Oil Disasters: Why Man Is The Real Threat To Life On Earth

By Cyrus Kabaale

As we mourn the outbreak of global crisis COVID 19, thousands of people have been displaced by rising water in Lake Victoria, Lake Kyoga and swept away from their homes by riotous floods.

The government claims it warned the residents earlier in time to vacate the shores of the lakes in anticipation of the disaster. This claim is flawed because it would have made sense if the government had championed re-settlement of people to another site without waiting for the disaster to occur and start lamenting.

With such disasters, nature is claiming for its space. People in oil-rich regions with exploration and development activities happening should keep their eyes wide open and keep the government and oil companies on pressure to adopt the best practices possible.

Because of irresponsibility and negligence by the oil investors, communities in oil-rich countries have suffered worse disasters. The best example is that of Royal Dutch Shell and their reckless activities in the River State of Nigeria, West Africa.

Most oil disasters in this country have occurred because of obsolete equipment such as pipes and oil well heads that have rotten underground for close to 50 years without being replaced or serviced thus triggering oil spills and oil pipeline fires that have so far claimed more than 10,000 poor Nigerian.

On March 28 and 29, 2020, oil explosions in which drilling mud and crude oil are said to have spilled occurred. The drilling mud and crude oil like substances flowed into Lake Albert. The Royal Techno Industries Ltd was contracted by the Ministry of Energy to explore for geothermal energy near the Kibiro Hot Springs at Lake Albert.

This tragedy could have been avoided if the responsible oil companies and government agency and ministries had responded quickly to the warnings by communities about the leaking oils.

If such a disaster was to happen in Uganda’s network of rivers, swamps and forests, well-known world over as a rich biodiversity spot with 39% of Africa’s mammal species, 51% of African bird species, 19% of African Amphibian species, 14% of Africa’s plant and reptile species including 79 threatened terrestrial vertebrates according to IUCN red data book listening, then that would be a heavy blow to the much-anticipated oil revenues that the good oil investors and government are preaching now and again to be the one to uplift the country and its people from the biting poverty.

As we celebrate the never-ending new oil discoveries, let us keep in mind that unless best practices in the industry are emphasized, then the anticipated oil revenues might not solve the escalating poverty and community suffering.

The bucket and spade practice of cleaning oil spills, digging of a hole in the middle of a spill site, the burial of oil spills and wastes in the ground as Heritage Oil did in Amuru District in 2009, the burning of affected items together leaving mud pits wide open thus exposing the surrounding communities and the environment to toxic gas and wastes are all part of what the oil companies and government must safeguard and take precaution against.

Unfortunately, in Uganda, the government seems to be totally blind to what might befall the oil region. The oil companies are busy drilling in the absence of oil legislation. The absence of legislation such as Environmental and Social Impact Assessment (ESIA) regulations, Land Acquisition Act which can determine what is fair, adequate and prompt to regulate their activities will cause more harm than good. It will most likely result in land grabbing by the oil companies and massive environmental mess.  

What must be kept in mind by every Ugandan is that oil companies are purely profit-making corporations. Without any legislation to guide their operations, they will resort to using foreign oil experts as a route to overstate the costs of their investments, depots their profit money in foreign accounts and since Uganda has no proven institutional capacity to monitor accounts of the oil investors, it will eventually incur more losses than gains at the time of repaying the investment cost incurred by the oil companies.

It is, therefore, important to emphasize the adoption of the best practices right from the start of exploitation process so that Uganda does not loose on both fronts such as earning oil revenues and conserving the incredible biodiversity in the oil region.

Otherwise, if the oil companies continue claiming that the adaption of best practices is too expensive to guarantee them profits from their oil investments, then let us conserve our environment than oil and continue surviving on tourism money that has sustained the Ugandan economy for decades.

Cyrus Kabaale, Extractives Programme’s Officer, Africa Institute for Energy Governance (AFIEGO)

COVID-19 Should Not Delay Upstream FID In Uganda After Total - Tullow Deal

By Thomas Hedley

Hosted under the theme ‘Taking Advantage of Opportunities in Uganda’s Oil & Gas Sector,’ an Africa Oil & Power webinar Wednesday highlighted the domestic and regional opportunities associated with the Uganda Lake Albert project, oil and gas exploration, and associated services and infrastructure including the $3.5-billion East African Crude Oil Pipeline project. 

Speakers included Hon. Dr. Elly Karuhanga, Chairman of the Uganda Chamber of Mines and Petroleum; Gilbert Kamuntu, Chief Commercial Officer, Uganda National Oil Company; NJ Ayuk, Executive Chairman of the African Energy Chamber and Brian Muriuki, MD and Country Chair of Shell Ghana.

Uganda’s oil and gas sector potential was revealed in 2006 and 2007 when sizeable amounts of oil were discovered in Lake Albert on the remote western edge of the country, by Tullow Oil.

On 23 April 2020, Total announced it had signed a deal with Tullow Oil to acquire its long-standing stakes in the Uganda Lake Albert project for $575 million. With Tullow’s exit, the joint venture partners are now Total and China National Offshore Oil Corporation (CNOOC).

Hon. Dr. Elly Karuhanga expressed: “This deal brings a lot of hope to the Ugandan oil and gas sector, which was first put in light upon first discoveries in 2006. It is amazing to see Total sign [a deal of] over half a million [dollars] at times when the oil prices are so low. We are grateful for the vote of confidence and are excited about what lies ahead.”

This milestone takes Uganda closer to a long-awaited final investment decision on the Lake Albert Project (Tilenga project) which is associated with the $3.5-billion East African Crude Oil Pipeline project. The Tilenga project comprises oil exploration, a crude oil processing plant, underground pipelines, and infrastructure in the Buliisa and Nwoya districts of Uganda.

