Prime
Energy revolution, or energy illusion?
Elison Karuhanga
What you need to know:
- Let’s call it equal parts optimism and experience; I am confident that our oil assets will not become “stranded assets.” Oil and gas will continue to be relevant and essential commodities for a substantial period.
Last week, I had the rare privilege of sharing my insights on the energy transition with the distinguished members of the Uganda Law Society. The key questions surrounding the energy transition remain at the forefront of discussions. One pressing inquiry is whether this transition might lead to the stranding of oil assets. In other words, if we continue to develop oil fields while the world moves away from fossil fuels, could we be left with outdated and unprofitable assets?
Let’s call it equal parts optimism and experience; I am confident that our oil assets will not become “stranded assets.” Oil and gas will continue to be relevant and essential commodities for a substantial period. Although it is true that Western governments have taken significant steps to reduce their addiction on fossil fuels since COP26 in Glasgow—introducing carbon taxes, subsidizing wind and solar power, and phasing out combustion engines in favour of electric or hydrogen vehicles—this has not resulted in a significant decrease in the demand for oil and gas. In spite of these regulatory interventions, we have not seen any “green revolution” in the West. They remain as addicted to fossil fuel as ever.
The decision to curtail lending from multilateral investment banks such as the World Bank and the African Development Bank, to African oil projects has not translated into a green revolution on the African continent either. Africa remains a place where 600 million people lack access to energy, and 900 million people still rely on firewood and charcoal for cooking. Sadly, the freeze and constraints placed on our projects have only exacerbated the continent’s energy challenges. Fortunately, the world is no longer solely reliant on the policy decisions of Western leaders. Alternative sources of financing are emerging from parts of Asia and Africa, most notably from China.
Furthermore, even in the event of a transition, oil and gas will continue to play vital roles in various sectors. Consider, for instance, the ongoing need for tar in road construction, especially for the infrastructure that electric cars depend on. For instance, we will continue to require tar for constructing roads upon which electric cars can be driven. Indeed, in the wake of the noble declarations made in Glasgow to phase out fossil fuels, what have we witnessed?
The United Kingdom, host to the Glasgow Climate Summit, has granted more than 100 oil and gas licenses in the North Sea. Similarly, Norway has issued more than 53 licenses in the North Sea. In China, the construction of two coal plants per week continues unabated. Even in the midst of the Russian invasion of Ukraine, a recent study reveals that Europe now purchases 40 percent more Russian gas than it did prior to the conflict in Ukraine. Without exception, every country in the western hemisphere now subsidizes fossil fuel to make it affordable for their citizens.
Nonetheless, we must not distance ourselves from participating in the crucial discourse on the energy transition. To bring this transition to fruition, the world’s reliance on what are referred to as “critical minerals” is indispensable. In 2020, the World Bank underscored the necessity for a 500 percent surge in the supply of “graphite, lithium, and cobalt” to meet the demands of the energy transition. Additionally, minerals such as copper, cobalt, platinum, and rare earth elements will play pivotal roles in facilitating this shift. Clean-energy technologies, per the World Economic Forum, demand more critical minerals. Electric cars use 5x minerals compared to combustion engines, wind farms need 8x more than gas plants, and energy-efficient fossil fuel plants require extra nickel.
Presently, China holds a significant share of the critical minerals market. Hence, the transition presents a fascinating opportunity for Uganda, a nation endowed with rich reserves of cobalt, copper, lithium, and rare earth minerals. It is imperative that we invest in these critical sectors, not merely as raw material suppliers but as drivers of technological advancement that can propel the transition forward. We can no longer afford to sit idle on these valuable mineral resources.
The transition debate must be understood in its proper context. There was a time when conserving African poverty served as a useful tool for domination and control. Some things have changed while others remain but what is certain is that the development of our continent is now non-negotiable, we must continue to advance our critical and essential oil and gas resources.
The writer is an advocate and partner at Kampala Associated Advocates
