Egypt commits to African partnerships in energy sector

Egypt has committed to working with other African countries to process more of the continent’s natural resources within the continent, says Karim Badawi, Minister of Petroleum and Mineral Resources.

Speaking at a session on energy at the Alamein Africa Forum in Egypt last week, he said Africa needs to move beyond the traditional model of exporting raw resources and instead develop the infrastructure, skills and financing required to build integrated value chains.

“Resilience means developing the capacity to process more of our own resources, expand our industrial base, and connect producers with consumers across the continent and beyond,” Badawi said.

He was speaking ahead of a panel discussion on “Moving from Vulnerability to Resilience: Rethinking Africa’s Energy Systems” at the forum, organised by the Government of Egypt and Afreximbank in collaboration with AUDA-NEPAD and the African Union. 

Badawi said Egypt’s refining, petrochemicals, ports, pipelines and LNG infrastructure could provide a platform for greater African cooperation. He said the country’s facilities in Idku and Damietta, together with its petroleum ports, storage facilities and international maritime connections, could link African producers with markets in Europe, the Middle East and beyond. 

“This creates the possibility of retaining a greater share of value within the African energy value chain through refining, blending, storage, transportation, and the production of higher value-added petroleum products.”

Badawi added that Egypt also intends to extend its technical capabilities across the continent, noting that Egyptian petroleum companies already operate in countries such as Libya, Algeria, Nigeria, and Angola. 

Badawi said financing would be critical to making this ambition possible and affirmed Egypt’s support for the African Energy Bank.  

High costs

A panel discussion at the session discussed how high project costs are undermining Africa’s energy resilience.

Edu Okeke, CEO of pan-African energy company Azura Power, said Africa’s policymakers need to focus on reducing the cost of producing power and improving the speed with which power projects are completed on the continent.

Speaking at a panel discussion on the first day of the forum, Okeke pointed to the company’s experience in Nigeria, where it had taken six years to develop a power project, as evidence of the challenge facing power producers. The country, he said, should be adding 1,000MW every year for sustainability.  

Okeke said delays in project development, combined with high financing costs and other structural constraints, ultimately raised the cost of electricity. A gas-fired power plant in Africa, for example, costs about $1.5m per MW to build, compared with about $1m per MW in other regions, he said. 

“We cannot think of resilience in Africa if our cost of generating power is the most expensive in the world,” he stressed.

Investment challenges

Vanessa Baldwin Mushi, CEO of CATA Energy, said political pressure to keep electricity tariffs low is making it harder to attract private investment into Africa’s power sector. 

A major challenge is political, she said. “Politicians want to win votes, and so the agenda is to look for the lowest tariff that they can provide for the citizens.” 

Pressure to lower tariffs, however, can prevent projects from reaching financial close because the economics no longer supports investment.  

The solution is closer coordination between governments and the private sector to find a realistic approach to cost-reflective tariffs. While subsidies still have a role in protecting consumers from high electricity costs, Mushi said they should be targeted rather than achieved by suppressing tariffs.

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