Western financiers' discrimination against African oil and gas is "very unjust, hypocritical and colonial," the head of a key African energy advocacy group has claimed.

The African Energy Chamber (AEC) is preparing to take Western financiers to court over what the energy advocacy group’s chairman, NJ Ayuk, has described as their discrimination against financing African oil and gas investments.

Over the last few years a number of major Western banks and other financial institutions have announced policies to scale back support for fossil fuel projects, citing commitments to tackle climate change. But according to Ayuk, there is an inconsistency between the standards they apply when determining whether to support African energy investments, and those they apply for Western ones.

“Natural gas is treated as a fossil fuel in Africa, but it’s seen as green energy in Europe,” he said in an interview with bne IntelliNews. “It’s clear discrimination, it’s outrageous and it should not be happening. You can’t have one set of standards for the European and American energy industries and another for the African energy industry.”

“This is very unjust, hypocritical and colonial,” he said.

NJ Ayuk, executive chairman of the African Energy Chamber

Africa’s missed opportunity

Europe has rapidly expanded its LNG import infrastructure and signed a raft of deals with LNG suppliers over the past two years to replace lost Russian gas supply. Financing for such projects has been justified in the name of energy security, Ayuk said. The EU also added natural gas to its taxonomy for what it considers sustainable investments in 2023, albeit with strict conditions, and this paved the way for ESG-conscious banks to fund them.

The global energy crisis has spurred a wave of new oil and gas investments, “but Africa has largely missed out on this opportunity, and international financing has been the biggest hurdle,” Ayuk said. In the case of LNG, most new investments in supply that have been greenlit have been in the US and Qatar. In contrast, Africa has seen few new project approvals in the last two years.

 

“Financial apartheid”

The AEC aims to launch litigation proceedings against Western financial institutions in Western courts next year, Ayuk said, “with the help of some of the best law firms in the world,” and the support of various African states.

“We want to end these very discriminatory lending practices towards Africa. This is financial apartheid in the name of ESG and the name of climate change,” he said. “We’re going to look at it as a human rights matter. We believe in the system of justice, that it will give us a fair hearing.”

Oil and natural gas development can raise living standards for Africans by generating export revenues, supporting domestic industrialisation and reducing energy poverty, Ayuk said. An estimated 600mn people in Africa lack access to electricity, while 900mn do not have access to clean cooking fuels, causing serious health risks.

“There’s a whole new generation of Africans that are saying, we want to have the same standards of living that Europeans have. It’s important we create the opportunities and jobs right here at home, rather than Africans having to cross the Mediterranean to look for jobs in Europe.”

 

“Demonisation” of fossil fuels

The chairman slammed what he called the “demonisation” of fossil fuels. 

“The politicalisation of energy policy is causing underinvestment in energy. The demonisation of the fossil fuel industry is scaring everybody but not creating any pragmatic solutions.”

Major international oil companies (IOCs) like Chevron, ExxonMobil and Shell are key job creators in Africa, he said. “They have opened doors, they have given hope, they have supported governments. If the revenues that Africa was getting from these companies weren’t there, you would see more coup d'etats, more civil wars. These companies should be celebrated, not demonised.”

He also criticised the International Energy Agency (IEA) for becoming too “politicised,” and endorsing energy policies that are unrealistic. The Paris-based body was set up in the wake of the 1973-1974 oil crisis to help countries respond to major disruptions in oil supply. Over time, and especially in the last few years, it has increasingly prioritised policy recommendations to help the world reach net-zero emissions by 2050. In 2019, two years prior to the start of the energy crisis, the IEA caused a stir in the energy industry when it published a scenario that projected that if the world continued on the path to that mid-century goal, no new investments were needed in oil, gas and coal supply.

“The IEA has lost its relevance and its authority,” Ayuk said.

 

Africa’s LNG expansion

While Africa has not seen any fresh final investment decisions (FIDs) on LNG supply since the energy crisis, a number of projects that were previously greenlit are moving ahead.

One of the most important developments is TotalEnergies’ $20bn Mozambique LNG project in the Rovuma Basin, where an FID was taken in 2019. It aims to develop the Golfinho and Atum gas fields in Offshore Area 1 and involves the construction of two LNG trains with a capacity of 12.88mn tonnes per year (tpy).

Eni also took an FID on the Coral South FLNG project in Mozambique in 2017, involving the development of the Coral gas field in Area 4 of the Rovuma Basin. The project includes the construction of a floating LNG (FLNG) facility with a capacity of 3.4mn tpy. It shipped its first cargo in 2022.

The first gas production from the Greater Tortue Ahmeyim (GTA) LNG project, located on the maritime border between Senegal and Mauritania, was achieved in November 2022. The project, greenlit in 2018, is operated by BP, in partnership with Kosmos Energy, and the national oil companies of Mauritania and Senegal. It includes the construction of an FLNG facility with an initial capacity of 2.5mn tpy, with the potential to expand.

In Nigeria, an FID was taken on the Train 7 project in 2019. It is an expansion of the existing Nigeria LNG (NLNG) facility on Bonny Island. It aims to add an additional train to increase the facility’s production capacity by 8mn tpy, bringing the total to approximately 30mn tpy.

These projects highlight the significant investments and developments in the African LNG sector, showcasing the continent's potential to become a major player in the global LNG market.

Other projects that are yet to reach approval include Tanzania LNG, the prospects for which improved last year after the government signed an initial agreement with developers Equinor and Shell. But the government has since proposed changes to the deal, delaying an FID. In Nigeria, local privately-owned player UTM Offshore had hoped to take an FID on a 2.14mn-tpy FLNG in 2023, but then pushed the decision back to the first quarter of this year, but this schedule was not met either.

The expectations are that the global LNG market will move to a glut towards the end of this decade, meaning that the longer these projects are delayed, the less likely they are to secure strong demand for their gas. Meanwhile, LNG production among Africa’s established exporters such as Algeria, Angola, Egypt and Nigeria has either stagnated or fallen in recent years, indicating a lack of new projects to feed terminals with gas.