Serving as the most significant driver of industrial growth and economic activity, the energy sector comprises the complex and intricate system of activities and companies involved in the production and distribution of various types of power. With continent wide objectives to expand energy access, enhance investment competitiveness and drive economic growth, several sectors are poised to experience accelerated growth in 2022.
Oil and Natural Gas Drilling and Production
The need to increase access to modern energy to spur economic development in Africa has never been greater. Currently, fossil fuels represent approximately 40% of the overall energy mix in sub-Saharan Africa, and this figure is expected to increase with the accelerated exploration of oil and continent-wide uptake of natural gas.
Between 2021 and 2025, an estimated 428 oil and gas projects are expected to start operations on the continent. The most notable include Shell’s $30 billion Tanzania Liquefied Natural Gas (LNG) Liquefaction Project – expected to commence construction in 2023, with completion aimed for 2028; Mozambique’s $30-billion Rovuma LNG Terminal and $20 billion Mozambique LNG facility – expected to begin production in 2025 and 2024, respectively -; and Nigeria’s $20 billion Ogidigben Gas Revolution Industrial Park – a planned downstream refinery and petrochemical complex set for construction in the west-African country’s Delta Region. This region is also where the development of the Etan and Zabazaba oil fields are taking place. Accordingly, as projects come online and new investments secured, Africa’s hydrocarbon sector is set to experience significant growth in 2022 and beyond.
Natural Gas Pipelines
Another sub-sector poised for growth in 2022 is rooted in the midstream sector, specifically, natural gas pipelines. Natural gas pipelines transport gas from gas wells or import/export facilities to various sites, such as homes or export facilities. With several large-scale gas developments underway across the continent, and government objectives to increase the exportation of gas to international markets, the construction of gas pipelines is expected to increase.
Notable pipelines coming into production in Africa soon include the proposed $6 billion African Renaissance Pipeline Project, which will link Mozambique’s gas-rich Rovuma Basin to Gauteng Province in South Africa; the proposed 1,800km Tanzania-Uganda Natural Gas Pipeline Project that will transport LNG from Dar es Salaam in Tanzania to Kampala, Uganda; and the planned Ajaokuta-Kaduna-Kano Natural Gas Pipeline, that will serve as part of the wider Trans Nigeria Pipeline Project. These pipeline projects will not only boost gas exports from Africa, but will enable an increase in intra-African gas trade.
Endowed with bountiful reserves of gold, diamonds, cobalt, bauxite, iron ore, coal, and copper, Africa is already a major producer of key minerals critical for the renewable energy sector. With the ongoing climate crisis and associated global energy transition motivating the uptake of renewable energies, Africa’s mining sector is set to play a key role in the transition to a clean energy future.
Notably, with demand for cobalt – an essential mineral for the development of batteries used in electric cars, computers, and smart phones – expected to grow fourfold by 2030, countries rich with the resource are poised for growth. The Democratic Republic of the Congo (DRC), for example, which boasts 70% of the world’s cobalt reserves, can supply global markets, driving the energy transition while accelerating domestic growth.
Additionally, countries such as Zimbabwe, Namibia, Ghana, the DRC, and Mali, all of which are rich with lithium – used to manufacture batteries and other green technologies –are well-positioned to spur socio-economic growth through the development of the mineral resource. Accordingly, in 2022, Africa’s mining sector is projected to undergo significant growth, owing to the global energy transition.
Likely to become an inexorably critical component of Africa’s energy sector in the future, renewable energy has gained traction and investment in recent years. Despite the continent’s energy mix comprising almost entirely of fossil fuel and biomass sources, it is forecasted that renewable energy will account for 40% of all power generation capacity in sub-Saharan Africa by 2040. This capacity will vary in scale and will be comprised of various sources of clean energy, such as hydro, sun, wind, and others, with solar projected to be the dominant source. Technological advances and falling costs are key drivers for Africa’s renewable energy development, as, over the next three decades, it is expected that two-thirds of the continent’s mini- and off-grid systems will be powered by solar photovoltaics, small hydropower, or wind.
In 2022, Egypt has committed to the goal of generating 20% of its electricity from renewable sources, with the 1,650 MW Benban Solar Park and the upcoming $37 million solar-plus-storage project currently being developed to diversify the country’s energy mix. Meanwhile, the Grand Ethiopian Renaissance Dam is expected to contribute an additional 6.45 GW of installed capacity to Ethiopia’s national grid, and in South Africa, the country’s Renewable Energy Independent Power Producer Procurement Program is expected to close its commercial and financial concessions by March 2022 from a list of bids proposed the year before.
The transmission of energy is a critical component of the African energy sector, serving as a requisite for increasing energy access across the continent. Accordingly, the sector has been gaining traction in recent years, particularly as the continent has become more focused on expanding cross-border transmission lines for regional and international trade.
Notable developments in this area include the development of a 200 kV transmission line between Masaka, in eastern-Uganda, and the Mwanza region of Tanzania, which would facilitate direct interregional trade. Discussions for this project are currently underway between the Governments of Tanzania and Uganda. Meanwhile, with a goal of universal electrification in Ethiopia by 2030, the 500 kV Sodo-Moyale-Suswa transmission line is expected to revolutionize the power supply situation in the east-African country along with Kenya. In addition to domestic supply increases, the project will also provide Kenya with a source of low-carbon, renewable electricity from Ethiopia. Given the insurmountable energy developments set to be implemented in Africa in the coming years, the energy transmission sector is particularly important for the electrification of the continent, and will serve as a means to spur socio-economic growth and industrialization.