In the midst of COVID-19, Total’s announcement surprised many as most operators are currently looking to save costs rather than invest in new projects. Brian Muriuki stated: “I don’t believe COVID-19 will delay the final investment decision on this project, given the long-term perspective. However, the project execution and associated timelines may be at risk of delays due to the potential difficulty to mobilize people and put together a strong workforce, depending on how long COVID-19 lasts and how we can contain it.”

A key aspect of Uganda’s nascent oil and gas industry is the East African Crude Oil Pipeline from Holma in Uganda to the port of Tanga in Tanzania. Stakeholders are hoping the Total transaction will accelerate development. Front end engineering and design works have been finalized as well as environmental and social impact assessments, both in Tanzania and in Uganda.

The pipeline route has been traced and the land acquisition process is well understood. According to Gilbert Kamuntu, “The remaining steps mainly include the suite of commercial agreements that surround. There will be no change to the project following Total’s announcement. We will reach final investment decision imminently and start project execution”.

The planned Holma refinery is expected to produce 30,000 barrels per day on commissioning to reach a maximum production of 60,000 barrels per day in subsequent phases. “Total’s announcement has boosted confidence of investors involved in the refinery project, as they can now foresee first oil.” said Dr. Karuhanga.

Despite progress, concerns remain regarding sector recovery in the midst of the COVID-19 crisis. On the question of exploration contract renegotiation, Gilbert Kamantu said: “Governments take a prudent approach to renegotiating product and sharing agreements as they are the basis to operators’ strategy right from the start.

Although we are currently in a COVID-19 situation, a production and sharing contract is a 25-year-long agreement so we can’t go ahead and change the terms on a punctual situation. The [Ministry of Energy and Mineral Development] of Uganda is considering negotiating extension of periods in order to provide relief to the companies.”

Uganda currently has an ongoing licensing round which was launched in September 2019 and will close in September 2020. The round includes five blocks for a total acreage reaching 5,000 square kilometres.

Further discussions around the impact of the pandemic touched on the opportunity for African companies to fill the vacuum. As a local content advocate, NJ Ayuk called on African executives: “This is a great time for domestic companies to step up. The real economic impact on major projects will come from local companies, skill transfer, and partnerships with global players. We need to start building on joint ventures, and build capacity in the long-term.

Cost implications of this model are obviously a factor to consider. Such local content growth can be costly. However, this stance can be an enabler for the economy across sectors. We should quickly negotiate local content parameters in order to get the project moving forward, without being dogmatic. Local engineers, welders, pipeline management companies, must be proactive and engage with project leaders right now.”

The World Bank expects Uganda to grow at a rate of over 10 percent per annum from oil production and related activity, sending a message to investors that there are immense opportunities for comparatively high returns in Uganda’s oil and gas sector, despite the current challenges of the COVID-19 pandemic.

Thomas Hedley, Field Editor, Africa Oil & Power 

Here Is Why Uganda Needs A Solar Energy Policy

By Sandra Atusinguza

The supply and availability of solar energy is critical to the social and economic transformation and development of the country or the public will shift to the destruction of the environment for energy alternatives.

In a current COVID 19 pandemic situation like this, solar energy could be the best alternative to electricity to provide power and run machines in hospitals and factories which suffer payments of electricity bills time and again, further, the recent countrywide power blackout due to environmental hazards at Nalubale dam a few minutes to the presidential address on Coronavirus would be addressed by alternatives like solar energy.

The current Uganda’s Energy Policy 2002 aims “to meet the energy needs of Uganda’s population for social and economic development in an environmentally sustainable manner”.

The regulatory framework, the Constitution outlines that the State shall promote and implement energy policies that will ensure that people’s basic needs and those of environmental preservation are met thus an independent solar energy policy should clearly state out and amplify this further.

Uganda’s abundance of sunshine throughout the year on average solar radiation is 5.1 kWh/m2/day clearly indicate that the solar energy resource in Uganda is high throughout the year with a variation (max month/min month) of only about maximum 20% (from 4.5 to 5.5 W/m2), this can be attributed to the county’s’ location near the equator. (MEMD, 2004)

In the recent research conducted by AFIEGO and Busara centre   in the Albertine region about communities’ clean energy use and promotion it was discovered that Ugandans have resorted to obtaining own (individual) clean energy options to meet their domestic needs, which include installation of solar equipment.

Solar as a source of energy is also used for lighting, heating and operating machines because of the scarcity of electricity and escalating tariffs from the conventional hydro- and thermal- power sources in the country.

Solar energy is being used with appropriate technology for cooking food, water heating, refrigeration, lighting, telecommunications, in households, offices, hotels, schools and other organizations in Uganda. At the fishing landing sites on Lake Albert, Victoria and other solar-powered lights are being used in fishing of silverfish (Mukene) because they are bright and have no noise to scare away fish.

More so, the countrywide presence of solar energy dealers like M-Kopa, MTN solar, Solar Now, SunKing Solar and another private sector SME’s in solar marketing and distribution businesses among others have greatly contributed to solar energy consumption in the country due to the frequent load-shedding and high costs incurred using national grid electricity promotes many households mainly upcountry to resort to solar energy which is relatively cheap, readily available and environmentally friendly.

So as to achieve more of the above I call upon the government to develop a solar energy policy that shall promote tax waivers on solar panels and the associated accessories such as batteries, solar bulbs.

The policy must ensure that credit schemes are extended towards the promotion on use and affordability of solar energy so as people can access the credit services to buy solar panel and accessories, at all levels the policy must ensure that both men and women are targets to capacity building regarding the use of improved solar energy technologies.

