AFRICANENERGY CbI

www.africa-energy.com Issue 324 • 26 May 2016

Cairo looks ahead with new licensinground despite payment arrears burdenThe launch of EGPC’s bid round, with two more to follow later this year, suggests Cairo believes it has regainedthe confidence of investors. But while recent drilling success has boosted sentiment, EGPC’s payment arrearsare still causing significant problems for some IOCs, writes John Hamilton

Senior officials and some notable international investors areoptimistic that Egypt’s upstream sector is back on track,but this does not mean that some casualties have not been

left by the wayside. The announcement of a new licensing roundand the prospect of others later this year is the latest indicationof the opportunities now on offer (AE 322/1). Fielddevelopments are under way on and offshore, but EgyptianGeneral Petroleum Corporation (EGPC) has not paid backarrears owed to international oil companies (IOCs) as quicklyas it said it would, and a number of IOCs have suffered becauseof this.

EGPC’s latest licensing round offers 11 blocks with explorationhistories often going back several decades. A total of 139 wellshave been drilled in the six onshore Western Desert blocks overthe past three decades, while 47 wells have been drilled in the

five Gulf of Suez blocks, the earliest of which was spudded 70years ago. With a large amount of 2D and 3D seismic data alsoavailable, this offer of mature prospects is therefore a substantiallydifferent proposition from the highly speculative exploration inthe deep waters of the Nile Delta which has attracted interestover the past year thanks to Eni’s large Zohr discovery (AE320/13). EGPC has opened a data room at its Nasr City office.However, several days after the announcement of the round, ithad not yet published the production-sharing model agreement.The deadline for submissions is noon on 31 August 2016.

Both Egyptian Natural Gas Holding Company (Egas) andGanoub El-Wadi Petroleum Company are expected to holdtheir own licensing rounds later this year, indicating that Ministryof Petroleum officials feel they have regained the confidence of

ISSN 1463-1849 Cross-border Information

New capacityBacked by the US Power

Africa initiative, Endeavor

Energy has four projects close

to sanction in West Africa

aiming to fill short to

medium-term demand gaps

with a mix of imported and

domestic gas and heavy fuel

oil. Two of the projects are in

Ghana, where there is urgent

need for new capacity, while a

third is a CCGT scheme for

Côte d’Ivoire, and a fourth is a

short-term 50MW HFO plant

in th Guinean capital Conakry.

—SEE PAGE 10

Gas plansEnergy minister Tina Joemat-Pettersson has set out atimetable for the gas IPPprocurement programme aswell as plans for legislativechanges to bring midstreamgas fully under the purview ofthe Department of Energy.The programme has generatedconsiderable interest fromupstream, midstream and IPPdevelopers but the detailsremain to be ironed out. Theminister said a preliminaryinformation memorandumwould be released in Q3,enabling companies toorganise into consortia beforean RfQ in Q4.

—SEE PAGE 7

Following months of tensionbetween the Chinese owners ofthe loss-making Société deRaffinage de Zinder (Soraz)refinery and state distributorSociété Nigérienne des ProduitsPétroliers (Sonidep), thegovernment has agreed to endSonidep’s monopoly, paving theway for production to increase. Infuture, Soraz and Sonidep willboth be authorised to exportpetroleum products. Oncedomestic demand has been met,they will share the surplus forexport on a 50/50 basis, at a pricefixed each month.

The 20,000 b/d refinery isowned 60% by CNPC, whichproduces oil from the Agademlicence in eastern Niger, and 40%

by the state. Disputes over pricinghave marred operations since thestart, and local workers haveprotested about pay and workingconditions (AE 305/15). Theprice Soraz pays CNPC for thecrude, originally fixed at $70/bbl,has been reduced to about $57.

The Chinese have been lobbyingto manage exports directly,instead of via Sonidep, which hasstruggled with the logisticalchallenges of lifting and storingthe refinery’s output. Soraz has anameplate capacity of 20,000 b/dbut usually produces 12,000-18,000 b/d, of which 7,000 b/dis for domestic consumptionwhile the rest is destined forexport, to Mali, Burkina Faso andNigeria.

