Nigeria and African Energy Poverty and Gas-To-Power Projects: Build More and Build Better

As the executive chairman of the African Energy Chamber (AEC), it’s my honor and my privilege to tell the world the story of Africa’s oil and gas industry – to explain what this continent can do to help power the world and fuel its own future. But it’s also my mission to talk about African energy poverty and to explain why this continent needs better access to energy now in order to illuminate its own potential and power forward. To illustrate the issue of energy poverty in general, I’d like to focus on energy poverty in Nigeria in particular. Within Africa, Nigeria is an interesting subject. It’s the most heavily populated country in Africa, with more than 200 million citizens. It surpassed South Africa to become the continent’s largest economy about a decade ago, and its GDP topped USD441.5 billion in 2021. It has the largest crude oil reserves in sub-Saharan Africa and is typically the largest liquids producer in the region, though output figures have slumped this year due to problems with theft and sabotage. Likewise, it has sub-Saharan Africa’s biggest reserves of natural and associated gas and is far and away the region’s biggest gas producer. Nigeria also experiences significant energy poverty, despite these advantages. As noted in the AEC’s recently released report, “The State of African Energy: 2023 Outlook,” consistent access to modern energy services – that is, steady and reliable electricity supplies – is available to only 60% of the country’s population on average, and access rates appear to be significantly lower in rural areas than they are in urban areas. And according to World Bank data, about 99.9 million people, or more than 47% of Nigeria’s population, lived in rural areas as of the end of 2021. That means nearly 100 million Nigerians are living without any true level of certainty that the lights and the electric power that so many in the developed world take for granted will stay on. I, for one, think they deserve to have that certainty. They deserve it on human grounds, and their country already has a significant amount of what is needed to provide them with it. And by that, I mean that Nigeria has gas that it could use to generate power. What Nigeria Has As I’ve already noted, the country’s gas resources are the largest in sub-Saharan Africa. Nigeria has already been shown to have more than 200 trillion cubic feet (tcf) of gas in proven reserves, and government officials believe that the figure could go even higher, perhaps reaching 600 trillion cubic feet (tcf) following additional exploration. If that prediction comes true, Nigeria will have the fourth largest gas reserves in the world, behind only Russia, Iran, and Qatar. It will have more than enough gas to meet current demand; it will have enough gas to produce significant volumes of LNG for export while also supporting gasification programs, both on the domestic and regional levels. But it’s not enough just to have all that gas. Nigeria also needs the means to make use of its gas. Without the proper infrastructure, it won’t be able to put its resources to work and will merely have a scattered collection of raw materials. What Nigeria Needs In practical terms, this means that Nigeria ought to have the following: - Upstream production facilities for gas. - Midstream gas transportation facilities such as pipelines, including field networks and trunk lines. - Downstream gas-processing plants and production facilities for gas-derived fuels such as liquefied natural gas (LNG), compressed natural gas (CNG), and liquid petroleum gas (LPG). - Downstream gas distribution systems, including town gas networks. - Downstream gas storage depots. - Gas-fired thermal power plants (TPPs) – preferably co-generation plants, as they are more efficient. - Transmission, distribution, and storage infrastructure for the electricity produced by gas-fired TPPs. - Smart and secure operational technology (OT) systems that can optimize the flow of data and resources between consumer markets and energy networks. I’m not suggesting here that it’s the Nigerian government’s job to provide all this infrastructure. But I do believe that it’s Abuja’s responsibility to make sure that this infrastructure becomes available. To this end, I think that Nigeria also needs government bureaucracies that are competent and trustworthy enough to ensure that oil-, gas-, and power-related contracts are only awarded to companies capable of providing the goods and services required within the acceptable parameters. What Nigeria Envisions Developing this infrastructure requires the right kind of vision, which Nigeria already has in place: its “Decade of Gas” program is designed to make the country entirely gas-powered by 2030. When President Muhammadu Buhari rolled out this initiative in March 2021, he indicated that it aimed to make the gas sector the cornerstone of Nigerian economic activity. By the time the “Decade of Gas” comes to an end, he said, the country will have done the following: - Adopted a new oil and gas law to facilitate investment. - Carried out new exploration projects, discovered new reserves, and brought new fields onstream. - Constructed new gas-processing plants and production facilities for LPG and other gas-derived fuels. - Built new export pipelines and constructed new production trains at gas liquefaction plants such as Nigeria LNG (NLNG). - Constructed new domestic pipelines along routes to serve local customers plus gas-fired thermal power plants (TPPs) to increase domestic electricity supplies. - Expanded domestic power transmission and distribution networks, especially in rural areas. Nigeria still has a significant amount of ground to cover before it achieves all of these targets. However, it has made progress. The biggest example of this is the Petroleum Industry Act (PIA), which Buhari signed