Private companies and NGO’s campaigning for clean energy such as solar energy must work extensively to extend solar energy across all regions in the country, Uganda’s quality and standardization (UNBS) body must ensure that genuine solar energy products and other accessories are the ones imported and put on the market,  lastly despite Photovoltaic Pilot Project on Renewable Energy (UPPRE) a government project on solar energy Uganda, the policy must advocate for more projects balanced in all regions to enable the public access solar energy.

Complied by Sandra Atusinguza

AFIEGO Field - coordinator.

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

COVID 19: God Punishing Man For Destroying Environment

By Cyrus Kabaale

To date, over 145,551 innocent lives have been lost and other over 2 Million people are infected worldwide with COVID 19, a virus that remains with no cure despite great technology by man.

In response, almost every country in the world has closed its borders and internal road, air and water transport. It’s the biggest global crisis of our generation.

Most of us are rightly scared that the increasing calamities including COVID 19, the landslides, underwater earthquakes and others are a clear sign that God is unhappy with MAN.

That man has failed his duty of protecting the world and instead succeeded in destroying nature and yet, nature has its own regulations and defensive mechanisms.

When in 2016, the global community put in place the Paris agreement on climate change, there was relief that for the first time, humans came consensus to protect the environment.

Unfortunately, the agreement has not stopped environmental destruction due to human greed and ego by the mighty countries. As a result, the destruction of nature in form of forests, wetlands, lakes, rivers, seas, oceans, wildlife and many others by man activities.

What are consequences of these challenges? May it’s the COVID 19 and other calamities? We must respect nature or else we shall perish.

The current COVID 19 worldwide challenge clearly shows the limitations of MAN’s intelligence. Yes, man has the technology to go to the moon and beyond, has nuclear weapons and other advances in many other aspects of life. But can man order the COVID 19 to stop its impacts?

It should be noted that the previous corona virus outbreaks such as Mars, Sars and others did not reach Africa perhaps due to differences in climate but within a short time, COVID 19 has covered almost the entire world including Africa. 

Why, unlike previous corona viruses, has COVID 19 crossed to Africa? Why has it caused misery to the world than before at a time when the technology is at its best? May be and may be not, God and nature are angry with humanity.

In future, we may learn that the current challenges are as a result of a polluted and degraded world where forests, wetlands and national parks and game reserves, and others have been turned into oil fields, mining sites, sugar cane plantations while lakes, rivers, seas and oceans are being covered by plastics. All these impacts are a result of man failing to respect the environment within which he lives.

Let us work together to fight COVID 19 and to restore the integrity of nature. This requires sacrifice. We must stop activities such as oil that destroy nature irrespective of the billions of dollars expected in revenues. To date, those billions have failed to stop the impacts of COVID 19 on the world. Let us stop greed and be humble, and call upon God to save us.

As we call upon God to save the world, I call upon fellow Ugandans and all people across the global to respect the measures being undertaken to prevent the COVID 19 including washing hands, social distancing, respiratory hygiene, avoid touching your (eyes, nose and mouth) and stay at home as advised by the governments and professionals. Together we shall overcome COVID 19 and its social, economic and political impacts.

For God and My country

Cyrus Kabaale

Extractives Programme’s Officer, Africa Institute for Energy Governance (AFIEGO)

 

COVID19: Actions Oil Sector Companies Need To Take To Mitigate Risks

By Oneyka Ojogbo

The compounding effects of the coronavirus and oil industry disruptions pose unique and significant challenges, particularly on the African continent where the economies of producing countries are largely dependent on oil revenues.

The budgets of countries like Nigeria, Equatorial Guinea and Angola have been made mostly impractical and with annual budgetary goals now unachievable due to these unprecedented events. Nigeria, the continent’s most populous country and its largest oil producer, is expected to cut its 2020 national budget by $4.9 billion.

That budget was prepared based on the estimation of crude prices at $57/barrel. With the Brent price at slightly over $20 today, the country is most probably headed towards a recession, absent quick and miraculous interventions like the discovery of a COVID-19 vaccine.  

As more countries remain locked down and businesses remain shut because of the pandemic, the demand for oil will remain low, leaving prices equally low. The continuing disruption in the industry distribution chain and the businesses of international oil and gas companies which the African oil market relies heavily on has caused a direct and immediate impact on the local market.

Oil and gas producers and service companies from Port Harcourt, Luanda to Juba and emerging producers like Senegal and Mozambique are now faced with a myriad of financial and legal issues. Oil projects have either been suspended, like in the case of BP which issued a force majeure notice to delay taking delivery of the LNG facility for the African Tortue Ahmeyim project in Senegal; or simply terminated like the Tullow Deepwater drillship contract in Ghana.

It is now critical for companies operating in the African oil and gas sector to assess the impact of the pandemic and industry disruptions on their local operations and contractual obligations. With no end in sight, companies need to consider and take all necessary actions to mitigate all associated risks.

I have identified below some crucial issues relating to contracts and local operations.

  • Contracts (including Production Sharing, Joint Venture, Service and other Financing Contracts)

With the pandemic and oil price crash likely to cause some countries and businesses to suffer great financial challenges, there may be a need for oil producing governments to reconsider their position under oil contracts. International Oil Companies (IOCs) and foreign service companies may also be unable to meet their capital spending commitments. Potential production cuts and reduced demand could affect their ability to meet up with repayment obligations under financing instruments. Consequently, it is possible that parties will seek to terminate or renegotiate existing contracts. Companies should consider their position and begin to prepare for this possibility.

