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Amid growing frustration with Western institutions’ reluctance to finance fossil fuels due to environmental concerns, a coalition of African oil producing countries has announced plans to set up an “energy bank” to finance projects on the continent. They are seeking $5 billion to raise the price.
The 18-member African Oil Producers Organization expects the financial institution to begin operations in early 2025, said Heyssam El Mayyargui, executive vice president for global trade at African Export-Import Bank, a partner in the project. He hopes to be able to start.
Africa’s oil-producing countries face funding constraints from traditional Western backers, including multilateral institutions with rules that increasingly prohibit investment in oil and gas. The World Bank stopped financing upstream oil and gas projects in 2019, but the African Development Bank, whose second-largest shareholder is the United States, has not put money into fossil fuel projects.
However, El Mayargui argued that “Africa’s situation is completely different from other regions” because Africa’s resources are underdeveloped and contribute minimally to climate change.
“(These countries) are at a stage of development and you can’t suddenly go green (transition). . . You can’t simply say funding is cut and you can’t produce oil,” he said in an interview. El Mayargui said there are other projects in Africa that are not related to fossil fuels, such as power infrastructure, and that they also need funding.
Standard Chartered last year withdrew from a multibillion-dollar contract to finance a pipeline to carry crude oil from landlocked Uganda to the coast of Tanzania after the proposed project became a target of environmental activists. .
Campaigners say such financial blocs are contributing to worsening Africa’s energy poverty. On the African continent, 600 million people lack access to electricity and nearly 1 billion still cook with dirty energy sources such as charcoal and firewood.
They argue that Africa contributes little to increasing global carbon emissions and should be allowed to develop its oil and gas resources to start industrializing.
The African Energy Chamber, an advocacy group, says Africa has a “balanced and sustainable” environment for its natural resources, which it says includes 125 billion barrels of oil and 620 metric tons of natural gas. He claimed that he had a “sovereign right” to develop the area. manner.
The 18 countries in the African Energy Bank project, including Nigeria, Angola and Libya, are each asked to contribute $83 million, bringing the total raised to approximately $1.5 billion. The African Export-Import Bank would be comparable.
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The remaining funding will come from other sources, including Gulf states, banks and other institutions, sovereign wealth funds, deep-pocketed traders and international banks interested in acquiring stakes.
El Mayarghi did not mention specific projects where financing is difficult due to environmental concerns, but he said Africa should take pre-emptive steps to transition away from fossil fuels. warned that it means
He said financing oil and gas projects is “not as easy as it used to be.” “We know that over time, the trends we are seeing across fossil fuel financing can cause the African context to be lost,” he added. “We need to develop a different timeline strategy. . . . It’s pre-emptive for us.”
The consortium’s oil ministers are expected to meet early next month to finalize plans for a new energy bank to be headquartered in Nigeria’s capital, Abuja.