into law after it passed both houses of the National Assembly. The Nigerian government is also successfully promoting LPG, a gas-derived fuel, as a replacement for wood and charcoal as cooking fuel. (According to NLNG, domestic LPG consumption has climbed by around 1,000% over the last 14 years.) And as recently as this November,  Nigeria moved closer to building its first floating liquified natural gas (FLNG) facility. Nigerian company UTM Offshore signed a front-end engineering design (FEED) contract to design the facility with JGC Corporation, Technip Energies, and KBR. Chief Timipre Sylva, Minister of Petroleum Resources, Nigeria, described the project as a step in the right direction for Nigeria to develop, exploit, and monetize its natural gas. During the African Energy Week in Cape Town, Amni International Petroleum Development Company Limited, a Nigerian independent oil and gas exploration and production company and the African Export–Import Bank (Afreximbank) signed an agreement for the provision of a $600 million syndicated reserve-based lending facility. To a lesser extent, Abuja can also claim credit for the headway it has made on the Ajaokuta-Kaduna-Kano (AKK) pipeline, which is being built to bring gas to the northern part of the country. When finished, the pipeline will deliver fuel to gas-powered industrial facilities and feedstock to TPPs with a generating capacity of 3,600 MW. It may also serve eventually as the first leg of the Trans-Saharan Gas Pipeline (TSGP) network, which will allow Nigeria to export gas to Europe via Algeria. Unfortunately, though, the project has been running behind schedule, and the heavy floods that began hitting many parts of the country in mid-2022 have caused additional delays. In the meantime, Abuja has also moved forward with plans for establishing another gas export network – the Nigeria-Morocco Gas Pipeline (NMGP), a 5,600-km offshore network that would serve more than a dozen West African states. This system would, like TSGP, pump Nigerian gas to Europe, but it would also serve the purpose of delivering the gas to regional markets as well. As such, it would establish Nigeria as a supplier of fuel to much of West Africa. Thus far, neither NMGP nor TSGP has been built. But Nigerian authorities are working to hammer out agreements on these projects – and they see the ways that European market conditions have changed since the beginning of 2022 as an incentive to work harder and to work faster. What Nigeria Could Achieve If they succeed, they will create infrastructure that could do quite a bit to alleviate energy poverty in Nigeria and beyond. In the case of NMGP, the construction of this pipeline would provide multiple countries beyond Nigeria with a steady source of gas. As such, it would serve as an incentive for the construction of TPPs in places where millions of people do not have access to reliable energy supplies. At the same time, the pipeline’s access to European markets, where buyers are more likely to pay in hard currency, would help ensure the profitability of the whole system. Likewise, the TSGP network has the potential to benefit Nigeria by ensuring that the country has enough access to hard-currency markets in Europe to cover the costs of the domestic initiatives that depend on AKK – that is, the gas-fired power and industrial projects in the northern part of the country. Infrastructure Is Needed Throughout the Continent Of course, energy poverty is not limited to Nigeria; more than 600 million people in Africa lack access to electricity, and nearly 730 million use hazardous and inefficient cooking fuels and technologies. Nevertheless, while each African country is unique, I hope that this look at Nigeria helps shed light on some of the common challenges facing our continent’s countries — a higher rate of energy poverty in rural areas and the tremendous need for infrastructure development. As “The State of African Energy: 2023 Outlook” points out, even in the four African countries with a universal electricity rate of more than 70% — Egypt, South Africa, Kenya, and Algeria — access to electricity drops significantly in rural areas, to an average of about 63% of the population, compared to an average of 96% in urban areas. The situation for rural Africans is even more dismal in other parts of the continent. In the Democratic Republic of Congo, for example, only about 19% of the overall population has access to electricity and in rural areas, only 1% of the population has electricity. This will not change until we develop the necessary infrastructure to deliver energy to Africans throughout the continent. On the brighter side, Nigeria also gives us examples of measures African countries can take to begin addressing these challenges. No, Nigeria has not achieved its ultimate goal-eradicating energy poverty, but it has plans and initiatives in place with real potential to make a difference — as long as Nigeria continues pursuing them. If they haven’t done it yet, governments throughout the continent should be developing and implementing multipronged programs of their own to eradicate energy poverty. They, like Nigeria, should be leveraging their natural gas resources. They should be developing and executing gas utilization plans, improving their approach to resource management, monetizing natural gas to help pay for infrastructure projects, and launching more gas-to-power initiatives. Instead of being daunted by the vast numbers of Africans without electricity, shrugging our shoulders, and giving up, I hope that we will be steadfast in our determination to make energy poverty history by the end of this decade. For a complete look at our recommendations and “The State of African Energy: 2023 Outlook,” download our report here (https://bit.ly/3goAZzK). OPINION PIECE by By NJ Ayuk, Executive Chairman, African Energy Chamber Distributed by APO Group on behalf of African Energy Chamber.