Key considerations when renegotiating the contracts during this period:

  • Both parties’ capacity to fulfil capex commitments in joint venture or production sharing contracts;
  • Crude prices and global demand for crude which will affect future receivables;
  • Ability to obtain other financing post covid-19;
  • Political and economic stability in host country;
  • Any changes in law that affect the stability of the current contract;
  • Local content obligations; and
  • The opportunity cost of the deal.

Another set of contracts that may be affected are those with Independent contractors and service providers. With the mandatory shutdown of business across sectors, subcontractors may be unable to deliver on their contracts commitments and obligations. It is important to review all contracts and confirm the conditions of these contractors. This will prepare the company to implement necessary measures to cushion any defaults until such a time that specific contractual remedies can be sought.

  • Tax implications and reliefs

Despite the negative impact of the pandemic and falling crude prices on company operations and finances, companies in the sector still have huge tax obligations to the government which must be fulfilled. Some countries are currently offering tax reliefs and fiscal packages to companies to mitigate any adverse economic impacts.

It is important that companies determine their eligibility for these reliefs. For example, the government of Equatorial Guinea has granted some tax reliefs which include a reduction in the minimum income tax from 3% to 1.5%. However, this relief does not currently apply to companies in the oil and gas sector. Other governments have provided some extension for tax payments. It is likely that governments may offer specific reliefs and tax exemptions to oil and gas companies going forward if the industry woes continue.

  • Force Majeure Provisions

An issue may arise where a party is unable to fulfil its contractual obligations. In such an instance, the company may find some reprieve in the force majeure provision. Force Majeure relieves a party from liability for non-performance under a contract and it generally refers to the occurrence of an event which is outside the control of the party affected by such event and which prevents that party from performing its obligations under the contract.

It is usually provided in and interpreted according to the agreement. Force majeure will never be implied into an agreement. So, the definition of force majeure, the events that constitute the force majeure, the effects of the force majeure on the contract (including suspension of any obligations or eventual right to terminate) and the procedure to report a force majeure event to the other party are very important to consider when trying to determine whether a party may be able to take advantage of this provision and to what extent it can be used.

With the impact of the pandemic on operations, it comes as no surprise that several companies in the industry have already declared force majeure. Tower Resources declared force majeure on its Thali offshore Cameroon license for instance, and BP sent a notice of force majeure to Golar LNG seeking to delay the receipt of the Gimi FLNG facility.

Shell which was lauded for ground-breaking success at Forcados, Nigeria, had also declared force majeure after the closure of its pipelines. However, the force majeure has since been lifted and the Forcados Oil Pipeline system, the second largest in the Niger Delta, has been reopened. Should the current situation persist, it is likely that more companies will look to suspend their obligations using force majeure clauses.

Oil and gas companies must review their contracts, including PSCs and services contracts, to determine whether they can suspend their obligations under the force majeure clause and which obligations can be suspended during the pendency of the force majeure event. It is important to note that while some force majeure clauses permit the suspension of all obligations, others only cover the suspension of non-monetary obligations.

  • Employment and Employee Safety

At this crucial period, companies may face challenges with maintaining their staff on ground and ensuring that adequate levels of health and safety measures are always provided. Companies must consider the current employment regulations and measures applicable in their countries of operation and ensure strict compliance. It may be illegal to terminate employment contracts at this point as is the case in Senegal. The company could consider the option of furlough but in countries such as Gabon, the approval of the work inspection will be required for this.

It becomes prudent to discuss with labour experts in the country and closely monitor the proclamations of the authorities for any changes in laws or regulations affecting labour.

In countries where there is no lockdown and businesses are still in operation, the company must ensure that adequate COVID-19 policies and health measures are put in place to protect the employees. The protection of workers in the workplace during this period cannot be overemphasized. Some countries have swiftly adopted health and safety laws/regulations to deal with the spread of the pandemic.

These laws may be applicable in workplaces. The company needs to consider these provisions and effectively implement them.  Countries such as Equatorial Guinea have issued specific COVID-19 work policies to ensure the safety of workers. Companies are therefore advised to adopt protocols that, at the minimum, comply with the government prescribed policy.

The world will continue to deal with the adverse economic impact of this pandemic and the declining crude price for years to come. Certainly, many aspects of our lives and how we do business will never remain the same. Africa will be heavily impacted by this incident and will require radical government responses to push through. African oil and gas players ought to carefully assess the situation and take the necessary steps to alleviate the short- and long-term effects on their operations.

How Africa Can Make A Comeback From The Oil & Gas Downturn?

Stunning drops in crude oil prices—the result of COVID-19-related declines in demand and an oil price war between Saudi Arabia and Russia—have been taking their toll around the globe this spring. For Africa’s oil-producing countries, where crude oil exports make up a large portion of their revenue, the situation is especially dire.

In Nigeria, for example, Finance Minister Zainab Ahmed recently warned of an imminent recession and requested billions of dollars in international emergency funding. As of the second week of April, national oil production in Angola was expected to fall from 1.8 million to 1.36 million barrels per day as the government prepared to freeze 30% of its goods and services budget. And Ghana, according to the Africa Centre for Energy Policy, stands to see a 53% shortfall this year in projected revenue from crude oil sales. There are similar difficulties across the continent.

There has been a ray of hope: a landmark production-cut agreement among OPEC, OPEC+ and G20 stakeholders on April 12 put an end to the oil price war. Shortly after that historical agreement, the African Petroleum Producers Organization (APPO) committed to significant crude production cuts of its own, effective May 1. While demand remains a concern, the production cuts will help lower oil inventories and should bring some stability to the oil market.

