Energy transition and Africa's oil and gas resources: Challenges and opportunities

The global energy system is changing as the world is moving towards a low-carbon economy. Since 2010, however, there have been significant oil and gas discoveries in several African countries that promise to address critical energy security and equity needs. Revenues from these natural resource exports are needed to close the estimated annual US$130-170 billion continent-wide infrastructure financing gap, and to fund other key investments to reduce poverty and inequality. The difficult dilemma for oil-producing African nations is how to fund development if they give up on exploring newfound oil and gas resources due to climate change concerns. This chapter critically analyses what the energy transition means to developing Africa's oil and gas industry. It assesses the legal, economic, and environmental risks of the energy transition on the continent and the opportunities that this transition presents. We present some country case studies of how petroleum-producing African countries are responding to the energy transition and compliance with Paris Agreement commitments. Furthermore, we discuss the increasing role of critical minerals in this energy transition era and how African countries can position themselves to attract investments and add value to strategic minerals such as cobalt and lithium, which are needed to power the low-carbon economy. Our findings also show that increasing environmental, social, and governance (ESG) pressures will translate into highly selective upstream projects on the continent as every project is highly likely to be re-evaluated on new tighter metrics, including carbon intensity. In relation to oil and gas, we advocate for a four-tier strategic response to the pressures of the transition encompassing an aggressive exploration, asset stewardship and infrastructure strategy, regulatory and investment environment strategy, redefining the strategic role of African national oil companies (NOCs), and supply chain and capacity development strategy.