The IEA’s Net Zero to Hit Non-OECD Countries Energy FutureIn its new report “Net Zero in 2050”, the energy agency calls for no new investments in oil- and gas-related projects.
The International Energy Agency, which has stepped up its efforts to become a major green energy supporter, appears to have forgotten the reason it was set up as an agency in the first place. In its new report “Net Zero in 2050”, the energy agency calls for no new investments in oil- and gas-related projects.
As stated by Fatih Birol, the IEA’s executive director, “new energy security challenges will emerge on the way to net zero by 2050 while longstanding ones will remain, even as the role of oil and gas diminishes”. The IEA also stated that the contraction of oil and natural gas production will have far-reaching implications for all the countries and companies that produce these fuels.
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In a remarkable statement, Birol said that “no new oil and natural gas fields are needed in the net zero pathway”. While he admits that, within that pathway, oil and gas supplies (aka production) will become increasingly concentrated in a small number of low-cost producers. Based on its own assessments, the IEA predicts that OPEC’s share of a much-reduced global oil supply will increase from 37% at present to 52% in 2050, a level higher than at any point in the history of oil markets.
While the IEA’s new report focuses on the need to drastically reduce our use of fossil fuels in order to reduce CO2 and methane emission, there are some major underlying issues it fails to address. In its determination to reach Net Zero emissions by 2050, the IEA appears to have engaged in wishful thinking, ignoring the existing constraints and immense investments needed to achieve such a goal. In its report, the agency does admit that there are severe risks on the way to Net Zero, including geopolitical and economic risks related to an overdependency on critical minerals.
In doing its recommendations elevate the privileged thinking of the rich world to the detriment of the developing world. This is especially the case across the continent of Africa, where the scope of opportunity for renewable investment is without parallel, but which first needs to develop the infrastructure to enable such investments to scale.
Renewable energy will of course form a key component of Africa’s future. But for a continent that is still presently power-starved, coal, oil, natural gas and nuclear must and will continue to represent a large proportion of energy investment in the short to medium-term.
Investment needs to come within Africa more than it does from abroad. Many Western firms are still wary of major investment in light of unstable political conditions, pointing to politicized jurisdictions and a range of leading multi-national companies that have got stuck in legal quagmires lasting decades, including Shell, ENI, and Lundin, to name just a few.
In the case of Shell and ENI, their acquittal of a decade old corruption case in Nigeria this March seems to have helped consign their concerns to the past, given they have signed a new deal with the country’s National Petroleum Corporation just this week – in tandem with with Exxon and Total – to develop an offshore oil block that includes the deepwater Bonga field.
The Lundin case by contrast remains outstanding, or rather resurrected. Two decades after an investigation concluded allegations of complicity in alleged war crimes in Sudan were unfounded, the case was reopened in Sweden in 2010 but seemingly remained dormant ever since.
For decades Western firms have found themselves reluctant to engage for fear of having their involvements politicised on the ground. However this vacuum has created an opportunity which African firms have successfully capitalized on – and their continued success should be encouraged by the IEA, not overlooked.
Innovation in oil and gas across the African continent has done well in recent decades, but needs to do better. African gas production is expected to double in the next two decades, and the continent, according to the International Energy Agency itself, needs $400 billion in that time to provide power to the full half of the population that is without it.
As such anyone who says this must be done with no coal, no nuclear, or no hydro, are simply not being serious. Technologies such as small nuclear reactors and other innovations in ‘non-renewable’ energy sources will be highly desirable to develop and scale across the continent.
It is also clear that LNG projects in Africa, such as in Mozambique, represent a huge opportunity for the continent to establish itself as a global powerhouse. A project like the East African Crude Oil Pipeline (EACOP) promises residents of Uganda and Tanzania more local jobs, new infrastructure, and enhancements in the central corridor between the two regions and more. Already EACOP has seen $3.5 billion USD in investment and a 60% increase in foreign direct investment in Uganda and Tanzania.
A fully renewable, sustainable, and stable world before 2050 is not something that can be achieved without oil and gas for both petrochemicals and energy, let alone in Africa. The IEA’s member countries may be able to cough up the cost of this aggressive green strategy without imploding their own economic wealth, but non-OECD countries will not be able or willing to.
Oil and gas represent an opportunity for Africa’s own companies to become world beaters. The IEA should be the first acknowledge and indeed encourage that.
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