Energy transition: NCDMB seeks mechanism to harness huge African hydrocarbon
By Uthman Salami
The Nigeria Content Development Monitoring Board (NCDMB) has begun to facilitate promotion of a new funding mechanism that will transform Africa’s oil and gas industry after shift in funding of the sector by Western nations to renewables.
Executive Secretary of the NCDMB, Simbi Wabote said this at the first edition of African Local Content Investment Forum (ALCIF) for African Oil Producing Countries, organised by the Board in Lagos on Monday.
He said the situation on ground challenges African nations to develop a robust response to the push for Africa to abandon her hydrocarbon resources.
Wabote said the African continent is blessed with enormous human and capital resources with a population of about 1.3 billion people, out of which a significant proportion are youths.
“The continent is one that needs energy to fuel its developmental and economic activities,” he said, adding that African electricity requirement was estimated to be about two Terawatts out of which a paltry 162 Gigawatts or less than 10per cent is generated.
He said, “The expectation is that the existing and new hydrocarbon discoveries would have presented additional opportunities to address the energy challenge in the African continent but the narratives we are hearing from most of the developed countries in Europe and North America are quite disturbing.
“The quest for energy transition, as it is being advocated in some European countries and other parts of the world, is now taking centre stage and as this trend progresses, the hydrocarbon resources in Africa are becoming endangered resources.”
He said it was first in the history of for countries to make unilateral declaration and commitments on behalf of the rest of the world “to curb methane emissions, align the finance sector with net-zero by 2050, ditch the internal combustion engine, accelerate the phase-out of coal, and end international financing for fossil fuels.
“Already, some European banks are pulling out of hydrocarbons development projects and most International Operating Companies are shying away from investments in hydrocarbon projects to avoid backlash from green energy activists.
“This unfolding scenario is of huge concern to African leaders and policy makers in the oil and gas industry. It is therefore critical that we explore the necessary steps required to address this funding and investment challenge so that our hydrocarbon resources is not abandoned below the surface like many African countries including Nigeria abandoned their coal mines,” Wabote warned.
While stating that some African countries had made some in-roads in securing funding and investment for the development of hydrocarbon projects with strategic partnerships with countries that have not turned themselves to oil and gas adversaries such as China and India, “Other African countries are also doing their bit to develop infrastructure and processing plants for the hydrocarbon value chain but there is need to do more,” he said.
On the roles of African institutions, he stated that “one bright spot is the African Export-Import Bank (Afrexim Bank), a Pan-African multilateral financial institution mandated to finance and promote intra-and extra-African trade based in Cairo, Egypt.
“It is very instructive that AFREXIM Bank signed a $US1.04 billion facility with the Nigerian National Petroleum Corporation (NNPC) Limited to finance the exploration of petroleum during the second intra-Africa trade fair which held in Durban, South Africa few days after the completion of COP-26 event in Glasgow.
“For a bank that disbursed more than US$42 billion between 2016 and 2020 in support of African enterprises, there is no doubt that AFREXIM bank is an institution of note in consideration of the quest for funding hydrocarbon development projects in Africa,” he said.
He added, “AfDB has the African Development Fund (ADF) which became operational in 1974 and has cumulatively invested USD 45 billion over its 44 years of operation on the African continent.
“Although the Fund has not been used much in the hydrocarbon sector, there is opportunity to engage AfDB to utilize part of the Fund for gas development which could be of interest to its largely Western donor countries against the backdrop of disruption in gas supplies in Europe.”
At country level, Wabote observed that Nigeria represents a bright spot in the provision of funds that can be sourced for the execution of oil and gas projects.
The funds include, the Nigerian Content Intervention Fund and other funds that can be sourced from Development Financial Institutions (DFIs) like the Bank of Industry, NEXIM bank and other special funds that are managed by the Central Bank, to mention a few.
For instance, NCDMB partnered with Bank of Industry to establish the USD300 million Nigerian Content Intervention Fund (NCI Fund). In addition, NCDMB partnered with NEXIM bank to create a USD50million fund for Working Capital and for Women in Energy.
In the area of research and development, he said the NCDMB has sponsored the patent for some inventions, and has commenced the process for commercialising those inventions. A USD50 million Research and Development Fund was also launched to enable Research and Development in the oil and gas industry.
Beyond the provision of intervention funds as loans to industry players, the Board has also entered into partnerships with project promoters in the hydrocarbon sector.
In the aspect of Modular Refineries, NCDMB is serving as a catalyst in the development of four (4) modular refineries with the 5,000bpd Waltersmith Modular Refinery already in operation. Let me highlight that the Africa Finance Corporation (AFC), played a role in seeing the project to fruition.
The other three under construction are the 2,500bpd Duport Modular Refinery, 2,000bpd Atlantic Refinery and the 12,000bpd Azikel Modular Refinery.
“Our partnership investments in the gas value-chain which span across development of LPG storage terminals and jetties, inland gas processing to produce LPG and propane, infrastructure for gas gathering and injection into gas pipeline networks, CNG facilities, and manufacturing of composite LPG cylinders.”
