Reuters recently quoted you saying, “Africans want to get married, Russians want just to date”. This caused a lot of discussion among experts in Russia. What exactly did you mean?
Russia has always shown interest in Africa, but that interest has so far failed to materialize in concrete long-term Russian deals and investments on the continent. Some Russians companies operate down here, but their level of engagement has remained little compared to the potential there is for a strong and vibrant African-Russian energy cooperation. We need to move beyond simple investment promises or MoUs. While security and military cooperation between Russia and African nations has grown, the same cannot be said for other major sectors of our economies such as manufacturing, energy or infrastructure.
Some Russians companies operate down here, but their level of engagement has remained little compared to the potential there is for a strong and vibrant African-Russian energy cooperation. We need to move beyond simple investment promises or MoUs.
Russian African Energy cooperation is best served, when based on the back of economically viable long-term projects, of which there are many, rather than short term opportunistic political goals. For example, gas deposits off the coast of Mozambique present a great opportunity for Russian gas expertise.
However, interest from Russian companies and Petro-giants there I say, has been at best anecdotal, to the benefit of course of European, American and even Chinese players. Russia has a long-standing positive relationship with Mozambique, and a very developed and mature gas services industry. We must therefore question why there isn’t more cooperation between both countries’ gas sectors.
I have as a lawyer, personally supported Russian companies seeking market entry in Africa. They have a lot of expertise, and Africans want and need that. However, I will ask that Russian company horizons need to align around long-termed opportunities.
Do you have an understanding why there are still few successful Russian energy investment projects in Africa?
I think Russian energy investments in Africa have been limited due to a number of reasons:
• Opportunities at home in mother Russia
• Russian companies seem to be extremely risk averse in the face of competition in Africa
• Over reliance on state support or involvement to proceed with investments
Cooperation and investment have remained heavily influenced by security or geopolitical considerations, not pure economic ones. On the African side, stakeholders have been ready to welcome Russian counterparts and business partners for years across several industries. On the Russian side, however, mixed signals continue to be sent as to what the real appetite is for the African continent.
I think we need stronger engagement from Russian companies in order to understand what their interests and needs are. Similarly, we need to move beyond just politically motivated deals and encourage private sector investments. The true enabler of the Russian African energy cooperation is the private sector, the entrepreneurs and the SMEs. I would encourage stakeholders to move beyond the G2G sphere and look at concrete joint-venture and deals that can be made between private entities.
The true enabler of the Russian African energy cooperation is the private sector, the entrepreneurs and the SMEs. I would encourage stakeholders to move beyond the G2G sphere and look at concrete joint-venture and deals that can be made between private entities.
There already have been Russian success stories in Africa, for example in mining in West Africa. These need to provide the kind of trust and demonstration that such a cooperation can work. When Russian companies make business in Africa, good things happen. The work of Rosgeo in Equatorial Guinea is a prime example: the company contributed to open up exploration offshore Equatorial Guinea decades ago and is now back in the country to open up onshore areas to hydrocarbons and minerals development.
Just to be clear, Africa’s energy space is not all perfect, and there is a lot of improvement that needs to be done to continue attracting investments. However, much has been done recently to improve the business environment, and Russian companies need to take note. For example, Angola has put in place one of the most attractive laws for oil and gas companies in 2020, reducing government take and bureaucracy.
What is Africa Energy Chamber? How can Africa Energy Chamber be of help to Russia and Russian companies?
The African Energy Chamber is an organization that offers a pan-African platform for companies to profitably invest in African energy sector opportunities. We represent the fastest-growing network of energy sector companies operating on the continent and have been able to structure the Chamber in such a way that it provides a global African voice on energy sector investment opportunities and related topics like the global energy transition debate. The African Energy Chamber works with indigenous companies, willing governments and credible international businesses to promote growth in the African energy sector under international standard business practices.
From lobbying governments for an enabling business and legal environment to promoting capacity building, we make sure that the right kind of deals are put forward for investors coming into the continent. We attend all major meetings held in Russia, including the St. Petersburg International Economic Forum and the Russian Energy Week, and look forward to welcoming and supporting Russian engagement into the African Energy sector in 2021.
