Oil & Gas

Renewable energy investments in Africa are being hobbled by insufficient government loan guarantees, as the International Monetary Fund keeps a tight leash on country indebtedness, TotalEnergies CEO Patrick Pouyanne said on Wednesday.

Pouyanne said currently electricity projects in Africa suffer from “a problem of solvency… you have a risk not to be paid”.

“So, when a renewable developer wants to develop, and it’s obvious you have huge potential, he will go and see the government and ask for guarantees,” he said.

“But the African governments, they will tell you, are not able to give these guarantees because the IMF is coming and telling them, ‘Don’t go and give these guarantees, you are already over-indebted’.”

Pouyanne said the result was that in Africa, his company was largely limited to business-to-business mining projects because it is an industry where they know they will receive payment.

TotalEnergies has oil and gas operations in 30 African countries, plus two solar parks in Egypt and plans for a solar power and battery storage project in South Africa to come online in 2025.

Its global renewable energy projects totalled 22 gigawatts (GW) of installed capacity by the end of 2023, most of the oil majors, located in Latin America, Eurasia, the US and the Middle East.

The comments were made at a government-industry dialogue hosted by the International Energy Agency focusing on Africa and renewable energy.

“I am disappointed not to see … a real international financial body to counter guarantee all these African states — and not to ask them more than what we are asking,” Pouyanne said.

He said that on TotalEnergies’ 1 GW solar plant in Iraq, the project’s international financiers were asking the Iraqi government for more loan guarantees than TotalEnergies, leading the French company to fully self-insure the project to avoid burdening the government with more debt.

Opening the event, Prime Minister Giorgia Meloni unveiled a “non-predatory” plan that her far-right government hopes will foster a new relationship between Europe and Africa.

Her approach, which includes energy deals in return for stopping migration, is inspired by Enrico Mattei, the founder of state-owned Italian electricity giant Eni.

It positions Italy as a key bridge between Africa and Europe, funnelling energy north while exchanging investment in the south for deals aimed at curbing migrant departures across the Mediterranean.

Eye on energy
Meloni outlined a series of pilot projects in individual countries that she said would enable Africa to become a major exporter of energy to Europe, helping it reduce its dependence on Russian energy.

“We want to free up African energy to guarantee younger generations a right which to date has been denied,” Meloni said.

“Because here in Europe we talk a lot about the right to emigrate, but we rarely talk about guaranteeing the right to not be forced to emigrate.”

Meloni, who came to power in 2022 on an anti-migrant ticket, said the plan would initially be funded to the tune of €5.5 billion, some of which would be loans, with investments focused on energy, agriculture, water, health and education.

Representatives of more than 25 countries attended the summit on Monday at the Italian Senate. Also present were European Commission President Ursula von der Leyen and representatives of UN agencies and the World Bank.

No consultation
Critics have warned the plan favours European priorities and pockets.

African Union Commission chairman Moussa Faki Mahamat said that African countries would have liked to have been consulted before Italy rolled out its plan.

“We need to pass from words to deeds,” Faki, the former prime minister of Chad, said addressing the summit. “We cannot be happy with promises that are never maintained.”

Giovanni Carbone, who runs the Africa programme at the Institute for International Political Studies in Milan, questioned whether Italy had the necessary African development knowledge or experience to make its plan work.

“Italy has a tradition of relatively close relations with Mediterranean countries such as Tunisia, Libya, partly Algeria and Egypt, but less so with sub-Saharan Africa, which should be at the heart of the Mattei Plan,” he told French news agency AFP.

Swire Renewable Energy A/S, a renewable energy maintenance and services company owned by the Swire Group, has acquired South African renewable energy service provider – Obelisk Energy Services Ltd (South Africa), its related South African group companies, and its related Irish company, Obelisk Energy Ltd (Ireland).

Swire Renewable Energy has purchased Obelisk to consolidate its business in South Africa and establish a footprint in the Irish renewable services sector.

Obelisk’s renewable services businesses are leading suppliers of high-quality maintenance, testing and support services based in Capetown, South Africa. Obelisk has supported more than 200 renewable energy development sites and 20+ windfarms in South Africa since 2010. The company provides wind measurement services, HS&E advisory services, statutory inspections, operational maintenance services and blade and tower services, as part of its product portfolio. Obelisk is committed to local content and job creation in South Africa.

