African Petroleum Producers' Organisation Looks to Establish Energy Bank to Finance Oil and Gas Projects in Africa
· African Petroleum Producers’ Organisation (APPO) is preparing to establish the Africa Energy Bank, which will finance oil and gas projects in Africa.
· Global financial institutions, including the World Bank, are slashing funding for oil and gas projects in Africa due to stringent conditions and environmental concerns.
· While addressing the funding challenges faced by national oil firms in Africa, the Africa Energy Bank seeks to attract investment from Saudi Arabia, the United Arab Emirates, Qatar, and Kuwait.
African Petroleum Producers’ Organisation (APPO) is set to launch the Africa Energy Bank by the end of the year. According to Dr Omar Farouk Ibrahim, the APPO general secretary, the bank will finance oil and gas activities on the African continent without external financing that comes with strings. The organisation is partnering with the African Export-Import Bank to establish the bank, focusing on funding oil and gas projects on the African continent.
Dr Ibrahim noted that the World Bank and other international financing institutions have closed financing channels, and their conditions need to be revised, unlike 20 or 30 years ago. The bank aims to attract investment from countries like Saudi Arabia, UAE, Qatar, and Kuwait, which have a stake in oil and gas development.
The Africa Energy Bank was mooted during the eighth African Petroleum Congress and Exhibition in Luanda, Angola, last year. Angola’s President Joâo Manuel Lourenço said the idea would resolve challenges faced by national oil companies.
This move comes at a time when many international banks are under pressure from climate activists to stop funding oil projects due to high carbon emissions and the shift to cleaner energy. Major banks like HSBC, Standard Chartered, and Standard Bank have announced that they are reviewing their lending for oil and gas projects in light of the net-zero campaign.
Uganda has faced challenges in financing the 1,443-kilometre crude oil pipeline due to diminishing financing for greenfield oil and gas projects and the pressure from climate activists to halt pipeline construction. The East African Crude Oil Pipeline (EACOP) will require a $4 billion investment and has received funding from the Islamic Development Bank and Afrexim Bank, totalling $300 million. However, it continues to face threats of commitment withdrawal by European and American banks.
The bank’s goal is to finance oil and gas projects on the African continent without external financing that comes with stringent conditions. While oil and gas projects do contribute to greenhouse gas emissions, the impact of the bank’s financing on the planet will depend on the types of projects it funds and the extent to which they adhere to environmental regulations and
standards. Many international banks are facing pressure from climate activists to stop financing oil and gas projects over high carbon emissions. Therefore, establishing a new energy bank for such projects may be seen as a controversial move by some. Ultimately, the impact on the planet will depend on the decisions made by the bank and the countries and investors involved in its financing.