Oil still has a role to play in the energy market going forward and is forecast to dominate energy supply up to 2040; however, policy decisions will be critical in how Africa and its oil industries move forward to meet net zero targets, speakers said at the virtual Africa Energy Indaba on March 3.
Energy African Leadership Centre director Dr Rod Crompton told attendees that South Africa’s policy stance, on whether it will continue to support internal combustion engines (ICE) and oil industries, or switch to supporting electric vehicles (EVs), will determine the future for oil in the country.
He said the case for EVs in South Africa is compelling, with these scoring above ICEs in terms of transport efficiency, balance of payments and emissions.
The only downside he noted was in infrastructure costs if this switch occurred. While there are already many recharging stations for EVs on major highways across the country, a lot of supporting infrastructure still needs to be built, he said.
Speaking for the continent broadly, World Energy Council Africa vice chairperson Dr Elham Ibrahim said Africa had been impacted considerably by the pandemic, with decreased revenue owing to lower oil and gas exports.
She said this was not the first time a situation like this has occurred globally, with the oil industry having had to contend with two other price collapses in the 12 years prior to Covid-19.
However, Ibrahim highlighted that, on those occasions, the oil industry rebounded and returned to business as usual. However, now, there were many different factors at play, such as the supply shock, the unprecedented demand drop, the global humanitarian crisis and the industry’s financial and structural health being worse than ever before.
Despite all this, she said, the pandemic could be an opportunity for the development of oil industries globally and in Africa, as it accelerated the change that had already been under way when the pandemic hit.
Regional integration, innovation and technology, and reallocation of resources and investments were all matters that had to be considered.
Even in the worst case scenario, oil would remain a multibillion-dollar market for many years to come, Ibrahim emphasised.
AVA board member Niall Kramer posited that the future of oil was not oil, but rather, gas, and more specifically, liquefied natural gas (LNG).
He said LNG presents considerable opportunities for South Africa, as it is the world’s largest energy market that does not produce gas or import LNG.
However, he indicated that the country’s policy environment was not supportive and does not provide clarity, and stressed that government needs to give attention to this, as it is necessary to drive exploration.
He emphasised that being proactive, attractive and commercially sensible in this space would attract big investments to the country that could easily compete with what mining was for its economy.
He stressed that one impact of the future of oil that was being overlooked was the economic impact it could have for the country in terms of gross domestic product growth and job creation.
He said there needed to be immediate implementation of more benchmark studies in terms of where the country was right now in terms of infrastructure, stakeholder engagements and regulations.
Kramer noted that the country spends about R8-billion a year on diesel during load-shedding, while LNG presents a cheaper and more realistic alternative to that, but is not being pursued – which he noted as an oversight.
Meanwhile, Puma Energy Global Lubricants, Aviation & Downstream East Region head Eghosa Oriaikhi Mabhena noted that while more mature markets would start to reduce their need for oil, African markets may increase demand as they continue to develop.
She also stressed that it was important for the continent to consider its next positive contribution to climate change, such as what it can produce locally, how it can participate in the energy mix and to ensure that these were produced at a lower cost.
Moreover, she noted that the continent was still grappling with its biggest challenge of energy poverty, and that this would continue to be a primary concern for many governments.