Africa Energy Bank will free continent from expensive oil loans says PAU
Obtaining oil funding, especially for African projects, has become hard due to the push to green energy. Photo / File
What you need to know:
- The African Petroleum Producers Organisation says it has finalised plans to establish the Africa Energy Bank before the end of this year
The Uganda Petroleum Authority (PAU) has said the Africa Energy Bank, expected before the end of this year, will free Africa, Uganda inclusive from expensive energy-related funding, resulting from perceived increase in risks.
Reacting to reports that the African Petroleum Producers Organisation (APPO) had finalised plans to set up the Africa Energy Bank before the end of this year at the weekend, Mr Ali Ssekatawa, the PAU legal and corporate affairs director, said the bank was a welcome idea that could help counter the global trend against financing oil and gas projects, which continues to hinder progress of African projects.
The International Energy Agency, he said, indicates that funding energy projects in Africa is currently seven times more expensive than in Europe due to perceived higher risk by funders, which results into expensive energy infrastructure projects.
“European funders often impose onerous terms such as political insurance cover and the application of foreign law, as well as external dispute resolution mechanisms like international arbitration, which do not recognise African jurisdictions,” Mr Ssekatawa said, noting the Africa Energy Bank could provide an equitable and just alternative for African countries and companies in the overall scheme of energy transition.
The declining investment in hydrocarbons continues to pose significant challenges to Africa’s exploration of fossil fuels at a time when the world is emphasising a shift to green energy.
However, African leaders argue that the transition should be a process that allows the continent to use resources from oil to transition to green energy.
The bank is expected to, among others, finance oil and gas activities, much of which is tied to external financiers.
Last week, Dr Omar Farouk Ibrahim, the APPO general secretary, said, African countries subscribing to the organisation will partner with the African Export-Import Bank to establish an energy bank, which will essentially focus on funding oil and gas projects on the continent due to reduction of funding by Western funders.
The bank, which was mooted last year during the eighth African Petroleum Congress and Exhibition in Luanda, Angola, will mainly attract investment from countries such as Saudi Arabia, UAE, Qatar and Kuwait, which have a lot of stake, and history in the development of oil and gas.
Uganda is yet to subscribe to APPO, but Irene Bateebe, the Ministry of Energy permanent secretary, at the weekend told Monitor that apart from increasing its engagement with other oil producing countries, Uganda is evaluating the process of joining APPO.
“As a country, we are not yet subscribers, but we are evaluating the process and criteria, and we will definitely join soon,” she said.
The move to form the Africa Energy Bank comes at a time when many international funders such as HSBC, Standard Chartered and Standard Bank, among others, are facing a lot of pressure from climate activists to stop funding oil projects, many of them in Africa, over carbon emissions, and the need to shift to cleaner energy.
Financial independence
Mr Elison Karuhanga, a partner at Kampala Associated Advocate, and a key advocate for the development of Uganda’s oil resource, said the Africa Energy Bank presents a significant opportunity for companies and oil producing countries on the continent to access funding that can support the transition to cleaner energy, develop oil and gas projects and ultimately achieve financial independence.
“The bank will serve as a key player in the energy sector, creating a more sustainable and stable market for investors and stakeholders,” he said.
