From MasterResource

By Robert Bradley Jr. — April 7, 2022

“The question is, can European leaders and organizations let go of the dynamics that have dictated their dealings with Africa in the past — actions that prioritized climate objectives above Africa’s most pressing needs — and begin embracing the many benefits natural gas has to offer both continents?” (African Energy Chamber, April 4, 2022)

No reading between the lines needed. An energy policy reset is in the works away from wind and solar and toward natural gas. Oil is already the mainstay of the transportation market in Africa (no Richie Rich EVs, please). Coal is well ensconced. It is past time to go natural gas/LNG, just as the EU itself earlier this year reluctantly agreed to do (along with blessing nuclear power).

Sorry EU, but energy imperialism needs to be demoted in the name of affordability, reliability, and self-determination.

The African Energy Chamber (AEC) editorial, “It’s Time for Europe and Africa [to] Agree on a Green Gas Deal,” talks about natural gas-to-hydrogen as a way station to climate goals. Never mind a bone thrown to the UN; “blue” hydrogen adds a layer of unnecessary cost and is criticized by environmentalists as ineffective given methane leaks and without carbon capture and storage (“grey” hydrogen).

Let natural gas be natural gas for residential, commercial, industrial, and power generation.

The polite-but-firm 1,400-word editorial follows:

It would be fair to say that when it comes to Africa’s energy industry, Africa and Europe have been at odds for the last several years.

Europe, which has valid concerns about protecting the climate and moving the world toward net-zero emissions goals, has been urging African oil- and gas-producing states not only to accelerate their transition to green energy sources, but also to send it into overdrive. The general sentiment in the European Union (EU) is that the time for new oil and gas projects in Africa has passed.

African Oil and Gas Producers and the African Energy Chamber (AEC) have been outspoken in our objection to European environmental groups, leaders, and financial institutions interfering in our energy industry, particularly when it discourages funding for new African petroleum projects. We even called for a boycott last July of European firms that cut off African oil and gas investments.

As you might expect, African countries have been equally frustrated with the EU’s interference. They are less than keen about turning their backs on the benefits their fossil fuel resources have to offer, particularly natural gas. When you consider that natural gas can ease the continent’s widespread energy poverty, help provide reliable electricity for nearly 600 million people in sub-Saharan Africa without reliable electricity, and be monetized to create the funds Africa will need for a successful energy transition, it’s easy to see why.

Nevertheless, the EU has been relentless in its push to halt Africa’s natural gas production. Until recently, that is.

A seismic shift began late last summer when Europe was faced with rising commodity prices and low natural gas supplies. Output from renewables wasn’t able to fill the gap, making coal use a necessary evil to meet their needs. European leaders started recognizing that the increased use of natural gas, which emits the least carbon dioxide of all fossil fuels, was their best strategy for sustainably protecting Europe’s energy security in the short term.

By early 2022, the EU declared that natural gas (along with nuclear power) can be considered green energy — as long as it emits less than 270 grams of carbon dioxide per kilowatt-hour.

Perspectives evolved further after Russia invaded Ukraine in February. Currently, the European Union relies on Russia for 45% of its imported gas, which totaled about 155 billion cubic meters last year, the International Energy Agency (IEA) estimates. But earlier this month, European Commission President Ursula von der Leyen said the EU would release proposals for phasing out its dependency on Russian fossil fuels by 2027.

Today, the world is starting to recognize the critical role Africa’s vast natural gas resources could play in meeting Europe’s needs. The EU is also eying Africa’s potential for the production of green hydrogen, that is, hydrogen produced with renewable energy sources. Countries like Germany have already determined that they cannot produce the large quantities of green hydrogen they’ll need to achieve their zero-emissions goals on their own.

