploy, how it is going to be paid for, over what period of time and how do you capture the emissions.” Kerry said.

He said developed nations need to step up efforts and meet the urgency to help other countries adapt and get over the initial hurdles of developing renewable energy systems.

Kerry said the United States has committed $12 billion for “adaptation and resilience,” and was working on a new structure to bring more the big investors with trillions of dollars.