President Ramaphosa arrives in Bali, Indonesia for the G20 Leaders' Summit

South Africa President Cyril Ramaphosa has arrived in Bali in the Republic of Indonesia for the annual G20 Leaders' Summit. The President will participate in deliberations among world leaders whose economies account for 85% of the global Gross Domestic Product (GDP), 80% of world trade and two-thirds of the world’s population.

The Summit takes place on 15 and 16 November 2022 under the G20 Presidency of Indonesia, themed “Recover Together, Recover Stronger”.

The G20 was formed in 1999 as a result of the Asian financial crises of the late 1990s, initially as a gathering of finance ministers and subsequently as a platform for Heads of State and Government in the aftermath of the global financial crisis.

The group consists of leading developed and developing economies aiming at a collective response to global economic and financial challenges rooted in the interconnected economic and financial architecture.

President Cyril Ramaphosa 

The G20 also seeks to increase multilateral cooperation for the recovery of the global economy, to bring stability to the global financial system, to promote long-term sustainable growth and to strengthen global economic governance.

G20 Leaders will seek consensus on Global Health Architecture, Sustainable Energy Transition, and Digital Transformation.

The G20 agenda has expanded beyond economic and financial issues and now encompasses issues of peace and security, global governance, international terrorism, the environment, refugees and other geo-political and foreign policy-related matters.

President Ramaphosa will be accompanied by the Minister of International Relations and Cooperation, Dr Naledi Pandor and Minister of Finance, Mr Enoch Godongwana.

Ahead of the start of the G20 Leaders' Summit, the President will chair an engagement of the African Union and NEPAD on Africa’s value proposition and priorities.

Issues under discussion in this forum will include the continent’s aspirations to reach the United Nations Sustainable Development Goals (SDGs) by 2030, the realisation of the African Union’s Agenda 2063 goals, and securing permanent membership of the G20 for the African Union.

Distributed by APO

Non-fungible Tokens (NFTs) and the Future of Capital Raising in Africa

Since January, I have been approached by investors and projects owners alike who are looking to get projects funded or deals flowing. At the same time, I have been trying to estimate using available data the gap between infrastructure and energy funding. The figure we have been using is $250 billion a year between now and 2025. Given that the African population is set to double between now and 2050, we can expect that figure to be in the trillions unless the continent finds a way to successfully develop and fund energy projects to universally guarantee electricity access and infrastructure expansion.