CONTINUED ON PAGE 3

Niger’s Sonidep loses monopoly

Issue 324 • 26 May 2016

Incisive analysis since 1998

EditorThalia Griffithsthalia@africa-energy.com

Editorial DirectorJon Marksjon@africa-energy.com

CartographerDavid Burles

Contributing EditorsEleanor Gillespie, John Hamilton, Dan Marks, David Slater, François Misser (Brussels)

Production editorShirley Giles

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AFRICANENERGY

Contents

FOCUSEGYPT: Licensing round, EGPC debt arrears 1NIGER: Sonidep loses monopoly 1EGYPT: EGPC licensing round blocks 5

POWERSOUTH AFRICA: Eskom renewables comments 6SOUTH AFRICA: Minister outlines gas IPP timetable 7NAMIBIA: Enertronica buys second solar project 8ETHIOPIA: Salini signs deal for Koysha dam 9 GUINEA: AfDB focuses on energy development 9RWANDA: KivuWatt plant inaugurated 10REGIONAL: Endeavor plans to fill supply gaps 10GHANA: USTDA grant for solar scheme 11GHANA: VRA start date for building coal plant 12GABON: Government to end SEEG monopoly 12POINTERS: Nigeria/Benin 12POINTERS: Rwanda/Burundi/DR Congo, Tanzania 12

UPSTREAM OIL AND GASLIBYA: Harigah blockade lifted 13SENEGAL: Cairn completes drilling 14GABON: Vaalco puts back maintenance 15POINTERS: Equatorial Guinea, Nigeria, South Africa14POINTERS: Tunisia, SDX Energy, Technip/FMC 14MOZAMBIQUE: Wentworth’s Rovuma plans 15

DOWNSTREAM HYDROCARBONS AND MARKETSNIGERIA: Protests over fuel price rise 15TANZANIA: Fertiliser plant to start construction 16

FINANCE AND POLICYREGIONAL: AEEP reports mixed progress 17REGIONAL: Interconnections key to energy security18NIGERIA: SFO investigates Rolls-Royce deals 20

DIARYEVENTS: What’s on around the region 20

AFRICAN ENERGY VIEWCAMEROON: An enigma for investors 22

2 AFRICAN ENERGY • ISSUE 324 • 26 MAY 2016

AFRICAN ENERGY • ISSUE 324 • 26 MAY 2016 3

Egypt’s Western Desert oil and gas blocks

investors and may finally be putting the difficulties of the pastfew years behind them. This confidence was recentlydemonstrated by a bullish announcement from petroleumminister Tarek El-Molla, who said he was planning a 28-blockround. He estimated that 12 gas field developments currentlyunder way would require a total $33bn in investment, $25bn ofwhich will go towards three large projects being carried out byEni and BP. These new fields will increase gas production from3.9bcf/d now to more than 4.6bcf/d by end-2019, andeventually increase it to more than 5.5bcf/d.

One of the key features of the government’s approach torevitalising the sector has been an emphasis on swift decision-making and approvals. Zohr is an example of this, as is Eni’s NileDelta Nooros field in the Abu Madi West concession whereproduction has reached 65,000 boe/d (33,000 boe/d net to Eni)just ten months after the discovery was announced in July 2015.In an 11 May statement, Eni said the result confirmed its strategyof developing fields close to existing infrastructure, which“allows the fast development of the discoveries”. It is aiming toincrease production to 140,000 boe/d by year-end.

Apache Corporation has also benefited from this. In March2015, EGPC took just 13 days to approve the development planfor its Berenice field and six days for Ptah. Apache chiefexecutive John Christmann told the Offshore TechnologyConference in Houston in early May that he believed Egyptwas heading in the right direction and that the company wasnow making more money from Egyptian than US production.In Q1 2016, it maintained gross production in Egypt of 353,000boe/d, of which its net production was 103,000 boe/d. Thereis considerable financial market speculation that Apache couldbe the target of a takeover thanks to its strong management andgood financial health. This is a result by no means guaranteedfrom Egyptian operations. Despite the fact that the governmenthas reduced the arrears owed to IOCs from about $6.3bn to$3.2bn since 2014, some companies’ ability to weather thedownturn caused by the fall in the oil price has been severelyimpaired by Egypt’s failure to pay.