I am not saying we can expect smooth sailing from this point on. There’s no denying that the COVID-19 pandemic will continue to test African countries on multiple fronts, from the health and safety dangers it poses to our people to the economic devastation and low demand for crude. The situation is painful, but it’s not permanent. And when this chapter is over, African countries will recover.

This is the time to lay the framework for that recovery. When demand for crude oil increases again, and it will, Africa will need exploration and production activities to resume. That means oil and gas ministries should be working now on regulations that foster a more enabling environment for investors and businesses.

We should be fine-tuning our local content policies and exploring technologies that can contribute to a leaner, more profitable petroleum sector. Last October, I released a book that explains how we can accomplish these things, along with other measures that will help Africa better capitalize on its oil and gas resources. The ideas and examples it provides remain on point. We can still do this.

Exploring Solutions

With demand for oil at a historic low, it may seem odd to talk about E&P activity. But, as I have said, the situation we find ourselves in now is temporary. After we get through the current crisis, production will play a critical role in our economic recovery.

We need indigenous companies involved so employees, business partners, and suppliers can benefit from these activities. We also need foreign companies that are willing to share knowledge and technology—and to create economic opportunities in the communities where they operate.

That’s why it’s vital that government leaders take steps now to remove obstacles to launching production, from red tape and lengthy delays to excessive taxes. Governments also need to support smaller independent companies by breaking exploration maps into smaller sections. And we need better fiscal terms for companies like breaks on import duties.

This isn’t my first time to call for these things, I cover them in-depth in my book, Billions at Play: The Future of African Energy and Doing Deals. But in the COVID-19 era, they’ve become more important than ever.

Local Content: Striking a Balance

African countries need to develop fair, balanced local content policies that create economic and educational opportunities for Africans without overly burdening foreign investors and discouraging them from operating here.

A shining example of this kind of balance can be found in Equatorial Guinea, which I wrote about in Billions at Play. “The government enacted requirements for international companies to hire Equatoguineans, contribute to training programs, and work with local subcontractors.

They were careful to balance the need to boost local industry, however, with the limitations of the current local industry. They understood how unrealistic it was to require 100 percent local content until more training, education, and local capacity in that field is created.”

I’d like to see more African countries consider the example of Equatorial Guinea, along with successful local content policies in Nigeria and Angola, also covered in my book. Effective local content is key to helping everyday Africans realize the benefits of Africa’s oil and gas resources. This is a good time for leaders to look at what works and what doesn’t in their own policies and make the necessary adjustments.

It’s Time for More Tech

COVID-19 has forced companies around the globe to rely on technology to function, whether they’re using it to hold virtual meetings or monitor vital assets. I’m confident that technological solutions will play an important role in the comeback of Africa’s oil & gas industry, too.

In my book, I described technology’s potential to help indigenous African oil & gas companies operate more efficiently and boost profits, which in turn, benefits their communities and promotes economic growth. “Innovations such as the development of new ways to drill wells and handle equipment, the design of new seismic data collection programs, the management of petroleum data systems, and the monitoring and protection of internet-connected equipment have the potential to redefine how business is done in this sector.”

Now, with economic difficulties and low oil prices, benefits like these could be more valuable than ever. I encourage African oil and gas companies to work with one another, and with local tech firms, to augment their technological capacities.

African companies also should be pursuing partnerships with foreign investors that are open to technical knowledge and skills transfers. Billions at Play describes the successes that Angola-based Friburge Oil & Gas has had partnering with international technology providers to drive efficiency and environmentally friendly production methods.

We need to see more companies doing the same. Governments can support these efforts through local content policies that call for knowledge sharing, along with the creation of educational initiatives and public-private partnerships.

Long before the unthinkable happened, and COVID-19 changed our world, I made a case for strategically harnessing Africa’s oil and gas resources to create stability and economic growth. Now, because of the pandemic, we find ourselves in a difficult place with extremely low oil prices and faltering economies.

As a result, some of those strategies I’ve recommended may have to go on hold. Nevertheless, the steps I’ve put forth to help us reap the full benefits of our petroleum resources will still have merit when we emerge from this trial. If we start preparing now to set them in place, they’re even more likely to be successful.

NJ Ayuk is Executive Chairman of the African Energy Chamber

How Africa's Oil & Gas Industry Can Bounce Back From The COVID-19 & Oil Price War

The double crisis of the COVID-19 pandemic and the collapse in oil prices is taking a toll on African economies and the African energy industry. An unstable and precarious oil prices environment has resulted in substantial cuts in state budgets and public spending, in losses of contracts and hundreds of thousands of jobs put at risk.

Because bouncing back from this historic crisis will require strict and bold government action, the African Energy Chamber recently released its Call to Action, detailing 10 measures that form a commonsense energy agenda for Africa, which is now accessible to download for free HERE.

The impacts of the current crisis are wide and affecting both Africa's most promising exploration prospects, but also its multi-billion-dollar landmark projects such as BP and Kosmos Energy's Greater Tortue Ahmeyim (GTA) LNG project in Mauritania and Senegal or ExxonMobil and Eni's $30bn Rovuma LNG project in Mozambique.

Oil projects are suffering even more. In Ghana, the development of the Pecan Field has been thrown into very uncertain waters. Aker Energy cancelled its letter of intent sent to Yinson Holding this year to charter, operate and maintain the Pecan FPSO, set to be Ghana's next big oil offshore development.

Woodside Energy's Sangomar Offshore Oil Project, Senegal's very first oil venture that was sanctioned early this year, will be facing financing delays. FID on Shell's Bonga South West Aparo project in Nigeria, for which the invitation to tender was released to contractors early last year, could also not see FID this year.

