As the world moves to tackle climate change, the International Oil Companies (IOCs), which insist on ramping up production of fossil fuels in Africa may face the risk of regulatory action from the United States, the country’s Deputy Special Presidential Envoy for Climate, Jonathan Pershing, has said.
If the US makes good its threat, it will be a major blow to Nigeria, Angola, Congo and other oil-producing countries in Africa, which have intensified efforts to attract foreign investors to fund major hydrocarbons projects on the continent.
This is coming as the Organisation of Petroleum Exporting Countries (OPEC) and its allies, OPEC+, are considering going beyond the existing deal to boost production by 400,000 barrels per day (bpd) when it meets tomorrow (Monday).
In August, President Muhammadu Buhari finally signed the Petroleum Industry Act (PIA) to spur competition in the sector as well as attract foreign investments.
But with the position of the US, many of the expected funding for Nigeria’s fossil fuels may be stranded since oil companies would be circumspect about putting their dollars in the upcoming projects.
Western fossil fuel companies planning to develop new projects in Africa would then need to consider the significant risk of regulatory action vis-à-vis the returns on investment in Africa.
Speaking from South Africa, the US envoy urged western investors to consider whether fossil fuels were a good commercial opportunity anymore in Africa or anywhere else.
“There’s a risk of regulatory … and financial activities, and I believe that’s getting more and more explicit. If you are a company looking to invest in oil and gas, you have to ask yourself…‘am I going to be left with a stranded asset?’ I would not bet very strongly on a fossil fuel future,” he said.
Pershing, who was speaking at a virtual media briefing, after being asked about the current rush by western oil and gas companies to develop deposits in Africa, noted that even China had committed to stop building overseas coal plants.
Africa accounts for just 3.8 per cent of greenhouse gas emissions, according to the non-profit Carbon Disclosure Project, but Pershing noted it was the fastest-growing continent.
It could, he said: “leapfrog” older carbon-based technologies and embrace renewables, just as it skipped wired telecoms in many places and went straight for wireless.
“Africa doesn’t need to move in the direction of the West’s high-carbon intensity. It can move directly beyond that,” he said.
His comments came despite the United States itself being a major producer and exporter of oil and gas, with recent growth driven by output from shale fields, a Reuters report said.
The US envoy is visiting several African countries as part of efforts to raise global climate ambition ahead of the United Nations COP26 Climate Summit in Glasgow, Scotland next month.
African nations are seeking financial assistance from the West to switch to renewables.
On Tuesday, South Africa, the continent’s biggest greenhouse gas emitter and the world’s 12th largest, owing to its reliance on coal-fired power, told the envoy that it needed major support for its energy transition.
In the new PIA, Nigeria is devoting as much as 30 per cent of the proposed Nigerian National Petroleum Corporation (NNPC) Limited’s profit oil and profit gas, to crude exploration in the frontier basins.
Speaking recently on why Nigeria continued to focus on a seemingly irrelevant resource, the Minister of State for Petroleum Resources, Chief Timipre Sylva as well as the NNPC Group Managing Director, Mallam Mele Kyari, had noted that the idea was to get as much oil as possible from beneath the ground before it becomes useless.
Most of the big IOCs like Royal Dutch Shell, Mobil, Chevron which operates in the United States also have major investments in Nigeria and could withdraw funding for Nigerian hydrocarbons if threatened in that country.
Emmanuel Addeh in Abuja
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