African governments and energy companies must help make the continent’s energy projects more bankable and attractive to market-based financing, Mr. Alex Kofi-Mensah Mould – Chief Executive, Ghana National Petroleum Corporation (GNPC) – has said.
Addressing the Africa Oil and Power Conference in Cape Town, South Africa, Mr. Mould said the move will involve nurturing strong and financially independent National Oil Companies (NOCs), improving the management of power utilities, and ensuring financial viability of the power sector.
“It will also involve setting the right tariff while creating the necessary social safety nets for the extreme poor – and, indeed, public sanitisation on energy efficiency,” Mr. Mould said in a statement issued by the GNPC.
The maiden edition of the Africa Oil and Power Conference was on the theme ‘A Continent of Abundant Resources Yet Lagging in Many Areas of Development’.
He said Africa has substantial oil and gas reserves – more than 130 billion barrels and over 500 trillion cubic feet, respectively – yet it has the lowest usage rate in modern forms of energy.
Mr. Mould said Africa has for decades exported oil to the rest of the world.
“Today the continent contributes about 10 percent of global oil supply; and it is fast-becoming a major source of natural gas supply to the world, with West and East Africa, leading the charge,” he said. “Nigeria, Algeria and Equatorial Guinea are among the top-15 of the world’s largest Liquefied Natural Gas (LNG) exporters.”
He said the continent has approximately 30 percent of the earth’s remaining mineral resources, yet it has only a few refineries to add value.
“Africa has the largest deposits of diamonds, yet it was only in November 2013 that Botswana managed to move the trade of its diamonds to Gaborone,” he said.
The Chief Executive said the continent has enormous power potential – from hydro to solar, to thermal and geothermal – yet it remains the least in electricity connectivity and consumption.
On a continental level, this will also require cross-country cooperation and collaboration among all public and private actors, he said.
Mr. Mould said each of the sub-regions of sub-Saharan Africa should therefore have a regional Power Pool toward that goal.
He said such collaboration in West Africa, though challenging at this moment, holds the promise of pooling gas resources and energy investments from the region, and thus provide regional energy security.
Mr. Mould said in Ghana government is tackling this through a number of ways: such as setting cost-reflective tariffs; reforming the power utilities; and creating a sector-wide cash waterfall to ensure revenues from the sector are allocated to various entities in the value chain in line with their value addition.
He said this is an opportunity for the private sector to join governments and NOCs of Africa to bridge the financing gap in the oil and gas sectors.
“Another challenge for African countries as we seek to leverage the energy resources, is making sure that much of the value created in the sectors stays within the continent,” he said.
“This is where local content comes in.”
Mr. Mould said by some estimates there are over 500 oil companies that participate in Africa’s hydrocarbon exploration and production – of which most are foreign companies.
“Africa is endowed with enormous resources,” he said. “It is a sad reality that we have not transformed those endowments into wealth and prosperity. We must be the ones who break this jinx.”
He said Ghana has a local content policy framework that is guided by the Ghana Petroleum (Local Content and Local Participation) Regulations, 2013 (L.I.2204).
“We need to change the local content paradigm in our oil and power sectors. Local content is not a charity by International Oil Companies (IOCs). It is not protectionism by us as resource owners,” he said.
Mr. Mould explained that at GNPC local content development is a key pillar of Ghana’s strategy, adding that: “We are leading the creation of an ecosystem comprising indigenous Ghanaian oil and gas companies that will be the backbone of our industry in the country”.