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African Energy Chamber calls for boycott of firms shunning Africa's oil sector

Highlights

Western elites 'disrupt African progress', says AEC's Ayuk

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The African Energy Chamber has called for the region's countries to boycott companies shunning the continent's fossil fuels sector as part of net-zero ambitions, highlighting the growing concern of energy-hungry African nations over the shift to clean energy by most Western producers.

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African oil and gas investment has fallen sharply in the past few years, exacerbated by the COVID-19 pandemic and the energy transition away from oil and gas. The outlook for this sector in Africa is looking bleak, as many of the big international energy companies are starting to reduce their upstream footprints and funding sources for smaller oil and gas players dries up.

In a post published on July 13 on its website, AEC, which represents energy companies on the continent, said it is urging African countries to boycott or refrain from working with international companies that discontinue investments and reject the African oil industry.

"Financial institutions that discriminate against Africa's oil and gas industry in the name of climate change are wrong and desperately need to change both their mindsets and actions," AEC said in a statement. "Institutions have insisted on ending oil and gas investments and development, promoting an immediate energy transition which will and continues to prove disastrous for the African continent and its people."

With significant oil and gas reserves, Africa is expected to see a significant divestment of legacy oil and gas assets, as more energy companies pledge net-zero ambitions. This is already having an adverse impact on Africa, which still depends heavily on the energy and commodity sectors.

AEC's outspoken Executive Chairman NJ Ayuk said the role of oil in Africa's energy and economic future is still key for many underdeveloped African countries.

"As the international community moves to boycott investments in the African energy sector, African people and African development stand to suffer," added Ayuk. "The role of oil in Africa's energy and economic future is apparent, and consequently, should be defended as Western elites move to disrupt African progress."

Decline of oil and gas

The decline of oil and gas poses economic challenges to Africa, where many governments see fossil fuels as the most cost-effective way to pull millions out of energy poverty and boost state revenues. Africa is already a big player in oil, and it is expected to emerge as a major player in gas markets as a producer, consumer and exporter with gas output in the coming decades.

But financial institutions are coming under increasing pressure to cut their funding for oil and gas businesses because of the large carbon footprint of such projects. The pressure has intensified since the International Energy Agency said in May the world needs no more new oil and gas developments if wants to be on a path to a net-zero emissions energy sector by 2050.

Last year, Equinor dropped its extensive exploration acreage offshore South Africa and this year ExxonMobil pulled out of a deep-water oil prospect offshore Ghana.

Uganda's maiden oil project has also attracted the growing attention of global environmental groups which claim it will harm the climate, local communities, water supplies, and biodiversity. In March, more than 260 charities and organizations from 49 countries called on banks not to participate in loans to fund the construction of the line.

In mid-May, Nigerian Vice President Yemi Osinbajo said Africa needs an "inclusive, equitable, just and multi-dimensional" energy transition, which will not be achieved by completely banning future natural gas projects.

The "shutting off of capital in energy infrastructure" will not result in a just transition and the attitude towards natural gas needs to be looked at from an energy access and energy poverty point of view, according to Osinbajo.

Africa is projected to represent 8%-9% of the global upstream spend between 2012 and 2025, but its share of global production is also expected to decline over the same period, according to AEC's African Energy Outlook 2021 report.