…Oil industry is the engine of economic growth and energy security
…600 million sub-Saharan Africans lack access to electricity
-Felix Douglas
The 13th Annual Energy Finance Forum was hosted recently by the Center for Petroleum Information (CPI) to commemorate 25 years of CPI leadership in providing critical insights into the energy sector.
It was CPI Energy Finance Forum (EFF-XIII) hybrid edition held in Lagos.
The gathering comes at a critical moment for the industry. This year’s theme: Financing is Fast-Changing Industry amid Heightened Risk and Hostilities.
Across Africa and beyond, the industry faces an era in which traditional models of financing and investment are being shaped by a confluence of challenges, from rapidly existing global dynamics to end positive decisions and impact to domestic uncertainties and an evolving regulatory landscape. The road ahead is volatile, uncertain, complex, ambiguous and at times hostile.
The CPI program reflects this reality. The backdrop of global geopolitical conflicts in the cascading effect on energy markets, explores how political shifts, exemplified by the impact of Trump, 2.0.
The forum was not only about understanding risks, it’s also about forging solutions.
The afternoon session of the forum discussed game change in concepts possibly as the proposed African Energy Bank and innovative approaches to financing Nigeria’s energy projects amid hostility. The discussions premise to shed light on how to secure long term investment while mitigating risk equitable balance in an era where heightened political hostilities and market uncertainties are the norm.
Experts provide deep insights into various issues. Sessions offer a comprehensive backdrop on the impact of global geopolitical conflict on energy markets, followed by a critical analysis of how emerging political dynamics, such as those brought to light under the banner of transcribing zero are influencing energy financing. They explore strategies in supporting Nigerian oil and gas entities as they navigate and increasing foster global environment.
In his opening remarks, Chairman of forum, Franklin Erebor, non-Executive Director, United Bank of Africa Plc, said the drill on energy financing, are altering the cost of capital and reshaping investor expectations and global investment decision matrix.
How does leaders in the industry confronts the harsh realities on the ground and how Nigeria oil and gas entities adapting to an environment marked by escalating risks. In an interconnected world, no market operates in isolation.
Erebor was of the opinion that global conflicts and trade tensions send ripples through financial markets, affecting everything from oil prices to lending conditions. Recent developments have underscored that risk one thought distant is at the doorsteps, for example, while “global headlines remind us of the turbulence affecting energy flows from volatile regions. Our African market fits their own unique hurdles, ranging from currency volatility to local regulatory uncertainties and infrastructure challenges to declining reserve to production ratio and governance challenges that limit access to financing.”
The Chairman asserted that these factors compound complexity of financing the oil industry and demand rethink strategies. “As these risks mount, there is a profound opportunity for innovation. Our industry has long been the engine of economic growth and energy security. Despite the world’s accelerating transition towards renewable, fossil fuels remains a major part of the world energy mix as oil and gas are proved to be the bedrock from which much of modern industry is built.
Continuing, he said they are the feed stock for essential products from gas to power turbines for energy to aviation and vehicle to fuels to plastics and chemicals to pharmaceuticals and agricultural interests. “Our challenge is to continue delivering the reliable energy that fuels economic growth while simultaneously investing in the technologies and strategies that reduce emissions, enhance efficiency and secure long term value.”
As traditional financing channels titans and investors demand greater transparency and resilience, innovative financing instruments have emerged to which green bonds, equity finance, including public markets, equity lines of credit and standby distribution agreements, convertible loans and private capital, including private equity, sovereign wealth funds, strategic corporate investors, venture capital and earnings.
According to Erebor, debt financing, including project finance, bonds, development finance institutions as to credit agencies, reserve based lending and sustainability linked loans, production based financing, including pre export financing repayment. Finance streams and royalties and hybrid financial models are few examples of tools at stakeholders’ disposal.
These instruments help to balance dual imperatives of maintaining robust production and funding transformation necessary to meet future energy demands sustainably. The challenges that face demand that stakeholders work collaboratively to build a financing framework is as dynamic and adaptable as the industry itself, Erebor added.
The CPI forum Chairman stated that as the industry stands at the crossroads of opportunity and uncertainty, stakeholders view the forum as call to collective action by harnessing the power of combined expertise craft finance and strategies that not only address immediate challenges but also have paved the way for sustainable growth whether through advanced risk management techniques, embracing new technologies or rethinking the architecture of capital allocation.
The goal must be to ensure that the African energy sector remains robust, competitive and resilient.
Notwithstanding, the issues addressed are not merely abstract financial challenges. They are defining issues affecting communities, driving national development and shaping the future of energy security across Africa. There are indeed, tough questions to grapple with. What will be the posture of the new US government on energy transition to net zero? What is the reasonableness or otherwise the transition timelines for developing Africa which is still energy deficient. The industry cannot settle for this declaration in these crucial opinions, especially when considering the green washing of financing resulting international finance intentions between rapidly addressing energy poverty and deficiency in Africa which is still energy deficient.
Africa cannot settle for these declarations. The fact that the deficiency in Africa is using available lowest cost energy resources while simultaneously addressing nationally determined contributions to green house gas emissions.
Today, 600 million sub-Saharan Africans lack access to electricity, and 1.2 billion lack access to clean, healthy cooking fuels.
Therefore the task is clear. Stakeholders must design and deploy financing solutions that not only sustain the industry in the face of heightened situations and hostilities, but also enable it to lead global transition towards a secured and sustainable energy future.
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