By NJ Ayuk, Executive Chairman, African Energy Chamber (http://www.EnergyChamber.org).
In an era when Africa needs oil and gas investments more than ever, attracting those investments has become increasingly difficult.
Part of the challenge lies in the mounting pressure on oil companies to shift their focus from exploration and production to investments in renewable energy in response to global emissions-reduction goals.
The perception that African energy assets are more carbon-intensive than average certainly has not helped. I could simply laugh at this absurd claim, point out that our entire continent produces less than 10% of global upstream emissions, and move on with my day. As our newly released “The State of African Energy 2024 Outlook Report notes, when compared to other global regions, Africa may not have the lowest oil and gas extraction emissions, but it certainly does not have the highest.
Nevertheless, myths about carbon-intensive African energy assets are hurting our oil and gas industry.
And that makes a very real African problem, excessive gas flaring, all the more disheartening.
We need to end this practice immediately.
The environmental implications are obvious — if Africa stopped flaring tomorrow, then the continent’s upstream emissions would decrease by half. Flaring releases methane, soot, and nitrous oxide into the atmosphere. Locals who breathe air near flaring sites have complained of poor eyesight, chronic headaches, and difficulty breathing — and those are just the functioning flaring sites. Flaring-related accidents have also led to severe burns and deaths.
Yet despite these horrific effects, the practice continues. Annually, global regions flare enough gas to power all of sub-Saharan Africa. Well-intentioned regulations on flaring often fall short because they don’t address the core problem: When oil developers encounter gas, they must deal with it or risk deadly accidents. Unfortunately, the physics behind compressed gas explosions does not care about government fines or restrictions. For companies that still lack the infrastructure to reinject or transport the gas, flaring isn’t just the safest and cheapest option — it’s the only option. How can states significantly reduce flaring, much less end it?
The answer is simple: Treat the symptom, not the disease. Flaring happens because raw gas is a nuisance to many developers; they lack the resources to reinject or treat, store, transport, and market it. To fight flaring effectively, all actors — from consumers to governments to investors — must embrace natural gas.
I was pleased to see African leaders doing so at COP27, and hope that we continue the momentum. While reinjecting gas into the ground also has its place, I firmly believe that African nations should focus on monetization. Natural gas burns cleaner than any other fossil fuel, generates electricity, and serves as feedstock in fertilizer production. Because it can also power grids in conjunction with developing renewables like wind and solar, it serves as an excellent tool for a green energy transition. More than 600 million Africans subsist without electricity — it’s common sense to use the gas that oil companies would otherwise waste. And those are just the potential domestic uses — as more Western nations seek to divest from Russian gas, they increasingly turn to African exports. The transition from flaring to monetization will not happen overnight, but I am encouraged to see progress from states like Egypt, Nigeria, and Algeria.
Open to Investors
Since 2016, Egypt has reduced its overall gas flaring by 26%. Lower flaring often accompanies a corresponding drop in oil production, but that was not the case in Egypt — oil production only lowered by 16% during the same period. This 10% decrease in flaring intensity owes much to Egypt’s 2017 energy reforms, which gave consumers and private companies access to its national gas grid. (Prior to this change, only its national oil company purchased Egyptian natural gas.) These changes also greatly encouraged foreign investment through practical measures, such as cutting waiting times for permit approval. Since then, Egypt’s natural gas production has risen by over 24 billion cubic meters. The investor-friendly environment also made gas recapture projects possible — both majors like Shell and IOCs Pharos and Apache have successfully implemented flare-to-power projects. Simply put, cutting the red tape and encouraging investment brought Egypt an energy boom — one that enabled greener practices.
Sub-Saharan Steps
Nigeria and Algeria, by contrast, remain two of the largest flarers globally — despite harsh penalties on their books for illegal flaring. However, hope may be on the horizon: Both nations lowered their flaring intensity this year, not just their total flaring volumes. Nigeria-based oil companies have begun using gas to power their operations, and Algeria’s investments in both reinjection and recapture technology are beginning to pay off. While neither sub-Saharan nation is ready to commercialize the recaptured gas, they have taken a valuable step in the right direction.
Breaking the Cycle
Gas flaring often comes down to a vicious PR cycle. Faced with environmentalist pressure, investors avoid hydrocarbon projects. Lacking funds and certainty about the future, oil developers shy away from up-front costs of implementing reinjection and recapture technology. Said developers resort to gas flaring, which sparks more bad press.
This self-fulfilling prophecy hurts the entire energy industry, but particularly Africa’s: As we point out in our 2024 Outlook Report, African energy assets face higher scrutiny. However, the narrative has begun to change on natural gas. Many African states have stepped up to help Europe replace Russian gas supplies, and African leaders presented a united front at COP27. There has never been a better time to create operator-friendly policies and treat natural gas as a vital tool. Let’s start by investing in projects that reinject and recapture flared gas. Burning this resource was always harmful and wasteful. In a time of rising gas prices, flaring makes about as much sense as lighting cash — and our planet — on fire.
Download our 2024 Outlook at: https://apo-opa.co/3QLEoHd.
Distributed by APO Group on behalf of African Energy Chamber.