Delays in the execution or sanctioning of these projects will severely impact African economies whose local goods and services were set to benefit from billions of dollars of subcontracting opportunities.

"Our commonsense approach advocates for measures that will support the continuity of business operations and future sector growth. The oil and gas industry will only work for Africans when we set fair policies and treat oil and gas companies as partners who drive our progress," declared NJ Ayuk, Executive Chairman at the African Energy Chamber. "As the voice of the energy industry, we will continue to work with the public and the private sector and other stakeholders to revitalize the African oil and sector by putting Africans back to work," added Ayuk.

While the immediate impact on the continent's biggest oil & gas project is already being felt, a much bigger one will result from the deferral or cancelling of drilling plans. Across oil & gas basins, drilling projects are being put back on the shelves or terminated.

It is the case of Valaris' drilling activities for Chevron in Angola, of BW Energy's drilling operations on the Marin Dussafu Permit in Gabon, of the much-awaited exploratory drilling by FAR in The Gambia, of early termination of drilling works of Maersk in Ghana's Jubilee and TEN Fields, or of Tower Resources' force majeure on the Thali PSC in Cameroon. No country is sparred, and such delays will further defer discoveries of new fields, and development drilling to ramp up Africa's daily output.

Since the beginning of the COVID-19 pandemic and its subsequent effect on oil demand and prices, the African Energy Chamber has been leading the dialogue between the public and the private sector on advocating for measures to support our industry and its jobs. While the Chamber believes that market forces need to determine the industry's future and advocates for limited government across the industry, the time calls for urgent actions.

We cannot let our companies and industry collapse for the fear of loosing jobs and investments that would sustain our economies for decades to come. It is worth bearing in mind, that activity in and income from Africa's energy sector generates significant amount of demand and services from other non-oil and gas sectors of the economy.

Key measures amongst the Africa's Commonsense Energy Agenda released today are the extension of PSCs and work program adjustments to boost exploration and ensure the resumption of drilling activities. While exploration is a major part of our Call to Action, the Chamber also strongly advocates for tax relief on services companies, reforms of upstream fiscal regimes, banking and financial support, regional content development, incentives to infrastructure projects, and bold actions on removing fuel subsidies.

The African Energy Chamber will continue to call on governments, regulators and private companies to work together on finding the right solutions that work for their country and operations. We have the tools in our hands to quickly open new markets for our oil and gas businesses and create new jobs for our continent.

Africa's Energy Transition Must Be African At Heart And In Practice

By Verner Ayukegba

Africa is at an energy cross-road. On one hand, the most talented, better educated, most entrepreneurial and competitive generation the continent has ever had is rising and taking on leadership positions that will propel African companies to become more competitive.

After many turbulent decades, most corners of the continent have found the necessary political and economic stability to strategize for a better future making use of their natural resources and wealth. Nowhere else on planet Earth are economies and populations expected to grow faster than in the mother-continent.

After such a long time dealing with the problems of the past, Africans can look to the future with the promise of a better life. After all, when it comes to natural resources such oil, gas, coal, diamonds, rare earths, woods, or agricultural potential and legacy-free technological development, there is no place like Africa.

Over the last decade, most of the world's biggest oil and gas discoveries took place on the African continent, and rapidly developing indigenous companies are ensuring these resources serve Africans and African economies more than they ever did before, resources that will power industries, light homes and create wealth.

Our time to rise is finally here

I have had the chance to witness this with my own eyes. From Equatorial Guinea to South Africa, from Angola to Mozambique and from Kenya to Senegal, the energy industry, the one I know best and the one closest to my heart, is revolutionizing life. Political leaders are willing to learn from the mistakes of the past to improve resource management, contract negotiations and environmental protection policies. 

Most of all, they have developed local content policies that potentiate the participation of Africans in these industries. Oil and gas training programmes and university degrees that cater to the industry like engineering are now more common than ever.

These programs are educating and giving opportunities for numerous Africans to find work in the industry and further, to start their own companies within the industry's supply chain. While the drive to strengthen the integration of the energy sector and other extractive industries with the rest of the economic system is far from complete, it has certainly been fundamental in developing Nigeria's indigenous upstream sector or in building a truly native gas industry in Equatorial Guinea.

In Nigeria for example, this critical mass of local talent has been instrumental in the establishment of regional energy giants like Seplat Petroleum, Sahara Energy, Atlas Petroleum International Limited and Shoreline Natural Resources, whose influence is felt more and more beyond Nigeria's boarders.

Local content clauses in contracts are the way African leaders assure that the exploitation of the local natural resources has a trickle-down effect on the local economy, through job-creation and increasing local participation in the value chain the industry brings with it.

Furthermore, most recent localization strategies for the oil and gas sector have been successful in developing truly native associated industries, particularly within the natural gas supply chain.

As the Africa Energy Chamber has advocated since its establishment, we are finally seeing petrochemical plants, fertilizer plants and gas-fired power plants popping up across the continent. An African natural gas economy is growing where before the plague of flaring stood unmatched.

Intra-African trade in both natural gas and Liquefied Natural Gas (LNG) is also likely to rise significantly, on the back of rapid urbanization and development across the continent which is set to increase energy consumption on the continent by more than 50% before 2040, This will speed up wealth creation and capacity building across borders.

Following the oil price crash of 2014, many countries across Africa have sought to reposition themselves to attract investment into their energy sectors through the introduction of varying incentives. These incentives ranged from granting tax breaks to potential investors to reducing bureaucracy affecting the sector.

On the other hand, the recent global climate change discourse which has also intentionally sought to demonize and simply hinder investments into Africa's oil and gas sector, poses a new challenge to the growth of the sector in Africa.