Winners and losers Egypt’s brittle public finances have placed some of itsinternational partners under severe financial pressure WhileEGPC has halved its arrears to IOC partners, some repaymenttargets have been delayed. The parastatal may be focusing moreon servicing debts owed to its largest partners who are planninglarge offshore gas developments at the expense of some – but

Egypt’s new licensing round

CONTINUED FROM PAGE 1

4 AFRICAN ENERGY • ISSUE 324 • 26 MAY 2016

Egypt’s Gulf of Suez oil and gas blocks

AFRICAN ENERGY • ISSUE 324 • 26 MAY 2016 5

Focus

not all – smaller outfits. Combined with reductions in revenuecaused by the lower oil price, this has so far contributed todifficulties suffered by two independent North Africa-focusedexploration companies.

Shareholders in Circle Oil, the AIM-listed and Egypt, Moroccoand Tunisia-focused exploration and production company arelikely to be wiped out in a financial restructuring process madenecessary by global factors, but exacerbated by EGPC’s failureto pay arrears in a timely fashion. Dublin-based PetrocelticInternational also found its cashflow squeezed thanks to a

restriction of revenues from its Egyptian assets. The companyfinally succumbed to the aggressive takeover strategy of itslargest shareholder,Worldview International Management, on12 May, after Worldview acquired all its debt at a substantialdiscount (AE 322/13). According to one estimate, Worldviewmay have bought Petroceltic for approximately one-third of itsactual value of about $1bn. The company’s cashflow problemswere worsened because, at the end of December, approximately$25m of its cash balances were held in Egyptian pounds thatcould not be converted into dollars.

Western DesertThe North Umbarka Block lies on the Mediterranean coast just northof the Umbarka and Khalda fields operated by Apache OilCorporation through its Khalda joint venture with Egyptian GeneralPetroleum Corporation (EGPC). Five concessionaires have previouslyheld parts of the block and between them drilled 34 wells between1967 and 2014, all of which were temporarily or permanentlyabandoned. A total of nine wells produced gas or oil shows or weredeemed worthy of further study. The concessionaires also carried outfive 2D and 3D seismic surveys over the past 23 years. These includeVegas (1993), IEOC (1998) Shell (1998), Apache (2007) and Hellenic(2008).

The Southeast Meleiha Block is immediately south of Apache’s WestKanayis and Sultan fields and IEOC’s Meleiha field in the northernportion of the Abu El Gharadig Basin. Three previousconcessionnaires, Tunisia’s HBSI, Phillips and IEOC, drilled nine wellsresulting in IEOC’s non-commercial oil well in 2000 and gas well in1990, in addition to seven dry holes. Six seismic surveys have alsobeen carried out.

The Southeast Siwa Block lies south of IEOC’s Meleiha blocks andeast of Apache’s Siwa Block in the Western Desert’s Ghazalat Basinand the northernmost part of the Ghorab Basin. Between them,Apache, Merlon and ConocoPhillips have drilled six wells, all ofwhich were plugged and abandoned, although three revealed oilshows. Apache carried out 2D and a 3D seismic surveys over the areain 2008.

The West Badr El-Din Block extends to the southern terrace of theAbu Gharadig Basin. It is surrounded by numerous concessions andfields such as Shell’s Badr El-Din and West Sitra, IEOC’s Ras Qattaraand West Abu Gharadi, and TransGlobe Energy’s South Ghazalat.Shell, HBSI, IEOC and earlier licensees drilled 25 wells between 1956and 2005, of which three were temporarily abandoned havingproduced some quantities of gas or shown positive results. Of theremaining plugged and abandoned or suspended wells, five producedoil or gas shows. The previous concessionaires have carried out fiveseismic surveys over parts of the territory.

The South Alam El-Shawish Block is surrounded by Shell, Apache,General Petroleum Company (GPC), Naftogaz and HBSI concessionsand fields, within the Abu Gharadig Basin. Shell, Naftogaz, Vegas andGPC drilled 23 wells between 1975 and 2012. Of these, four weresuccessful, including Shell’s 2010 gas discovery and 2012 oil-producingwell. The concessionaires also carried out five seismic surveys.

