African nations are preparing to establish a new financing entity to support oil and gas projects. This move comes in response to increasing pressure from Western financial institutions to halt the development of these resources. A coalition of 18 countries is seeking $5 billion to launch what they refer to as an “energy bank.”
These countries form the African Petroleum Producers Organization, as reported by the Financial Times. Resource-rich African nations are expressing frustration over Western banks’ refusal to provide funding for oil and gas projects. They believe they have a sovereign right to develop these resources.
Haytham El Maayergi, global trade executive vice president at the African Export-Import Bank, emphasized the need for these countries to continue their development. “You cannot suddenly move into green transition,” he said. “You can’t just cut funding and expect them to stop oil production.” The African Export-Import Bank is collaborating with the 18 nations to establish this new institution.
Africa has the smallest carbon footprint globally but is rich in untapped oil and gas reserves. Under pressure from Western governments advocating for a shift to renewable energy, international lending institutions like the World Bank and the African Development Bank have ceased funding energy projects in Africa. This restriction limits the ability of these countries to utilize their resources, unlike the United States, which continues to benefit from its oil and gas reserves.
The United States is the second-largest shareholder in the African Development Bank. While officials from the Biden administration praise the recent surge in U.S. shale oil and gas production, representatives in the ADB oppose oil and gas development in Africa. This contradiction is particularly striking.
El Maayergi pointed out that Africa’s situation differs significantly from other regions. Much of Africa’s hydrocarbon wealth remains undeveloped. Access to these resources could help alleviate widespread poverty, as around 600 million people lack electricity, and nearly 1 billion rely on charcoal, dung, and firewood for cooking.
The argument that African nations deserve to benefit from their hydrocarbons, just as Western nations have for decades, is difficult to dispute. This is especially true as the transition to renewable energy in the West proves more challenging than anticipated, with many countries still heavily dependent on oil and gas.
In addition, African governments face boycotts from banks and insurers pressured by climate activists. These activists insist that Africa should leapfrog the hydrocarbon era and move directly to renewable sources like wind and solar power. While institutions like the World Bank and the African Development Bank are eager to fund renewable projects, significant challenges remain.
Solar and wind farms generate electricity by capturing sunlight and wind energy. However, this electricity must be transmitted to where it will be used or stored. Many African nations lack the infrastructure needed for efficient transmission, which complicates the deployment of large-scale solar and wind projects. The difficulty of establishing this infrastructure is evident even in mature markets like Europe, highlighting the scale of the challenge in Africa.
In response to these hurdles, African states are uniting to find alternatives to Western financing. So far, the 18 members of the African Energy Bank initiative have pledged $83 million each, totaling $1.5 billion. The African Export-Import Bank will match this amount, leaving a $2 billion gap that needs to be filled by external entities such as sovereign wealth funds and private banks.
According to the African Energy Chamber, there are approximately 125 billion barrels of oil and 620 trillion cubic feet of natural gas available for development in Africa. Fortunately, major oil companies remain interested in exploring these resources, despite ongoing pressure from activists. Namibia aims to become Africa’s fifth-largest oil producer by 2035, joining other countries like Uganda and Senegal, along with established producers such as Nigeria, Angola, and Libya, which are all part of the African Petroleum Producers Organization.
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