Africa’s Survival in a Green World

March 21, 2022


The idea that people and companies must only buy eco-friendly products or benefit from services with a near-zero carbon footprint to avert climate disaster is still a novel concept in most countries. For example, electric vehicle (EV) sales accounted for only 9% of global car sales last year, said the International Energy Agency (IEA) in January.

However, demand for clean energy is rising. In 2019, EVs accounted for 2.5% of global car sales. “All the net growth in global car sales in 2021 came from electric cars,” noted Leonardo Paoli, clean energy technologies analyst at the IEA, in a January note.

According to the IEA, demand for other non-petroleum-based products is also rising. “Since the beginning of 2020, the price of PV-grade polysilicon has more than quadrupled, steel has increased by 50%, copper by 60% and aluminum by 80%,” noted a December paper.

That already is hurting national and international oil and gas companies. “Exploration for new oil and gas has dropped … to the lowest level in 16 years,” said Bjørn Sverdrup, chair of the executive committee at the Oil and Gas Climate Initiative (OGCI). “Some companies are already [saying] they’ll plan to reduce production.”

That worries African nations that depend on oil and natural gas extraction and refining to power their economies and exports. “The decision by Western countries to halt overseas fossil fuel financing has sparked alarm among Africa’s largest hydrocarbon exporters,” said Felix Thompson of Global Trade Matters, a specialized news portal, in January.

Uncomfortable future

The sector’s long-term future doesn’t look promising. In September 2020, a British Petroleum (BP) report said the pandemic saw oil and gas consumption peak. “Energy markets will undergo lasting change, shifting toward renewable and other forms of zero or low-carbon energy,” wrote Bernard Looney, CEO of BP. “Demand for oil and gas will be increasingly challenged.”

In December 2020, Tom Randall, a Bloomberg senior analyst, looked at data from the IEA, BP’s 2020 Energy Outlook and the climate-focused portal Carbon Brief: he found that even if companies continue “business as normal,” demand for fossil fuels will gradually decline by 10% through 2040. A more optimistic view comes from a 2020 report from OPEC, a cartel of the world’s largest oil producers. It estimates global oil consumption will start declining by 2040. That is nearly a decade before the target set by companies who have pledged to become carbon neutral.

Achieving carbon neutrality would result in global oil demand dropping from 5 gigatonnes in 2020 to 1 gigatonne by 2050, noted a 2020 report from the multinational consultancy Accenture. “That is the equivalent of the [EU’s] combined emissions (or 80% of U.S. emissions),” wrote Muqsit Ashraf, a senior managing director and Global Energy Industry Sector Lead at Accenture.

In May 2021, Wood Mackenzie, a global research and consultancy business focused on natural resources industries, projected that if the world keeps global warming to 2 degrees Celsius over pre-industrial levels, oil prices will decline significantly. That is mainly because more governments, companies, and people increasingly prefer to use non-fossil fuels, such as electric vehicles, solar, and wind energy, to produce electricity.

For example, Egypt’s government plans to mass-produce electric passenger vehicles in 2023, with plans to reach nearly 100% locally sourced components. It has also achieved its target of generating 20% of the nation’s electricity from renewable sources one year ahead of schedule.

According to international experts, that global trend could slow down new oil and gas excavation operations until 2050, when most governments pledged to reach net-zero emissions.


Some industry observers are skeptical that oil and gas stocks would be a viable long-term investment. “Some [oil and gas] giants will fall,” Bill Gates, Microsoft’s founder and a climate advocate investing in clean energy, told CNBC in November. “Thirty years from now, some of those oil companies will be worth very little.”

Yet, most oil and gas giants have seen stock prices rise since their 2020 collapse. In fact, stocks of four of the top five oil and gas companies have surpassed their pre-pandemic levels.

Some believe that changing investor sentiment will eventually hurt stock prices. “Although a significant need for oil and gas will remain for the foreseeable future, companies will no longer be assessed solely by the price and quality of their products,” noted a Strategy& report published in 2021. Instead, investors will take into account their environmental impact. That is partially why most IOCs worldwide have announced decarbonization plans since 2019, focusing on cleaning their operations and supply chains, said the report.

Apache, the biggest oil and gas investor in Egypt, has eliminated routine flaring on its rigs in the United States. It also uses solar panels to power living quarters in remote drilling locations in Egypt.

Some companies, including Bosch Global, are developing low-emission oil products, such as synthetic fuels, that don’t require engine modifications. The Strategy& report noted a few Egyptian oil companies are catching up, “recognizing the importance of decarbonization.”

Gates told CNBC that diversifying into clean energy might be the only lifeline for oil and gas companies. The Wood Mackenzie report said oil and gas companies are reinvesting profits in renewables, hydrogen and carbon capture “to build a sustainable business.”

Left out?

Changes undertaken by international oil companies have African nations concerned about their economic futures, as most rely on oil and gas investments. Nearly half of Egypt’s exports come from fossil fuels, and the government is undertaking an aggressive strategy to increase reliance on locally sourced natural gas instead of imported oil.

But high poverty rates on the continent mean cutting-edge, eco-friendly solutions will likely be unaffordable to the masses. Moreover, governments probably would face opposition if they mandated lower emissions.

African countries could decouple from the global oil and gas FDI. Since the last quarter of 2021, several African oil and gas experts have said the continent needs a continental financing institution to finance oil and gas operations. “If we insist on the exploration of our oil and gas reserves when the world is cutting down on investments in the sector, we must set up a financial institution,” said Timipre Sylva, Nigeria’s petroleum minister, in September. He points to creating an “African Energy Bank to develop the [continent’s] oil and gas sector.”