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Energy Leaders Give Insight On The Future of Kenya's Oil & Gas Transition

Under the theme ‘Moving Kenya Forward: Oil Production and New Exploration Under COVID-19,’ Africa Oil & Power and the African Energy Chamber provided energy industry leaders a platform to share strategies and thoughts on how Kenya’s oil and gas sector can deal with the implications caused by COVID-19.

The Kenya webinar featured Hon. Dr. Elly Karuhanga, Chairman of the Uganda Chamber of Mines & Petroleum & Chairman, Private Sector Foundation Uganda; Doris Mwirigi, Chief Operating Officer of Energy Solutions Africa; Toks Azeez, Sales and Commercial Director for Sub Saharan Africa, Baker Hughes; Mwendia Nyaga, Chief Finance Officer of Oilfield Movers and Brian Muriuki, Managing Director & Country Chair of Royal Dutch Shell Ghana.

Kenya’s oil and gas industry is in a state of transition, as its major oil and gas development — Blocks 10BB and 13T in Turkana — has been put on hold, with Tullow Oil submitting a notice of force majeure to the Kenyan Ministry of Petroleum and Mining, citing complications from COVID-19.

Meanwhile, Uganda’s Lake Albert Project is moving ahead, with Total announcing plans to acquire Tullow Oil’s stake in the project. The massive development in Uganda, which is set to include a pipeline and refinery, could easily have an impact on regional oil and gas developments and opportunities.

According to Dr. Elly Karuhanga, “Force majeures are reactive for companies, it is something that is beyond their means or the problem there are facing. So, it is unfortunate that this has happened in Kenya, but it is also unfortunate that Tullow had to exercise this in their business. When you think about the reasons they faced, they had no alternative.”

In East Africa, Kenya has the most natural resources and is the most explored country in the region. In order to have a knock-on effect and attract investors in this climate, East African countries need to keep exploring and looking at other projects. In Kenya, there are offshore blocks operated by Eni and hopefully with a great oil flow they will help the economy.

For companies like Baker Hughes, transition into deep-water explorations is expected to be less difficult, because it is already involved in offshore projects across Africa and has actively interacted with Eni in Kenya.

“For us it is more about, how do we get our local partners in Kenya who have been involved in the onshore activities, to then up their game a little bit to meet the offshore requirements and that’s going to take a lot of back and forth, integration, cooperation to get them to a point where the skillset of that personnel and the equipment that they have and intend to acquire will be able to meet the requirements of deep-water play,” said Toks Azeez, Sales and Commercial Director for Sub Saharan Africa, Baker Hughes.

Speakers encouraged synergies and regional collaboration to overcome the challenges faced by the oil and gas industry. Local companies as well as countries need to come together to find a solution to them. According to Mwendia Nyaga, Chief Finance Officer of Oilfield Movers. “Companies can scale up from the location at which they are based and start working in other places. For me it is cooperation, synergizing and not over complication.”

African governments are advised to think about the long-term effects COVID-19 has on oil and gas projects as well as how to regain investors’ appetite, “You should always look at fiscal incentives that allow fair and equitable taxation on revenues, but allow an investment environment that is lucrative, because every dollar in our industry can go anywhere in the world."

"East Africa, big companies and the small-medium sized oil and gas companies, will look at the investment climate as to where they get greater bang for their buck and that will mean that if the East African region does not have favorable fiscals then the dollars will go elsewhere, where you will get better bang for your buck, so there is a balance.

When government is looking at this to be able to enable an environment where investment will be made, knowing that the risk is carried by the investors initially,” said Brian Muriuki, Managing Director & Country Chair of Royal Dutch Shell Ghana.

Doris Mwirigi, Chief Operating Officer of Energy Solutions Africa closed by sharing her belief that the oil and gas industry is in a transition, seeing that oil prices are slowly recovering to pre-COVID-19 prices. “In Kenya we are already at the forefront in terms of green energy and if you look at it, we are still very dependent of fossil fuels. So, you find that we are ahead in terms of green energy, however, I am still an oil girl and believe that oil and gas will recover, and in any case as you can see globally, the oil prices are prices are coming up and if you look at the equity market the oil prices are good for oil companies, so I think oil and gas will still play a major role in the oil and gas mix and we will be here,” she said.

