Africa Needs Power, Not Just Oil Investment: Eni Chief
Eni will invest $20bn in Africa during 2016-19, or 60% of its total investment, and in the longer-term plans to invest a whole lot more, its CEO Claudio Descalzi has said. Most of the 12bn barrels of oil equivalent that Eni has discovered over the past seven years were in Africa in countries like Mozambique, Congo-Brazzaville, Ghana and Angola. The company’s equity production in Africa exceeds 1mn barrels of oil equivalent per day, the CEO noted.
But in a speech entitled "African development and access to energy" at the IEA on April 15, Descalzi explained how and why Eni has rolled out gas-fired power generation where it had been active.
Eni’s model of partnership, he said, dated back to the 1950s under its first CEO Enrico Mattei when, first in Egypt, it had pioneered 50-50 petroleum Production Sharing Contracts with state oil firms and in the following decades had also invested in local health, education and farming projects.
The private sector as a whole in Africa is not doing enough, and it is not coordinated, said Descalzi. He cited a 2014 special IEA report on Africa which found that -- despite its huge oil, gas and renewable resources -- two-thirds of the continent’s billion inhabitants still lack access to electricity.
Africa practically exports all the oil and gas it produces, the Eni chief said, yet had only one-third of China’s per capital energy consumption, one fifth of Europe’s and one-tenth of that in the US.
Descalzi lamented that 48% of Africa’s energy use today is met by biomass, and that 90% of the population of 23 out of sub-Saharan Africa’s 42 countries is reliant on it. “Biomass is a huge problem,” he said which causes 4mn premature deaths worldwide each year.
Africa had huge energy potential, especially for solar, wind, hydro and even geothermal generation. So a top priority across Africa should be that governments there build an energy model that can support demographic change and improve quality of life, said Descalzi, outlining three priorities: increasing use of hydrocarbons, especially gas, for domestic consumption; increasing use of renewable resources; and developing energy infrastructure, including off-grid solar for remote areas.
“I think it’s in the interest of Europe to do much more,” he said.
Europe – with 7% of the world population but consuming more than 12% of the world’s energy -- will become more and more an energy importer, while Africa -- with 16% of the world population but using less than 5% of the world’s energy -- has lots of energy but cannot exploit it easily.
Tax reliefs for gas producers that invest in power
Descalzi suggested that governments in Europe should perhaps give tax reliefs to oil and gas firms that implement sustainable or renewable power projects in Africa coordinated with national authorities there, just as they provide tax relief on petroleum exploration costs back home.
In Nigeria, Eni invested in a 480 MW gas-fired CCGT power plant in the early 2000s in the Niger Delta. Descalzi said Eni is now studying the possibility of doubling this plant’s capacity (to 960 MW).
An existing Eni-run 300 MW CCGT unit at Pointe Noire (Congo-Brazzaville) is already being expanded to 450 MW, he added, and in future could be doubled to 900 MW.
Eni supplied 18mn people with power in these two countries, at an investment cost of $2bn in the plants and local grids. It now has plans to build such CCGTs in Mozambique and Angola too.
Coral FLNG “practically certain”
Descalzi mentioned that the Mozambique government earlier this year had approved the Plan for Development and Operation of the Coral gas project in block 4, including a 3.4mn ton/yr floating LNG project.
The gas sales agreement was “finalised”, he added without saying with which company. It’s an open secret this is with BP – however full disclosure may be pending the project Final Investment Decision (FID).
“We just need to finalise financing,” the Eni chief continued: “But it is practically certain that we will take FID this year on Coral.”
Descalzi a month ago indicated its target for FID was “hopefully by June” 2016, with FID on the first phase of the separate onshore Mamba LNG venture following in 2017.