Africa’s energy transition dilemma

This is part 1 of a 4-part series

Facing pressure from the public and Western regulators, as well as from shareholders and financial partners, oil industry majors, especially those based in Europe – chiefly Shell, BP, Total and Eni – have initiated an unprecedented transformation by voluntarily reducing their crude oil activities in favour of “greener” forms of energy.

This may be good news for environmental activists, but not so for Africa’s oil-producing countries that benefit from the tax revenues and jobs the industry brings.

Ben van Beurden, chief executive of Shell, recently announced the Anglo-Dutch group’s new strategy: after its oil production peaked in 2019, the company expects output to decline by 1 to 2% a year.

Shell’s stated goal, backed by the European Union and the UK, is to become carbon neutral by 2050. Europe’s oil majors, while not required to meet any legal obligations at this stage, have integrated this target across their operations. It takes into account the end use of the fuels they sell (scope 3 emissions), which is by far the largest factor in carbon emissions.

For example, the French group Total’s direct emissions amount to around 45m metric tonnes of carbon dioxide equivalent, but its vehicle-related emissions are estimated to be as high as 450m metric tonnes.

Improving access to energy

In the global race to reduce carbon emissions, Africa is a bystander rather than an active participant. The continent produces 9% of the world’s liquefied petroleum gas (oil) – or 7.2m barrels a day – and 6% of its natural gas, while being a low emitter of greenhouse gases. Home to 17% of the world’s population, Africa accounts for just 2% of global carbon emissions. In addition, more than half of its oil production is for export.

In fact, when it comes to energy policy, the priority for African governments is first and foremost to improve access to energy: 600m Africans live without electricity and the widespread use of biomass energy sources, like charcoal, is detrimental to public health and the environment.

In short, Europe’s oil majors still have a long road ahead of them before the energy transition is complete. It may be a small consolation for their executives, but the American giants Exxon and Chevron, which have less of a foothold in Africa and remain rather sceptical about climate change risks, and the Chinese corporations CNOOC and Sinopec are much further behind on this front.

As for African national oil companies, which own a significant share of the continent’s hydrocarbon reserves, they are clearly not thinking with an energy transition mindset, their current goal being to use oil and gas resources more efficiently.