As a result, they’ve started setting the stage for successful import agreements with African producers by investing in infrastructure and African capacity-building programs. I was in Berlin Last week when Namibian Mines and Energy Minister Tom Alweendo and German Economic Affairs and Climate Action Robert Habeck, signed a Joint Declaration of Intent on cooperation in the field of green hydrogen during the Berlin Energy Transition Dialogue. Namibia has a Green Hydrogen project that has advanced a lot thanks to the work of James Mnyupe, Namibia’s presidential economic adviser and hydrogen commissioner and his team but more work is needed.

Frankfurt based, Emerging Energy Corporation has signed an agreement with the government of Niger to work on Green Hydrogen and also reduce carbon emissions in the oil fields and at the same time seek ways to get gas and hydrogen through pipelines into Europe.

Clearly, Africa has an important role to play in meeting European energy needs today and tomorrow. The question is, can European leaders and organizations let go of the dynamics that have dictated their dealings with Africa in the past — actions that prioritized climate objectives above Africa’s most pressing needs — and begin embracing the many benefits natural gas has to offer both continents?

Can we forge an alliance of mutual respect and cooperation, a “Green Gas Deal” of cooperation so to speak? I believe we can, and we must.

If we do, if European governments and businesses start ramping up their investments in African natural gas projects, they’ll accelerate the infrastructure development necessary for African countries to start exporting more gas and hydrogen to Europe, freeing countries there from reliance on Russia.

What’s more, European investments in Africa will open the doors to more gas-to-power projects with the potential to ease African energy poverty. The investments will open the door to industrial projects that use gas as a feedstock, such as chemical and fertilizer plants, that will diversify African economies. And they’ll foster the revenue generation that African countries will need to grow their energy mix and set the stage for a successful energy transition.

Now Is the Time to Invest in Africa

Besides, investing in African gas is a sound business move. For one thing, the African Energy Chamber’s efforts to foster a positive investment environment in Africa have already been productive. African governments like Nigeria, Uganda, and Namibia have been working to create business-friendly policies, from fair local content policies to improved fiscal regimes that enhance international oil companies’ (IOCs’) ability to operate profitably within their borders.

This October, the AEC plans to highlight Africa’s downstream, midstream, and upstream oil and gas opportunities with our Africa Energy Week, which will take place in Cape Town Oct. 18-21. It’s important to remember that Africa remains under-explored and still has vast stores of oil and gas. During the last year alone, there have been major discoveries in South Africa, Namibia, Gabon, and off the coast of Cote d’Ivoire, to name a few.

Not only do solid investment opportunities for Europe exist in exploration and production, but also in gas infrastructure. European governments, businesses, and organizations can facilitate African natural gas imports to their countries by investing in African gas infrastructure including pipelines, LNG export terminals, and maritime logistics operations. We hope to see businesses join forces, along with the creation of public-private partnerships, to drive these infrastructure projects forward.

Promising Steps

When it comes to a new era of energy cooperation, Europe and Africa are already moving in the right direction.

For example, I’m extremely encouraged by the commitment of Frans Timmermans, executive vice president of the European Commission, to participate in the AEC’s 2022 African Energy Week (AEW) in Cape Town this October. Timmermans will take part in investor forums, panel discussions, and meetings with African energy ministers, Presidents, Team Energy Africa and Oil and Gas industry stakeholders.

Meanwhile, the African Energy Chamber has met with the European Commission in Brussels and spoken to German leaders in Berlin about the role African hydrogen can play in Europe’s energy transition with great thanks and credit to the Konrad Adenauer Stiftung and particularly Anja Beretta, the Director of the Energy Security and Climate Change Program for convincing us to be on the table and speak up our views. She never tried to muscle us and it was respectful.

I only hope this pattern of open, respectful communication continues.

To build on this moment, we will need strong leadership. As I’ve said more than once, Africa and the EU need to think about our energy relationship not in terms of a binary choice between oil, natural gas, and coal production and climate change mitigation but rather in the context of energy security and a just energy transition. Rising energy prices and the conflicts underscore the urgency to do both.

That said, after my conversations with EU officials, I believe both Africa and Europe can rise to the challenge.

