Oil and gas will continue to play an important role in the African project story.
According to Ricard Torné, lead economist at FocusEconomics, uncertainty about the evolution of oil prices is the main challenge at present, as oil is still the main energy commodity not just in Africa but around the world.
“The ongoing transition to a lower carbon energy system will boost investment towards the renewable energy sector and trim demand for conventional energy sources,” he said. “However, the US decision to withdraw from the Paris agreement and its bet on fossil fuel to generate energy are steps in the opposite direction, and could be followed by other countries.”
He said traditionally demand for oil had a strong correlation with global GDP growth.
“While in recent decades technological improvements have led world economic growth to become less oil intensive, oil demand still depends on the evolution of the global economy. Therefore, rising uncertainty due to the brewing trade war between the United States and other major economies, tightening financial markets and the economic transition in China are seen leading global growth to decelerate in the coming years, reducing demand for the black gold. Moreover, a stronger preference for cleaner energy will also add downward pressure on oil demand.”
In Africa, he said, a mix of energy was being developed but fossil fuels remained the most prevalent due to a variety of challenges, including financing of more expensive renewable technologies. According to Norton Rose Fulbright’s Richard Howley and Penny Cygan-Jones, gas is a growing energy source on the continent. With large-scale discoveries of offshore gas in Mozambique and Tanzania, natural gas is being advocated extensively with some even calling for it to be the backbone of the regional economic integration among the SADC member countries.
Also in East Africa, despite a lack of infrastructure, gas finds are a reason for optimism. Howley and Cygan-Jones recently wrote a piece on gas in Africa saying that while East Africa was leading the way with progress to market (especially in Mozambique), West Africa was fast emerging as an important region for the deployment of small-scale floating LNG.
Torné said gas would continue to gain prominence in Africa in the years to come.
In Africa a mix of energy is being developed but fossil fuels remain the most prevalent. – Ricard Torné
