During his recent visit to South Africa, U.S. Deputy Special Presidential Envoy for Climate Jonathan Pershing essentially told Western investors to back away from oil and gas projects in Africa — or else.
“There’s a risk of regulatory … and financial activities, and I believe that’s getting more and more explicit,” Pershing said during a virtual media briefing.
“If you’re a company looking to make an investment in oil and gas, you have to ask yourself … am I going to be left with a stranded asset?” Pershing continued. “I would not bet very strongly on a fossil fuel future.”
With all due respect, Mr. Pershing, we have to disagree.
Not only is investing in African oil and gas projects a sound business practice that represents a significant opportunity for a positive return, but it’s also a way to have a meaningful, long-term impact on African businesses, communities, and individuals.
Threatening to penalize investors for being part of that is wrong.
American oil and gas companies, in particular, have a long tradition of being a force for good in Africa.
Instead of offering aid — which is a merely short-term fix that consistently fails to address the root causes of poverty in Africa — majors like ExxonMobil, Chevron, and General Electric have a legacy of empowering Africans. Because of their investments in Africa, millions of African people have gained job skills that position them and their families for financial stability well into the future.
Because of the investments, these companies have made in infrastructure, African communities have been able to deliver electricity to more people and lay the foundations for economic growth and diversification.
Has everything these companies have done been perfect? No, of course not. But their mistakes don’t negate the tremendous good they’ve done. And now, with the economic toll the COVID-19 pandemic has taken in Africa, our countries need American investors willing to partner with us more than ever. Africans need the well-paying job and training opportunities they can provide.
Indigenous African businesses need the partnership and knowledge-sharing opportunities they bring. And African governments need the revenue that international oil companies’ (IOCs’) projects produce — not to maintain the status quo, but to invest in a new future.
Oil and gas revenue will support continued efforts to eradicate the energy poverty impacting hundreds of millions of Africans. It will fund the infrastructure necessary for African countries to foster economic growth and diversification, to adopt new technologies, and to position themselves for a just transition to renewable energy usage and production when the timing is right.
Natural gas represents a particular opportunity for American investors and for Africans. Not only is natural gas the cleanest of the fossil fuels, but it is also abundant in Africa. Demand for natural gas is high around the globe today, and with Africa’s population surging, demand for domestic use is predicted to remain high for decades.
All the more reason why investing in African oil and gas makes good business sense. Looking at the major African oil and gas discoveries made by such American corporations as ExxonMobil, Chevron, and Noble Energy (now owned by Chevron) in Angola, Equatorial Guinea, Ghana, Mozambique, Nigeria, and Senegal, we can see that IOCs have profited from their presence in Africa — and they can continue to do so.
And now, more African countries than ever have taken solid steps to make doing business in Africa easier for IOCs. Nations like Nigeria, Angola, the Republic of Congo, and Senegal have been implementing legislative and regulatory changes specifically designed to encourage government transparency, minimize red tape and risks for IOCs, promote environmentally friendly practices, and foster good oil and gas revenue management.
With that in mind, it would make more sense to encourage companies to invest in Africa’s oil and gas, not to pressure them to stop.
We realize that Western investors face significant pressures to stop investing in African oil and gas projects because of concerns about greenhouse gas emissions and climate change. The chamber supports a transition to renewable energy sources like wind, solar, and hydrogen power. But the zeal to safeguard the environment must be balanced with pragmatism. And efforts to protect the planet must be guided by respect and empathy for those whose daily lives will be impacted by those measures.
The fact is, even if Western investments come to a halt, our petroleum resources are not going to be left in the ground any time soon: The world still needs oil and gas, and renewable resources cannot adequately replace them, at least not yet.
If Western countries stop investing in African oil and gas projects, the resulting vacuum will be filled mostly by China, which already has a strong presence in Africa but is not known for a solid track record on human rights or environmental protection. The African Energy Chamber is working to build up an African energy industry founded upon good governance and free-market policies, one that protects our people and our environment. To continue doing that, we need foreign partners with the same values.
The time for investing in African oil and gas is not over, Mr. Pershing. The time is just right for it.
NJ Ayuk is Executive Chairman of the African Energy Chamber, CEO of pan-African corporate law conglomerate Centurion Law Group, and the author of several books about the oil and gas industry in Africa, including Billions at Play: The Future of African Energy and Doing Deals.