Grace Ashiru
As Europe faces challenges in supply and seeks to diversify its imports, Africa is increasingly recognized as a key investment destination. The continent’s rich resources and untapped potential are drawing attention from various European businesses and countries. This shift is creating new market dynamics, allowing African nations to enhance their appeal to foreign investors.
The upcoming Invest in African Energy Forum in Paris, scheduled for May 14-15, exemplifies the ongoing efforts to foster investment in Africa’s energy sector. The forum highlights investment opportunities and discusses strategies to attract foreign capital, reshaping the Africa-Europe relationship through enhanced connections and spurring development.
Energy Master Plans Outline Paths for Expansion Opportunities
Many African nations, especially those producing or about to produce oil, are developing comprehensive strategies to establish a long-term outlook for the industry. These strategic plans highlight potential opportunities and assure foreign investors regarding risks. Additionally, they detail methods to optimize returns on investments.
Masterplans have been successful tools for emerging oil and gas nations. Senegal and Mauritania, set to begin gas production in 2024, have utilized strategies like the Plan Sénégal Émergent and the Gas Master Plan. These plans have been instrumental in attracting capital and forming partnerships. By offering clear visions for long-term development, they lay out fiscal policies and foster a conducive environment for collaboration and investment.
Mature energy producers diversify their sectors by creating energy master plans that draw investments into alternative areas like renewables, power, and infrastructure. An example is Nigeria’s Renewable Energy Master Plan, targeting a rise in renewable electricity to 36% of the total energy mix by 2030. Similarly, in South Africa, the Renewable Energy Independent Power Producer Procurement program aims to harness the demand for renewable energy and storage technologies to foster industrial growth and inclusive development.
Improved Regulatory Structures Define Terms Clearly.
Effective legal structures are vital in promoting European investment in Africa, focusing on developing and rejuvenating value chains. Based on contractual agreements, these structures set out tax conditions and streamline procedures, reducing the time needed to negotiate projects and offering security in the event of disputes. Such regulatory frameworks guide investors, establishing a solid base for profitable and reciprocal relationships.
In Mozambique, the energy sector has been made appealing to international companies, with corporate taxes capped at 21%. The clarity in royalty rates and regulations has drawn in significant companies like ExxonMobil, TotalEnergies, and Eni. After finding the offshore Zohr field, Egypt introduced a novel oil and gas contract enabling investors to manage their production share. Additional incentives are being introduced to boost the country’s investment appeal further. Equatorial Guinea, another example, has leveraged its Hydrocarbon Law to become the third-largest oil exporter in Africa over the past decade. This success is mainly due to its Gas Mega Hub project and corresponding regulations.
Supply-Demand Integration Enhances Project Scope
African nations can draw in the necessary investment for large-scale energy projects by focusing on those that encompass both supply and demand aspects. This approach minimizes costs and accelerates the journey from inception to market and proves the projects’ market feasibility and long-term viability. Integrated projects are a vital link between supply and demand, highlighting their profitability and sustainability while providing opportunities for ongoing growth and development. Additionally, these projects are more robust against market changes, shifting the focus away from mere extraction. This diversification leads to a decrease in the overall risk associated with investments.
The Structures A&E project, spearheaded by Eni with an investment of $8 billion, is a significant gas development initiative in Libya. This project leverages the existing pipeline and treatment infrastructure to facilitate gas supply to southern Europe. Beyond its export capabilities, it also focuses on producing gas for the local Libyan market. This approach meets the domestic demand for gas and stimulates job creation within the region.
Enhancing Local Capabilities to Foster a Competitive Workforce
Africa has the world’s youngest population, 70% under 30 years old. This demographic is a major draw for European project developers looking to invest, especially in countries rich in petroleum and minerals. These nations are actively fostering local expertise in the energy sector. This approach serves a dual purpose: it provides European firms with a skilled workforce with a deep understanding of the local market. It enables African governments to keep talented professionals within their borders. The ultimate goal is to enhance the economic prosperity of their people.
Ghana has introduced initiatives like the Ghana Upstream Sector Internship and the Associated Oil and Gas Capacity Building, designed to educate the youth. Similarly, Angola is boosting local content by implementing capacity building initiatives. These initiatives aim to reinforce domestic competencies and encourage partnerships and collaboration within the industry. Both countries’ programs emphasize enhancing technical, managerial, and operational skills, advocating for industry best practices to achieve more efficient operations.