Worryingly, these two issues are taking attention away from the need to ensure that the African energy industry benefits Africans at large and fulfils its transformative potential to raise the continent out of poverty.

The African energy transition will not be made in the West

The issue of climate change has come to dominate the global debate over the energy sector. An energy transition is necessary to tackle the effects of CO2 emissions on a planetary scale. While Africa has contributed only a miniscule part of those emissions, it stands to suffer the most from the effects of this change, and must as well prepare for a progressive shift in its energy structure.

In many ways, the channelling of natural gas for power generation and the upgrading of oil and gas infrastructure and equipment to improve efficiencies and reduce the industry's carbon footprint is already going a long way to achieve that. New renewable energy projects from Kenya to South Africa will also help balance out the continent's energy matrix as it expands its electrification rates to reach every African in every corner of the continent.

Many international and foreign institutions have already started to share their expertise and support with African governments and many foreign investors have started to develop their own projects in the mother-continent. Wind farms, solar parks, geothermal drilling, hydropower plants, etc, are taking advantage of each region's available resources.

Here too, these renewable resources must be used for the benefit of Africans, and they must be developed with the participation of Africans and in a manner that is sustainable economically and to a scale that is capable to supporting the growth of industry that provides for good paying jobs.

It is fundamental that these new technologies and sources of energy suit the communities which they are meant to serve. Climate concerns cannot side line discussions over local content and localization strategies. They must go hand in hand, be one and the same, or else we may again find ourselves dependent on foreign knowledge to provide for our energy needs. Such dependence is unlikely to lead to the mass scale of development with the potential to lift large swaths of the population out of poverty.

Education programs and employment clauses are a fundamental step of the energy transition and not a secondary aspect of it. Market-driven local content frameworks need to be designed for capacity building, employment generation and overall enforcing a value-adding multiplying effect in our economies.

This debate is now more important than ever, as Africa opens up to new industries and to greater trade integration. As more and more African nations gain the expertise to explore their natural resources for the betterment of their economies and their people, we need to see further integration and cooperation between them, so that the continent can take advantage of synergies that different regions and industries can offer.

Already, we see examples of gas-poor countries like South Africa investing in natural gas and LNG projects in gas rich Mozambique with the aim of reducing their growing energy deficit. As demand rises, exploration will accelerate and so will the use of the vast gas resources, including those that continue to be wasted through flaring.

The African Continental Free Trade Zone is an ideal platform to promote the development of an intra-African natural gas trade that will promote widespread economic growth and access to power.

Again, it is fundamental that these developments are pegged to well implemented and designed local content policies, so that Africans can truly benefit from the exploitation of their continent's resources, and by so doing, ensure that Africa's energy transition will be driven and made sustainable by those that will transition with it.

Verner Ayukegba is the Senior Vice President with the African Energy Chamber and Director of Operations at DMWA Resources, a pan-African energy marketing & investment firm.

Coronavirus: Oil Activities Could Worsen Pandemics

By John Kakule Lufukaribu & Cyrus Kabaale

It’s unfortunate that our country and the entire world is going through a terrible situation of fighting against the global Coronavirus pandemic. Scientists have said that the pandemic started at an animal market in Wuhan China where the virus likely jumped from an animal to a human being. Thereafter, the virus spread like wildfire.

Scientists are now advising that to stem the spread of fatal illnesses such as COVID-19, Ebola and other diseases that jump from animals to human beings, it is imperative to promote environmental conservation, provide clean renewable energy, decrease population growth and undertake under measures.

The scientists say that a burgeoning population that has cut down animal habitats or the need to collect firewood has increased interactions between animals and human beings, leading to increased cross-over of diseases such as COVID-19, Ebola and others.

Unfortunately, the Ugandan government is endangering citizens in the Great Lakes region including those from the Democratic Republic of Congo (DRC)by allowing degrading oil activities including in cross-border eco-sensitive areas.

For instance, on March 9, 2020, Uganda’s National Environment Management Authority (NEMA) issued an environmental and Social Impact Assessment (ESIA)certificate of approval to CNOOC (U) Limited for its Kingfisher oil project.

The certificate was issued for a project through which oil will be drilled from transboundary and eco-sensitive areas such as Lake Albert, which is of immense importance to the over 35,000 people that rely on the lake in Uganda and the DRC.

Communities for whom Lake Albert is a life source were not consulted for their views on the Kingfisher ESIA to safeguard their life source despite the Kingfisher developers recognising that their project could have transboundary impacts such as contamination of water, oil spills and others.

This was very wrong and communities in the DRC that survive off Lake Albert are demanding that the Ugandan government works with the DRC government to gather their views on how to protect their jewel, Lake Albert, from oil pollution. The communities are also calling on both the Ugandan and DRC governments to avoid oil activities in cross-border eco-sensitive areas.

The communities concerns are valid. On March 29, 2020, that the certificate was issued, an oil spill occurred during drilling for geothermal energy in Kibiro, Hoima. This spill, which affected Lake Albert, highlighted why communities are afraid of oil exploitation within and around a resource that they survive on.

The Ugandan government’s response, which involved a site visit five days, after the spill and an even longer period before they released a report which showed to what extent the oil spill affected the environment, is even more unfortunate as it shows that should an oil spill occur on Lake Albert, it will be poorly managed. This will hurt communities’ access to fish, water, incomes and others.

Oil activities in cross-border eco-sensitive areas such as Lake Albert, Lake Edward, Queen Elizabeth National Park and others must, therefore, be avoided.

