With the never-ending Russia-Ukraine crisis, energy-stricken Europe now turns to Africa. Notwithstanding the distance, European Union members have set their eyes on African oil and gas producing countries that could be potential alternative suppliers. In the latest research developments, Italy becomes one more EU member closely coordinating with Algeria, Angola, Equatorial Guinea, Egypt, Nigeria and Mozambique.
During the first Russia-Africa summit, a number of African countries were soliciting Russia’s assistance in exploring their oil and gas reserves in Africa. Some agreement were signed with Russian companies such as Bashneft, Gazprom Neft, Lukoil, Rosneft et cetera.
Long before the start of Russia’s February 24 “special military operations” in Ukraine, many African leaders illogically failed to understand that Russia has always wanted to claim global leading position in oil and gas supply. Experts have said that Africa’s supply would affect the aggregate global supply and consequently its prices.
According to official reports, Russian Ministry of Natural Recourses and Environmental says that Bashneft and Gazprom Neft have expressed intention of joint development projects with Angola. “The sides welcome Rosneft’s intention to develop cooperation with Angolan national oil company Sonangol in the area of studying potential joint development of oil and gas fields in Angola and Russia,” the protocol says.
As a direct result of the war in Ukraine, Russia has come under a raft of unprecedented stringent sanctions imposed by the United States and Canada, European Union, Japan, Australia, New Zealand and a host of other countries.
This has to be analysed and its geopolitical and business implications. The fact is that bilateral business relations and geopolitical impact are changing, some degree. The crisis has absolutely posed challenges, but at the same time opened possibilities and prospects for establishing new partnership cooperation between state institutions as well as between foreign countries and Africa.
Research shows that Angola is Africa’s second biggest oil producer after Nigeria. It has 1.7 billion tonnes of proven oil reserves and a resource portfolio of up to 3.5 billion tonnes, with liquid hydrocarbons predominating. Angola mainly develops fields under production-sharing agreements; Sonangol has a stake in the majority of them.
Media reports note that Italy and a number of other EU members are scrambling to break away from Russian gas over the Ukraine war. This April, many of them turned to Africa. Angola and Italy have already signed a declaration of intent to develop new natural gas ventures and to increase exports to Italy, said a statement from the Italian Foreign Ministry.
“We have reached another important agreement with Angola to increase gas supplies. Italy’s commitment to differentiate energy supply sources is confirmed,” Foreign Minister Luigi Di Maio said in the statement at the end of a two-and-half-hour long visit to Luanda.
Prime Minister Mario Draghi wants to add Angola and the Congo Republic to a portfolio of suppliers to substitute Russia, which provides about 45 percent of Italian gas.
“We do not want to depend on Russian gas any longer, because economic dependence must not become political subjection. Diversification is possible and can be implemented in a relatively short amount of time — quicker than we imagined just a month ago,” he said in an interview with the Corriere della Sera daily published this April.
The deal was described as “an important agreement that gives impetus to the partnership between Italy and Angola in the fields of renewables, biofuels, LNG and training in technology and environment.”
The Italy delegation headed to neighboring Brazzaville, the Republic of Congo, to meet President Denis Sassou Nguesso. A similar declaration to be signed in the Republic of Congo. The foray follows the signing of agreements with Algeria and Egypt in recent weeks. Algeria is currently Italy’s second-largest supplier, providing around 30 percent of its consumption. ENI said the deal with Algeria’s Sonatrach would boost deliveries of gas through the Transmed undersea pipeline by “up to nine billion cubic meters per year” by 2023-24.
Transmed only had spare pipeline capacity of 7.8 billion cubic meters per year in 2021 — though it has said it is ready to expand. Italy has also been in talks with Azerbaijan over the expansion of the Trans-Adriatic Pipeline (TAP).
Many experts have written about the implications of Russia-Ukraine crisis, and what that means especially for Africa. For example, Research Fellow Danielle Resnick from the Brookings Institution wrote that the crisis casts a long shadow across Africa. Despite the geographical distance, there are implications for pan-African solidarity and adherence to multilateralism increasingly uncertain.
Resnick further stressed that a few countries are sensing long-term growth opportunities from the crisis. Specifically, Africa’s natural gas could reduce Europe’s dependence on Russian energy. The African countries mentioned earlier in this article with dreams of re-outlining serious business on the global landscape, Tanzania has revamped negotiations with energy companies in the hopes of attracting $30 billion in foreign investment to revive construction of offshore liquified natural gas projects in 2023.
From Nigeria to Niger to Algeria, the Trans-Saharan Gas Pipeline has specific importance as it can help to increase exports of natural gas to European markets. On February 16, the three countries signed an agreement to develop the pipeline, estimated to cost $13 billion. Europe is likely to be a key financer, bolstered by the EU’s controversial decision in early February to label investments in natural gas as green energy.
Now there are a few key questions: Can Africa really become the preferred gas and oil supplier to Europe? Will Russia invest in exploring and producing Africa’s oil and gas? Do African leaders understand that Russia wants to be the global leader and helping them explore oil and gas is illogical?
As the European Union has already indicated during the last EU-AU summit, it looks at Africa from different perspectives, and more importantly pushing for their economic footprints on the continent. Fresh from that EU-AU summit, there are agreements on several investment projects.
The EU is committing approximately €300 billion ($340 billion) for financing new investment initiatives — similar to China’s Belt and Road initiative — an investment program the bloc claims would create links, not dependencies. EU and SADC, for instance, have been worrying on facilitating and coordinating implementation of the regional agenda in Southern Africa.
As Resnick pointed out there would be tensions between the United States together Europe on one side and Russia, on the other, over Ukraine. Nevertheless, Africa leaders have to analyze this within the geopolitical context, take into account various scenarios for the near future.
The proximity of the European market gives especially Maghreb, the north African countries strategic significance to become potential gas suppliers. She cited Algeria, as the world’s sixth-largest gas exporter and the continent’s largest gas producer. It has already stated its intention to double exploration and production in the next five years, according to the International Energy Agency.
Algeria increased its export volumes to Europe from €40 billion in 2020 to €53 billion in 2021, and it is expected to export €46 billion or more in 2022, as demand in Europe is expected to continue to rise.
African countries, can capitalize on current trends to attract much-needed investment in order to develop the infrastructure necessary to accelerate production for regional consumption and exportation while also reducing costs. According to Abdur-Rasheed Tunde Omidiya, President of the African Economic Commission, “the time to act on the Trans-African Gas plan is now.”