Over the past few months, I have made a couple of observations of which the most prominent is that not all deals are made equal. Many investors want renewable projects but only deals above a certain size - $2 million is too small, for example, for many larger investors though this project size timeline is much shorter and can bring immediate impact. A project upwards of $2 billion is more attractive in terms of funding returns but the timeline to project completion could be up to a decade. Overall, there is a hesitancy to engage in hydrocarbon projects even though there are about a dozen markets actively touting their blocks, which, in oil and gas hotspots, could be easily tied into existing infrastructure.

Given the enormous funding gap, I truly believe there is an opportunity to revolutionize how projects are funded. My thesis is that more African energy projects should be crowdfunded either in fiat or digital currency and non-fungible tokens (NFTs) to ensure that these projects get developed, especially the smaller ones.

This could work in two ways. Firstly, through crowdfunding debt. A project needs to raise debt for a project to start. All agreements and feasibility studies have been completed and the project has a 30-year term agreed with the government. Investors can loan the project money with a fixed percentage of return over a two-to-three-year period. The project gets funded, and investors get a great return on their money. Some projects could deliver up to 30% return if successful.

Secondly, through crowdfunding equity. A project needs to raise a percentage equity funding to attract larger institutions who will structure and loan the rest. The owners of the project have already invested all their working capital into completing pre-feasibility studies and there is little scope of sovereign guarantees due to historical mismanagement of funds. Investors can crowdfund to own an equity stake in the project and make the project more attractive to institutions. Equity owners later receive annual dividends over the lifespan of the project. With off take agreements in place from the beginning of the project, this could make the deal even sweeter.

Neither of the above is revolutionary as both strategies are often employed in the start-up scene. However, given the investment gap and how few Africans have a stake in their own energy futures, this could prove an interesting theory.

Then, in my opinion, I started to get a bit creative. I’ve been paying a little attention to crypto, blockchain, web3 and NFTs. I am not an expert by any means and the NFT pump mostly disinterested me until I started to hear about real-world utility. NFTs can be used to prove authenticity and ownership, and this has instant utility in the world of event ticket reselling and luxury fashion. A few weeks ago, I read a few articles about the tokenization of real estate in Miami whereby investors could “mint” a real-estate token giving them part ownership of the building. There must be an analogue linking of the deed to the token but after that point, the token is on the blockchain and can be transferred to future owners. In this respect, the barrier to entry is much lower. Instead of finding a 10% deposit for an apartment, real-estate NFTs could be minted for as little as the creator sets it at.

Could this be applied to African energy projects? I think so!

Let’s look at the above scenarios with a web3 lens such as energy asset NFT – debt. In this regard, the project raises capital via a cryptocurrency. Ethereum based technology makes sense, especially Polygon or Solana. Investors mint an energy debt NFT in order to raise capital for the project. NFT holders are rewarded through holding the NFT throughout the debt term by earning additional cryptocurrency interest known as distribution. The NFT can be sold at any point to a new owner on the blockchain and the sale can also trigger smart contracts ensuring a royalty to the project owner or the wider community where the project is taking place.

Secondly, let’s look at energy asset NFT – equity. This is where things could get interesting. If you tokenize a whole asset – such as a solar farm, oil block, or biogas plant - it means that anyone (with access to a smartphone, WiFi and a cryptocurrency) can own part of a real-life asset. What I like about this idea is the democratization of the energy asset ownership. It is not just energy companies, finance institutions, governments that get to get to own our infrastructure but anyone including everyday Africans and those in the diaspora. While NFTs cannot pay a dividend as they only prove ownership, the value of the NFT will naturally rise over time as a project comes online and starts to cashflow. Owning 1,000 tokens of an oil block pre-production will become far more valuable when the asset is producing, especially at $100 per barrel. Token owners can be rewarded in cryptocurrency or fiat when distributions are paid out.

I think the key thing here is transparency in ownership and transparency which sets the continent up for long-term success. If token holders are also constituents in the project vicinity, it brings an additional layer or accountability and governance. An NFT could contain voting rights, and future sales generate royalties that are directed back into the local community.

By Kelly-Ann Mealia

Source: APO Group on behalf of Energy Capital & Power.