Mwirigi also touched on the involvement of women and how the EqualBy30 initiative will empower more women in the oil and gas sector, “When you talk about adding women, it should not be just about diversity, but a business decision because companies headed by women do better. So, it’s not even a cry for help or diversity but business sense.” 

Renewables Increasingly Beat Even Cheapest Coal Competitors On Cost

Renewable power is increasingly cheaper than any new electricity capacity based on fossil fuels, a new report by the International Renewable Energy Agency (IRENA) published today finds. 

Renewable Power Generation Costs in 2019 shows that more than half of the renewable capacity added in 2019 achieved lower power costs than the cheapest new coal plants.

The report highlights that new renewable power generation projects now increasingly undercut existing coal-fired plants. On average, new solar photovoltaic (PV) and onshore wind power cost less than keeping many existing coal plants in operation, and auction results show this trend accelerating – reinforcing the case to phase-out coal entirely.

Next year, up to 1 200 gigawatts (GW) of existing coal capacity could cost more to operate than the cost of new utility-scale solar PV, the report shows.

 Replacing the costliest 500 GW of coal with solar PV and onshore wind next year would cut power system costs by up to USD 23 billion every year and reduce annual emissions by around 1.8 gigatons (Gt) of carbon dioxide (CO2), equivalent to 5% of total global CO2 emissions in 2019. It would also yield an investment stimulus of USD 940 billion, which is equal to around 1% of global GDP.

"We have reached an important turning point in the energy transition. The case for new and much of the existing coal power generation, is both environmentally and economically unjustifiable," said Francesco La Camera, Director-General of IRENA.

"Renewable energy is increasingly the cheapest source of new electricity, offering tremendous potential to stimulate the global economy and get people back to work. Renewable investments are stable, cost-effective and attractive offering consistent and predictable returns while delivering benefits to the wider economy."

"A global recovery strategy must be a green strategy," La Camera added. "Renewables offer a way to align short-term policy action with medium- and long-term energy and climate goals. 

Renewables must be the backbone of national efforts to restart economies in the wake of the COVID-19 outbreak. With the right policies in place, falling renewable power costs, can shift markets and contribute greatly towards a green recovery." 

Renewable electricity costs have fallen sharply over the past decade, driven by improving technologies, economies of scale, increasingly competitive supply chains and growing developer experience. Since 2010, utility-scale solar PV power has shown the sharpest cost decline at 82%, followed by concentrating solar power (CSP) at 47%, onshore wind at 39% and offshore wind at 29%. 

Costs for solar and wind power technologies also continued to fall year-on-year. Electricity costs from utility-scale solar PV fell 13% in 2019, reaching a global average of 6.8 cents (USD 0.068) per kilowatt-hour (kWh). Onshore and offshore wind both declined about 9%, reaching USD 0.053/kWh and USD 0.115/kWh, respectively. 

Recent auctions and power purchase agreements (PPAs) show the downward trend continuing for new projects are commissioned in 2020 and beyond.

Solar PV prices based on competitive procurement could average USD 0.039/kWh for projects commissioned in 2021, down 42% compared to 2019 and more than one-fifth less than the cheapest fossil-fuel competitor namely coal-fired plants.

Record-low auction prices for solar PV in Abu Dhabi and Dubai (UAE), Chile, Ethiopia, Mexico, Peru and Saudi Arabia confirm that values as low as USD 0.03/kWh are already possible.   

For the first time, IRENA's annual report also looks at investment value in relation to falling generation costs. The same amount of money invested in renewable power today produces more new capacity than it would have a decade ago.

In 2019, twice as much renewable power generation capacity was commissioned than in 2010 but required only 18% more investment.  

Total, Tullow Agree In Key Deal That Renews Hope In Uganda’s Oil & Gas Sector

Total and Tullow have entered into an Agreement, through which Total shall acquire Tullow’s entire interests in Uganda Lake Albert development project including the East African Crude Oil Pipeline.

