Africa tipped as world’s fastest growing downstream energy market in 2023

By YANGE IKYAA 

Global energy consulting and market research firm, S&P Global Commodity Insights, has released its latest report, known as the Africa Energy Review and Outlook 2022-23, in which it has tipped the continent to become the world’s fastest growing downstream energy market in the year 2023.

The report highlights key trends shaping Africa’s energy sector and providing recommendations for industry stakeholders and policymakers to maximize market growth.

Against this backdrop, the African Energy Chamber (AEC), as the voice of the African energy sector, has strongly commended S&P Global Commodity Insights for the work which will bring global investors up to date with opportunities within Africa’s entire energy value chain.

While Africa is at a cross-road of maximizing investments, development and the exploitation of its entire energy base to address energy poverty, the report provides a clear visibility of recent activities, as well as an outlook on upstream, downstream and power and renewables landscapes.

In regards to upstream activities, Africa had a bumper year in 2022, driven by increased focus by governments to maximize oil and gas exploitation and monetization to expand revenue streams and to meet growing energy demand locally and at global scale, according to the S&P study.

Despite the COVID-19 pandemic and energy transition related policies disrupting industry growth in previous years, 2022 was marked by new licensing round launches, revitalization of fiscal terms to attract new upstream investments, giant discoveries in Namibia and Angola, and countries such as Angola, Nigeria, Equatorial Guinea, Congo and Mozambique fast-tracking gas and liquefied natural gas project deployments.

With global majors and international independents intensifying activities in frontier markets and offshore basins, and seeking to accelerate resource development and monetization to take advantage of the high energy prices, the study forecasts investments across the region’s upstream sector to increase.

This is apart from the financial investment decisions for 30 new projects anticipated in 2023 and for another 30 projects in 2024.

Meanwhile, in the downstream sector, demand for refined products continued to grow, with 2022 levels matching pre-pandemic levels and Africa ranking as the world’s third-largest consumer of refined products, the study showed.

With some regional refineries closing, S&P Global forecasts Africa to record diesel shortages, a situation set to prompt increased investments in downstream infrastructure, as countries also strive to avoid external shocks on their markets. The continent is also predicted to become the world’s fastest growing downstream market in 2023.

NJ Ayuk, who is the Executive Chairman of AEC, said “although the region had a banner year for world-class frontier hydrocarbon discoveries, energy transition considerations remain a challenge to future upstream activity. The region is a leader in refined product consumption, but this also gives rise to supply concerns, including from the power sector, which increasingly has turned to liquid feedstock to compensate for failures of grid power.

“Renewables, however, may increasingly fill some of these power supply gaps.”

On the renewables front, despite Africa being the world’s smallest consumer of renewables at less than 500 KWh per capita, significant progress has been made to accelerate penetration and boost consumption, with corporate consumers embarking on large-scale project developments and capacity procurement to address grid security issues.

In 2022, the addition of 2.4 GW of renewables capacity drove the growth of the sector, while the green hydrogen industry, which is increasingly attracting global attention, is set to significantly drive renewables market expansion on the African continent.

“As the voice of Africa’s energy industry, the African Energy Chamber supports the S&P Global Commodity Insights study and its findings. We believe reports such as this are crucial in bringing together private and public sector institutions to address critical energy challenges,” said Ayuk.

As AEC’s strategic and knowledge partner, S&P Global Commodity Insights will present the study findings, while showcasing investment and partnership opportunities across Africa’s entire energy landscape during the AEC’s Invest in African Energy Dubai event, which is set to unite African energy stakeholders with companies and investors from the United Arab Emirates and the Middle East region at Ritz-Carlton in Dubai on 30 March, 2022.