“Acquiring the renewable services business of Obelisk represents an important strategic move for Swire Renewable Energy and consolidates our African position following last week’s acquisition of Altitec Blade Services, which provides blade services in South Africa,” said Ryan Smith, CEO of Swire Renewable Energy. “Africa is an important and highly prospective maintenance and service market for wind turbines, solar and P2X infrastructure.

By combining the Obelisk and Altitec teams in South Africa, together with Swire Renewable Energy’s core HV, mechanical, turbine, and installation teams, we now have the right platform in place to develop a competitive long-term strategy for OEM’s, project developers, and energy producers in the African renewable energy sector. Swire has significant operating experience throughout Africa and we will be leveraging that experience as we focus on developing our service network with these important acquisitions.”

“Obelisk has developed a sound reputation for providing quality services in South Africa and other countries on the continent. We are very much looking forward to integrating with Swire Renewable Energy and expanding our service range and expanding the business in South Africa, and other African countries,” said Riccardo Buehler, Managing Director of Obelisk South Africa.

A Nigerian solar plant and an Azerbaijan wind farm were among the 55 projects that received financing worth $1.7 billion from the OPEC Fund for International Development in 2023.

Almost 60% of the funding in the energy sector went to renewable energy projects, in line with the institution’s Climate Action Plan.

Investments included a $25 million solar plant in Niger, a $50 million 240-megawatt wind farm in Azerbaijan, and $40 million towards two wind power plants in Uzbekistan totalling 1 gigawatt of renewable energy capacity.

Projects in Tanzania and Bangladesh aimed to enhance energy security, supporting Sustainable Development Goal 7 for clean and affordable energy access. The funding was directed towards addressing climate change, social and economic resilience, and sustainable growth.

Abdulhamid Al-Khalifa, the organization’s director general, highlighted the impact achieved despite global challenges. OPEC Fund leveraged partnerships with multilateral development banks and institutions to mobilize development support.

The organization aimed to commit 40% of new financing to climate action by 2030. In 2023, Africa received the largest share of investments at 42%, followed by the Middle East, North Africa, Europe, and Central Asia at 20%, and Latin America, the Caribbean, Asia, and the Pacific. Public and private sector lending, trade finance, and grant operations were utilized.

Policy-based loans made up 31% of the total lending program, with the transport and storage sector receiving the most significant share at 14%.

Total Energies and Africa Oil are abandoning a project in Kenya, increasing challenges for operator Tullow Oil following a years-long effort to get the development off the ground.

Tullow found crude in the East African country more than a decade ago, but commercial extraction is yet to begin as it’s failed to find an additional partner and Kenya’s government has been slow to approve a development plan. With Total and Africa Oil now exiting, Tullow is left on its own to get the project underway.

The company’s two partners in the country will “issue notices of withdrawal from Blocks 10BB, 13T and 10BA in the South Lokichar Basin for differing internal strategic reasons,” Tullow said Tuesday in a statement. “As a result, Tullow’s working interest in these blocks will increase from 50 per cent to 100 per cent.”

The company’s shares sank as much as 3.9 per cent to 23.94 pence at the open in London.

Africa Oil released a separate statement, saying its “strategy has shifted to focus on production and high-potential exploration opportunities” elsewhere. Total didn’t immediately respond to a request for comment.

Tullow is continuing its search for a partner and said the change in shareholdings gives it “more flexibility” in that process. “Detailed farmout discussions continue with a number of companies,” it said, adding that it’s still hoping to secure a strategic partnership this year.

Bloomberg

FourQuest Energy Inc. has acquired privately owned Dubai, UAE-based Caley Energy FZCO. Founded in 2014 by Charlie Topp, Caley Energy FZCO is a leading provider of specialist equipment and personnel to the major service providers of the process and pipeline industry throughout the Middle East, Africa, and Caspian region.

“We are very proud to rejoin the FourQuest Energy team. Our mission within the region will be to offer our clients an engineered-driven, cost-effective solution that will add value to the clients of our projects.”