There are many outlooks and statistical reports where one may find information about African energy sector. What differs Africa Energy Outlook 2021 from, for example, BP Statistical Review of World Energy?
Most global outlooks and reports tend to overlook Africa, mostly because access to information is a challenge, but also because many African markets are deemed too small to deserve proper analysis. At the Chamber, we focus purely on Africa and benefit from our “boots on the ground” to dig deep and provide proper African perspectives. Similarly, we welcome all points of views and perspectives when we realize our Outlook, and we truly hope to receive participation and feedback from Russian stakeholders for our 2022 edition.
High-level takeaways from our 2021 Outlook notably include the forecast of a significant drop in CAPEX spending of almost $30 billion for 2020 and 2021 due to the historic shocks the continent has had to deal with in 2020. While an estimated 1,850 wells were drilled during 2012, the current estimate for 2020 points to only about 800 wells drilled, representing a year-over-year decline of about 20% versus 2019. However, the impact of COVID-19 on 2021 liquids production is not so severe as the current 2021 outlook stands at about 7.6 million barrels per day compared to 8.2 million barrels per day in the beginning of the year.
This is Your Second AEС report – and in both a special place is given to gas. Why do you think gas is the preferred option for African energy?
Our latest Outlook gives indeed a strong importance to natural gas. Gas-based power generation is a perfect partner to renewables, has low capex and short time from investment decision to market. Because Africa accounts for almost 10% of the world’s gas reserves, there is a much stronger potential for gas investments than oil. Africa has some of the cheapest gas reserves and some of the most expensive electricity in the world.
One needs to connect supply and demand. Africa needs gas transportation infrastructure – pipelines, small-scale LNG, CNG, virtual pipelines. LNG prices drop may activate LNG import projects – there are at least 12 countries now that are planning to import LNG. Gas power plants can replace outdated diesel and fuel oil generation in West Africa, and peak shaving gas power plants are perfect for providing additional generation during high-demand periods or when generation on hydro/solar/wind power plants drops due to different issues.
Africa needs gas transportation infrastructure – pipelines, small-scale LNG, CNG, virtual pipelines. LNG prices drop may activate LNG import projects - there are at least 12 countries now that are planning to import LNG.
Almost 600 million Africans don’t have access to electricity, and universal access to power is our priority. Our gas reserves will build our electric capacity and ensure energy poverty eradication and pave the way for wider use of renewables.
You advocate gas-friendly policy and sound fiscal terms in order to unlock Africa’s gas potential. Are there any examples of countries in Africa where this has already been implemented?
Very few African countries have so far truly embraced natural gas from a policy front.
Nigeria of course is one of the few exceptions, as it has been increasingly developing targeted gas programs and adopting policies supporting investments in gas. Its latest Natural Gas Expansion Programme for instance is accompanied by a series of policy developments such as the new gas transportation code or new guidelines for LPG investors that are expected to bring tremendous benefits in the near future.
Also in West Africa, Senegal has got very serious about gas and adopted its very first Gas Code in early 2020. We need to see more of specific gas policies across the continent, especially in Central Africa.
AEC members and the AEC itself constantly engage governments when called upon to support legislative initiatives. We will continue to do so. In terms of proposed incentives for the promotion of Gas to power, we think that companies who invest in gas to power infrastructure from the well head should see their tax burden reduced.
Your TOP-25 Movers and Shakers to watch list has already attracted attention from various stakeholders. There are two Russian citizens in this top: The Secretary General of GECF HE Yury Sentyurin and Vagit Alekperov, President of LUKOIL company? Why did you choose them?
Under the leadership of H.E. Yury Sentyurin, the Gas Exporting Countries Forum (GECF) led its first summit in Africa in 2019, in Malabo. We expect the GECF to attract an increasing number of African member countries. The more African countries join the ranks of gas producers and join the GECF, the more the organization is likely to gain in importance.
Africa plays an important role in Lukoil’s strategy, and the company has already invested in Africa. It participates in gas production in Republic of Congo, and soon will start production in Cameroon. Last year, it also won a tender for block EG-27 in Equatorial Guinea. I hope that all these projects will bring value to Africa.