Global upstream oil and gas investments are projected to hit $570 billion in 2024, marking a 7% rise compared to 2023. Of this, 33% will target frontier assets, creating strategic opportunities for Africa's emerging oil and gas markets. Meanwhile, the International Energy Agency estimates that providing modern energy access across Africa, where over 600 million people lack electricity, will require $25 billion annually through 2030.
Addressing the critical challenge of financing energy projects in Africa, African Energy Week (AEW): Invest in African Energy 2024, scheduled from November 4-8 in Cape Town, will spotlight the session "Unlocking African Assets Through New Risk and Finance Solutions." Sponsored by Howden, a global insurance broker, and TRM Risk Management, a Pan-African insurance advisory firm, the session will explore innovative risk mitigation and financing strategies that can accelerate energy project development in Africa.
AEW: Invest in African Energy has become the premier event for project operators, financiers, technology providers, and government officials, offering a key platform for signing major deals in the African energy sector. For more information, visit www.AECWeek.com.
The panel on risk and finance solutions will feature industry leaders, including Osam Iyahen, Senior Director & Head of Natural Resources at Africa Finance Corporation; Nick Mitchell, COO & Executive Director at green energy supplier Renergen; and Sam Martyn, Managing Director & Head of Natural Resources at Howden Broking. The discussion will be moderated by TRM Managing Director Hugo Hill. Together, they will explore the opportunities and challenges shaping Africa’s energy financing landscape and how political risk and credit insurance can foster investment.
Serving as a milestone development in the sector, the African Petroleum Producers’ Organization and multilateral financial institution Afreximbank signed an agreement last June establishing the Africa Energy Bank. The bank is set up to facilitate, promote and finance the development of oil, gas and energy projects in Africa, and will play a central role in strengthening energy access by providing the financing needed to get large-scale projects off the ground. With $5 billion in initial capital raised from African signatories so far, the institution aims to close the funding gap by providing capital to oil and gas projects across the continent.
Despite the role oil and gas has played and will continue to play in Africa, global efforts to transition to alternative sources of fuel have created a stark investment gap. Fossil fuel funding has been declining in recent years, as international oil companies divest their oil and gas assets in favor of lower-carbon investments. As a result, one of the challenges in Africa’s oil and gas sector is reliance on both foreign expertise and funding. The Africa Energy Bank serves as a prime opportunity for the continent to attract interest and stimulate participation from local and regional governments and private sector players to fund future projects.
African governments play a crucial role in developers’ ability to secure financing for oil and gas projects. Many countries on the continent offer flexible profit-sharing, royalty and tax structures that facilitate quicker cost recovery, which is a major consideration for investors. Equatorial Guinea has established a one-stop shop that enables investors to set up a business in the country in one week, while South Africa’s InvestSA platform serves to facilitate investment, fast-track projects and reduce government red tape. Earlier this year, Angola implemented a one-stop shop for local content compliance in the oil and gas industry, enhancing transparency and policy implementation across the sector.
Financial delays are a major risk to project timelines, requiring companies to secure the necessary funding before launching large-scale projects. As such, the establishment of certain financial mechanisms in the oil and gas sector can enable companies to better access funding, as well as unlock alternative sources of capital such as sovereign wealth funds, development finance institutions, bond markets and more. One such mechanism is public-private partnerships (PPPs), which can accelerate project timelines by sharing risks, resources and expertise. Governments can encourage PPPs by offering incentives such as tax breaks, reduced royalties or fast-tracked approvals for projects that involve private sector investment. PPPs are especially effective in infrastructure development, where private companies can bring in advanced technology and expertise to expedite construction and operation phases.
“Financial institutions across Africa’s oil and gas sector have an essential role to play in driving industry growth. By providing much-needed capital to critical energy projects, they help bridge the investment gap and reduce the level of perceived risk that has long hindered development. Their involvement ensures that Africa’s resources are harnessed in a way that benefits local economies, creates jobs and supports energy access. As we unlock new opportunities, the support of these institutions will be paramount,” states NJ Ayuk, Executive Chairman of the African Energy Chamber.
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