“We are very pleased to be acquiring Caley Energy FZCO as we continue to expand our services in strategic global markets,” said Nik Grgic, President of FourQuest Energy Inc. “Having previously operated in these markets with many of the same personnel, we’re excited to be back providing our world-class engineering and industry-leading field execution throughout the oil, gas, petrochemical, and power industries.”

Derek Grimley, Director of Caley Energy, has been appointed the Regional Manager for the newly formed Middle East, Africa, and Caspian region of FourQuest Energy, said, “We are very proud to rejoin the FourQuest Energy team. Our mission within the region will be to offer our clients an engineered-driven, cost-effective solution that will add value to the clients of our projects.”

The US First Lady Jill Biden’s visit to Africa this week to discuss climate change and food insecurity is timely. Africa faces serious environmental challenges, including land degradation, deforestation, biodiversity loss, and extreme vulnerability to climate change. Indeed, the continent is most vulnerable to climate change and the least equipped to cope. However, addressing climate change will almost be impossible until the world is ready to deal with the environmental and development inequality challenges. For instance, the United States has emitted over a quarter of all greenhouse gases since the 1750s, while the entire continent of Africa has emitted only about 3 per cent.

With this challenge not expected to end in the foreseeable future, we must now turn to alternative power solutions. One way of bridging the gaps is scaling up investment in renewable energy, which offers a cost-effective solution for providing communities and businesses in Africa with low-cost, reliable, and clean power—particularly in regions with no existing power grids.

In its report, Africa 2030: Roadmap to a renewable energy future, the International Renewable Energy Agency (IRENA), states that the world is increasingly embracing modern renewable energy technologies. For many years, these technologies have been supported to address environmental and energy security concerns and are now seen as the most economic option.

Globally, renewables are changing business models and creating opportunities not only for power plant operators and end customers but also for other system participants in the smart energy sector. Solar is an important renewable energy source, and many organizations and countries have invested in it as a key alternative to fossil fuels.

The total amount of energy irradiated from the sun to the earth’s surface is enough to provide more than 10,000 times the annual global energy consumption. Moreover, the cost of solar energy is less than that of conventional generation if the indirect costs of fossil fuels are included, such as environmental and health costs. Yet these benefits remain largely untapped; most energy decisions taken today overlook solar power as a modular technology that can be rapidly deployed to generate electricity close to the point of consumption. In addition, the implementation of sustainable energy solutions is beset with a myriad of challenges, key among them being the initial investment required to implement renewable energy projects.

The good news is that the African Development Bank and partners in the new fund will continue to provide growth capital and infrastructure equity to support renewable and sustainable energy and focus on decarburization, decentralization and digitalization as the key climate mitigation and energy transition strategies.

In South Sudan, the National Environment Policy aims to ensure the protection and conservation of the environment and sustainable management of renewable natural resources. South Sudan has about 8 hours of sunshine per day with a solar potential of 436 W/m2 /year. The country has demonstrated the potential to work with a wide range of stakeholders and support new clean-energy projects and sustainable peace.

While renewable energy has significant long-term benefits, it requires a significant upfront investment, which can be a barrier for some companies. To address this challenge, Trinity Energy has partnered with a range of stakeholders, including governments, NGOs, and the private sector, to leverage funding and resources to implement renewable energy projects across Africa. For example, the company has partnered with the South Sudan Electricity Corporation to increase the current 6 MW generating capacity with a 10 MW solar power plant which will supply the city and nearby counties.

It is noteworthy that without a stable and sustainable source of energy, our economy cannot grow and households will continue to suffer. We all have a responsibility to act swiftly and to support local businesses trying to create a better future by providing simple but effective solutions accessible to everyone. It will not happen in isolation but through collaboration and partnership with players across the public and private sectors.

One crucial step is to bring a far broader range of actors into the sector, particularly in the investment finance, marketing, and retail areas. At the same time, there is a need to proactively encourage its uptake and lobby for the development of a local industrial base. Above all, African governments need to identify energy security as the single most important challenge that must be prioritized and addressed effectively to accelerate economic growth.

Written by: Miriam Dangasuk, Operations Manager at Trinity Energy, South Sudan.