Africa can help Europe ease its dependence on Russian natural gas and produce the hydrogen it will need to meet its net-zero ambitions. And at the same time, Europe can support Africa’s goals for a just energy transition on our own timeline, one that allows us to use our oil and gas resources to build renewable energy infrastructure, skills, and technologies. One that will not negate our efforts to alleviate energy poverty.

We can, as allies, create the energy futures we both need and want. Now let’s change our mindset and get to work.

From NOT A LOT OF PEOPLE KNOW THAT

By Paul Homewood

This is a story that has got our old friend, Ambrose Evans-Pritchard, excited lately:

https://www.ft.com/content/0d14e8e9-63a1-400b-81af-e705d6eaaba9

According to AEP:

“Look at the deal just reached between Andy Fortescue and EON to ship green hydrogen (as ammonia) from his 200 GW planned solar and wind zone in Australia to Germany. Simply amazing. This is where the world is going”

The first thing to point out is that there is no deal to ship anything. It is simply a commitment to a research and study partnership. In particular, there is no obligation at all for Fortescue to spend a penny beyond this research. [Fortescue Future Industries, FFI, is, by the way the company. Andy Forrest is its Chairman – “Andy Fortescue” does not exist!]

But is green hydrogen really the breakthrough AEP thinks?

The first thing to note is that hydrogen does not grow on trees! FFI plan to use wind and solar power in Australia to produce hydrogen via electrolysis, an expensive process which also wastes some of the energy input.

The hydrogen is then combined with nitrogen in another expensive process to produce ammonia, which is more energy dense, and thus cheaper to ship. The ammonia then has to be cracked in another expensive process to split the hydrogen out again.

It therefore goes without saying that in energy terms hydrogen is much more expensive than the electricity used in the first place.

Solar power, of course, will be relatively cheap in the deserts of Australia. The IEA carried out a detailed study on hydrogen a couple of years ago, and reckoned that green hydrogen there would cost around $2.20 per kg:

https://www.iea.org/reports/the-future-of-hydrogen

That translates to $72.60/MWh, say £55/MWh. But on top of that we need to add all of the other costs.

The current, extremely high wholesale price of gas is about 270p/therm, or £92/MWh. Even now,  green hydrogen is unlikely to offer any significant savings, once all of the other costs are added in.

But there is no reason why natural gas costs should stay as high as they are now. Historically, market prices, which have reflected the “real” costs of extraction, have been around £14/MWh.

Allowed to function freely, markets will quickly correct the current imbalance of supply and demand, and prices will fall accordingly. It clearly makes no sense at all to spend literally hundreds of millions developing a green hydrogen alternative.

Indeed if we go down this route, we are locking in the current unaffordably high prices of gas for the long term.

So why are FFI and E.ON getting into bed on this one? The answer is simple – subsidy hunting.

There is no question from a technical point of view that green hydrogen can be produced and shipped in bulk in this way. But neither FFI or E.ON, nor for that matter their bankers, are going to invest big money just in the hope that the Ukraine crisis goes on forever.

There is only one way this project will get off the ground. They will be wholly dependent on subsidies from the EU or German government. This is most likely to be in the form of Contracts for Difference, already being mooted for hydrogen production in the UK.

Such a scheme would offer a guaranteed price to FFI and E.ON, with the cost passed on to consumers.

Finally, let’s put the production numbers into perspective.

The deal talks about 5 million tonnes of hydrogen a year. That equates to 165 TWh. In comparison, the UK consumes 855 TWh a year. Europe as a whole uses close to 6000 TWh annually.

Clearly this FFI project will make no more than a dent in the overall gas market.

Finally, one last number. The FT talk of a 200 GW wind and solar zone in Australia to make this happen.

Currently the global capacity of solar power is only 707 GW, and in Australia it is a tiny 17 GW.

It seems like we will need an awful lot of solar panels, simply to replace a tiny amount of gas!