It is a delicate balancing act of development of the oil and gas projects and impact on other sectors of the economy
COMMENT | YUSUF MASABA | In the recent past, a host of countries; especially those from the West, have announced major commitments to significantly cut the carbon emissions, committing to achieving “net zero” in a few decades. In pursuit of this, huge cutbacks in the fossil fuels industry are expected to be undertaken with a target of replacing them with new green technologies that are considered “environmentally friendly” by 2050.
The discussion on this global trend is present in our own backyard here in Uganda. A variety of environmental leaning civil society organisations in Uganda have fanned the discussion on this issue to the extent of opposing the development of Uganda’s Oil and Gas Project. Environmentalists have reached out to funders and discouraged them from providing financing to the Uganda oil project.
Norbert Mao, the Democratic Party President recently penned an article in one of the local dailies laced with pessimism on the likely success of the recently launched East African Crude Oil Pipeline (EACOP) Project which is intended to transport crude oil from the Albertine Graben in Uganda to the Tanzanian Port of Tanga for access to the international market.
Mao’s pessimism about the project may be premised on some of the recent reports published by several global environmental bodies which claim that fossil fuel-reliant countries will see a 51 percent (%) drop in oil and gas revenues in the next two decades as the world moves to cut emissions.
Contrary to this, a recent report by the U.S. Energy Information Administration (EIA) estimates that global energy demand will increase by 50% by 2050 and most of this increase in demand will come from non-OECD (Organisation for Economic Co-operation and Development) countries. EIA also asserts that in order to achiever net zero emissions by 2050, primary energy demand needs to fall by 17% between 2019 and 2030, to a level similar to 2006, even though the global economy is twice as large.
Africa, and the developing world, historically (and presently) have the lowest emissions. The World Economic Forum, projections are that, for instance, a three-times increase in use of Natural gas to meet energy (electricity) needs in Sub-Saharan Africa would only increase carbon emissions by only 1% of global emissions.
With fossils fuels still taking up 84% of the worlds’ energy mix, and the universal use of the clean energy sources still in its infancy, it is clear that upon commencement of production in 2025, Uganda’s oil will have a ready market for a period of at least 40 years.
This is backed by the fact that there is a large part of this market that lies within the developing world whose reliance on fossil fuels cannot be easily replaced by the onerous green technologies.
Countries like Norway that have projected themselves as Global Champions in transitioning to clean energy are already facing a big paradox. In 2020, Norway’s export of crude oil, condensate and natural gas exceeded €30 billion. About 5% of total employment is directly or indirectly within petroleum and petroleum-related industries. This goes further to show that fossil fuels still have a significant role to play in transforming the economies of the developing and underdeveloped world.
The recent launch of the Uganda Oil Projects on April 11, 2021; at which the key agreements for commercialisation of Uganda’s crude oil were signed, points to great strides made by the country in ensuring sustainable exploitation and utilisation of Uganda’s crude oil resources. This milestone will not only enable the shareholders raise the required financing for the EACOP project, but also de-risks the upstream and refinery projects.
The current global energy demand indicates that oil and gas will continue to play a leading role in the world’s energy mix and will remain the largest source of fuel needed to meet 2040 global demand. Uganda’s oil will surely have market, both locally and internationally.
Energy experts have predicted that fossil fuels will still be relevant by 2050 and beyond given the gradual process that all major energy transitions take and the fact that the growing demand for fossils driven by commercial transportation and feedstocks for the chemicals industry still stands.
Whereas the rapid transition will bring new opportunities, energy transitions have been, and will continue to be, inherently prolonged affairs. In large nations with high levels of per capita energy use and massive expensive infrastructure, it is impossible to accelerate this transition even with highly effective interventions.
For developing countries, such as Uganda, there is need to consider a balanced approach, that does not curtail development of the oil and gas projects. These projects are contributing and will continue to contribute to socio-economic transformation as a result of the opportunities, revenues and impact on other sectors of the economy.
Lastly, to quote NJ Ayuk, Executive Chairman of the African Energy Chamber, “on a continent where millions of families are using traditional, hazardous biomass for cooking, where 600 million people lack access to reliable electricity, the idea of leaving valuable oil and, especially, natural gas, in the ground seems neither practical, palatable, nor appropriate.”
The writer is a Corporate Affairs Officer at the Petroleum Authority of Uganda