Hope for Africa's energy industry persists despite COVID-19

The African oil and gas industry has so far been one of the hardest hit in the wake of the COVID-19 pandemic.

The initial aftereffects of the demand vacuum and price crash caused by the pandemic led to production sanctions imposed by African member nations of the Organization of the Petroleum Exporting Countries.

However, despite the challenges there are positive prospects for the continent's oil and gas as well as the broader energy industry, according to a new report by the African Energy Chamber released on Monday.

Dubbed the State of African Energy 2022, the report said the continent's exploration activity is expected to increase gradually to 2019 levels, albeit well below pre-2015 levels.

The recovery will predominantly be driven by exploration in Ghana and Angola. The Angolan government has formed a consortium with five international oil companies including Eni and Chevron and is discussing an investment of $2 billion in the Soyo terminal.

The plant is expected to produce 5.2 million tons annually and supply natural gas to a 750-megawatt power plant, a step in electrifying the African continent. The consortium plans to start production from the project by 2022.

Greenfield activity is also expected to keep increasing for the remainder of this decade as many of the liquefied natural gas projects in East Africa start attracting investments.

Greenfield investments offshore in sub-Saharan Africa are also expected to increase with the recovery in sanctioning activity.

Six licensing rounds are expected to conclude before the end of 2021, with about 92 blocks on offer, while another 14 are expected to close in 2022.

In addition to increased exploration activities, the report said Africa is expected to sanction more gas resources compared to the last decade, which focused mainly on crude oil projects.

The report said natural gas should continue to be the main instrument against energy poverty, because it has a proven track record of enabling access in the continent.

It said Africa's abundant 600 trillion cubic feet of natural gas reserves can help meet the continent's future energy demand and play a key part in electrification in various countries due to its accessibility.

Over 580 million lack access to electricity, nearly 46 percent of Africa's population according to the African Energy Chamber.

"Gas-to power generation can help move away from other more polluting conventional fuels and assist in the energy transition," the report said.

To achieve widespread distribution of natural gas and construction of gas-to-power facilities, the report said clear regulations are essential.

Thirdly, the increase in demand for battery metals is expected to disrupt global supply chains and open new market opportunities for countries globally, particularly Africa.

Over half of countries in Africa have at least one of the critical metals needed for the energy transition.