John Kakule Lufukaribu CSO Coordinator, DRC Ituri province and Cyrus Kabaale, Community Rights Defender

 

 

OPEC Still Has An Important Role To Play In Global Oil Market

By Sebastian Wagner

Scan Western news about OPEC from the last few years and a common observation tends to appear: OPEC had a huge influence on the global oil market back in the day. Now, in the shale oil era, not so much.

I would argue that OPEC can safely state that reports of its death—or dwindling relevance—are greatly exaggerated. In fact, OPEC has been at the center of one of the biggest stories of 2020 aside from COVID-19: a historic deal that resolved the oil price war between Saudi Arabia and Russia.  

From 2016 to late March, the two oil powerhouses had been part of a loose alliance of OPEC members and non-member producers known as OPEC+. Its purpose was to stabilize the global oil market through voluntary production cuts. The alliance was a success until early this year when COVID-19 effectively shut down China’s economy and dramatically reduced its crude oil imports.

To restore market balance, OPEC member Saudi Arabia asked OPEC+ member Russia to increase its production cuts. When Russia refused, Saudi Arabia stopped complying with its own production cuts and, instead, started flooding the market with oil.

Russia followed suit and plans to renew the OPEC+ agreement on April 1 were abandoned. Crude oil prices went into freefall, and U.S. shale oil producers started struggling to survive. It didn’t help when COVID-19 began forcing lockdowns around the globe, resulting in plummeting demand for crude and even lower oil prices.

The world was watching closely when Saudi and Russian leaders attended an emergency OPEC/OPEC+ meeting on April 9. After three days of negotiations, OPEC and OPEC+ members agreed to massive production cuts starting with nearly 10 million barrels per day May 1.

The cuts, which will gradually decrease, will continue through April 2022. While low demand remains a concern, by stabilizing the oil market, OPEC+ will still provide economic relief and save jobs around the world.

Shortly after the product-cut agreement was finalized, exhausted Saudi Energy Minister Prince Abdulaziz bin Salman shared his exhilaration with Bloomberg News. “We have demonstrated that OPEC+ is up, running, and alive.”

Indeed. Both OPEC and OPEC+ are very much alive and as relevant as ever.

A New Era?

Despite the condescending descriptions of OPEC I’ve read in American media coverage, I am seeing signs that U.S. leaders are starting to look at OPEC with newfound respect. Even one of the organization’s most outspoken American critics, President Donald Trump, had generous words for OPEC the evening before its April 9 meeting.

“Obviously for many years I used to think OPEC was very unfair,” Trump said during a press briefing. “I hated OPEC. You want to know the truth? I hated it. Because it was a fix. But somewhere along the line that broke down and went the opposite way.”

Then there’s Ryan Sitton of the Texas Railroad Commission, which regulates the exploration, production, and transportation of oil and natural gas in Texas. He responded to the Saudi-Russia oil price war by reaching out to OPEC and proposing statewide oil production cuts. After a one-hour photo call with OPEC Secretary General Mohammad Barkindo, Sitton was invited to attend OPEC’s June meeting in Vienna.

While I applaud Sitton’s initiative, I couldn’t help noticing what a departure it was from America’s usual “OPEC playbook.” U.S. energy policy has been driven by a strong desire to “free” the country’s oil and gas industry from OPEC’s influence. As recently as 2018, the U.S. House of Representatives attempted to pass the No Oil Producing and Exporting Cartels Act (NOPEC).

Had this harmful bill been approved, the U.S. Attorney General would have been empowered to bring antitrust lawsuits against OPEC and its member countries. The legislation likely would have jeopardized foreign investments in the U.S. oil and gas industry and cost America valuable commercial partnerships.

How dramatically things have changed. Two years after NOPEC was proposed, we had a representative from the powerful Texas Railroad commission offering to work with OPEC to help balance the market.

While it’s unclear whether Texas will cut production, Sitton’s decision to open communication with OPEC is a positive, and I hope other U.S. industry leaders will consider the same. Instead of viewing OPEC as the enemy, dismissing it, or avoiding it, why not learn to understand this important organization and lay the foundation for a productive relationship?

Gaining Perspective

I suggest starting with Amazon’s bestselling book, Billions at Play: The Future of African Energy and Doing Deals, which includes a chapter titled “A Place at the Table: Africa and OPEC.” Yes, the chapter covers the value OPEC membership offers African nations, but its insights are relevant to everyone with ties to the oil and gas industry.

The background on OPEC’s 2016 Declaration of Cooperation is particularly timely. It was that agreement among OPEC producers and 11 non-members that resulted in OPEC+. For the first time in OPEC’s history, member countries agreed to work with non-member countries to stabilize the global oil market after increased U.S. shale oil production triggered low prices. Together, participating countries committed to voluntary production adjustments of 1.8 million barrels per day. Until the extraordinary chain of events set off by COVID-19, the OPEC+ alliance remained firmly in place.

The book also delves into the reasons OPEC membership has so much to offer African oil-producers: strength in numbers and a commitment to unity. “The organization says that every new member adds to the group’s stability and strengthens members’ commitment to one another,” the book explains. “Different perspectives create a rich culture where colleagues can learn from one another, anticipate and respond to the complexity of today’s oil markets, and ultimately, influence prices.”

It’s not always a seamless process, but OPEC continues to achieve those objectives. And as we go forward, this kind of unified approach will remain critical. Most likely, the global oil and gas industry will be forced to deal with the economic impacts of COVID-19 and low oil demand for an unknown period of time. Instead of working at cross purposes, oil-producing countries will need to continue cooperating to find solutions, embrace opportunities, and keep the industry alive.

Sebastian Wagner is the Chair of the German African Business Forum and the CEO of DMWA Resources, a pan-African energy marketing & investment firm. 

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