The overall consideration paid by Total to Tullow will be 575M USD, with an initial payment of 500M USD at closing and 75M USD when the partners take the Final Investment Decision to launch the project.

The terms of the transaction have been discussed with the relevant Ugandan Government and Tax Authorities and agreement in principle has been reached on the tax treatment of the transaction.

Under the terms of the deal, Total will acquire all of Tullow’s existing 33.3334% stake in each of the Lake Albert project licenses EA1, EA1A, EA2 and EA3A and the proposed East African Crude Oil Pipeline (EACOP) System.

The transaction is subject to the approval of Tullow’s shareholders, to customary regulatory and government approvals and to CNOOC’s right to exercise pre-emption on 50% of the transaction.

Patrick Pouyanné, Total Chairman and CEO says the acquisition will enable Total, together with their partner CNOOC, to now move the project forward toward FID, driving costs down to deliver a robust long-term project.

 

Engie Africa Brings Off-Grid Power To Over 4m People On The Continent

ENGIE Africa ha announce that it has successfully accelerated the Access to Energy (A2E) strategy that it launched in 2018.

ENGIE has achieved this through the development of its three A2E off-grid energy solution companies: Fenix International, ENGIE Mobisol, and ENGIE PowerCorner.

With these three innovative entities, ENGIE Africa is bringing decentralized electricity to more than four million people in nine countries (Uganda, Zambia, Kenya, Tanzania, Rwanda, Nigeria, Benin, Côte d’Ivoire, and Mozambique). This growth is in line with the Group’s ambition to reach millions of households and businesses with clean, distributed energy across Africa.

Fenix, which was acquired by ENGIE in 2018, expanded its operations significantly in 2019. To date, it has sold more than 700,000 solar home systems that power 3.5 million people in rural communities across six countries.

Now employing 1,200 full-time team members, Fenix launched sales in Mozambique in June 2019. In the last month, the company has reached milestones in multiple markets, with 150,000 solar home systems sold in Zambia, 50,000 sold in Benin, and 20,000 sold in Côte d’Ivoire.

ENGIE complemented its range of solar home system solutions by finalizing the acquisition of Mobisol in October 2019. The higher capacity (40–200W) of ENGIE Mobisol’s products offers consumers access to modern energy services and appliances to establish solar-powered small businesses.

ENGIE Mobisol has operations in Tanzania, Rwanda and Kenya, and has installed more than 150,000 solar home systems, providing clean and reliable energy to 750,000 people and counting in East Africa.

Mini-grid developer and operator ENGIE PowerCorner now has 13 mini-grids in operation across two countries (Tanzania and Zambia), serving 15,000 beneficiaries. It is constructing new mini-grids in Uganda (in joint venture with Equatorial Power), Benin and Nigeria, with the aim to triple its number of customers this year. ENGIE PowerCorner focuses on powering income-generating activities and productive usages, thus contributing to the increase of the economic welfare of its rural customers.

Fenix’s inclusive solar home systems for household usages, combined with ENGIE Mobisol’s focus on larger households and small business appliances, together with ENGIE PowerCorner’s focus on income-generating activities and small-scale industries, enables ENGIE to offer affordable energy products and to extend its customer base from rural to urban areas.

Yoven Moorooven, CEO of ENGIE Africa, says: “We strongly believe in the huge potential of the off-grid electrification sector and that it will be instrumental in rapidly and cost-effectively bridging energy gaps across Africa. We will build upon our successes to sustain and meet our long-term ambition of impacting tens of millions of lives across Africa. ENGIE has an important role to play in industrializing and scaling up the off-grid solar business. We are keen to offer the lowest cost and best quality Access to Energy solution that addresses our customers’ needs.”

ENGIE is expanding its offerings beyond electricity provision, integrating cost-effective and tailor-made solutions “as a service” to accompany customers every step of the way. This expansion links energy access to other products and services: internet, water, productive appliances, clean cooking, financial services and products.

Universal electrification is the seventh of the United Nations Sustainable Development Goals that the global community has committed to achieve by 2030. ENGIE is confident that universal access to energy is achievable in the foreseeable future, through smart investments in a combination of national grid extension, solar home systems and mini-grids.

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