The Northwest Razzak Block is located on the Mediterranean coastwithin the Matruh and Shushan basins close to a number ofproducing oil fields operated by Apache, IEOC, Shell, NorthPetroleum and Kuwait Energy. From 1990 to 2010, Apache, Vegas,Burren and IEOC drilled 42 wells. Apache found oil in 2007. Theother wells were plugged and abandoned or temporarily abandoneddespite 18 oil and gas shows. The concessionaires carried out fiveseismic surveys.

Gulf of SuezThe Northeast October Block lies immediately to the west of BP’s E.Tanka, GS 172, NO-183 and October oil fields in the central part ofthe Gulf of Suez. Amoco, ConocoPhillips and Deminex have allpreviously licensed territories now part of the block. Of the five wellsthey drilled, Deminex’s 1979 well produced some oil in testing beforeit was plugged and abandoned, as were the rest, which merely had oilshows. 2D and 3D seismic has been shot over most of the area.

The North Issran Block is located immediately to the west ofNortheast October on the west coast of the Gulf of Suez south of RasZafarana and west of EGPC’s Northwest October field. In 1986,Union made a non-commercial oil discovery, while a further 11 wellsdrilled by Deminex, Trend, BG, ConocoPhillips, Dover and PetroSAbetween 1980 and 2009 were all plugged and abandoned, althoughfour produced oil shows. The area has been well covered by 2D and3D seismic surveys in 1995, 1998 and 2008.

The Northeast El Hamd Block is located in a well-explored part ofthe Gulf, south and west of IEOC’s Belayim fields. Agip, Mobil,Conoco and Texaco – as they were then – drilled 18 wells from 1983to 2008, all plugged and abandoned, although eight had oil and gasshows. 2D seismic has been shot over the entire block and 3D overpart of it.

The Northeast Ramadan Block is surrounded to the north and southby BP’s Ramadan, SB and Morgan fields on the eastern side of theGulf. Between 1970 and 1983, Amoco, Deminex and BP drilled fivewells. BP’s 1983 well was temporarily abandoned following a small oilproduction test, the rest were plugged and abandoned although twohad oil shows. The area is covered by 2D seismic and partly covered bya handful of 3D surveys.

The East Badri Block is east of BP’s El-Morgan field on the easternside of the Gulf. In 1982 and 1983, BP drilled seven wells, all of whichwere plugged and abandoned, although two had oil shows. In 1991,Unocal drilled a dry hole. The area is covered by a 2D seismic surveyand Gupco’s 1993 East Morgan 3D survey.

EGPC licensing round blocks

According to a report in Daily News Egypt, the Ministry ofPetroleum has, by contrast, agreed to pay back $400m to Shelland BG Group by the end of June and to clear the entire $1bndebt by the end of 2016. The newspaper said the agreement waslinked to BG’s development of phase 9B of the West Delta DeepMarine project in the offshore Nile Delta. In an earlier report,the same source said that BG had asked to increase the price forgas from the 9B development from $5.88/mBtu to $7/mBtu asan alternative to the accelerated debt repayment.

In mid-May, Circle said it had “continued to focus on achievingan improvement in the regularity and quantum of US dollarpayments from EGPC which now, alongside extracting USdollars from its Moroccan operations, is required to both satisfyits obligations to its creditors and fund operations”. This month,it expects to receive “an improved payment” from EGPCcompared to previous months, but said its “cashflows andfinancial position remain under significant pressure and asustained improvement in payments from EGPC is required”.

As a result of its difficulties, the company said it is “likely thatthere will be little or no value attributed to Circle Oil plc equityholders”. It is evaluating a number of indicative proposalsfollowing the announcement of a strategic review of its $77.5m

outstanding debt, $20m of which is comprised of a convertibleloan held by KGL Investment Company and the remainder afully drawn reserve base lending facility with the InternationalFinance Corporation. Options under consideration includerestructuring its debt, selling one or more of its assets, mergingwith a third party, or selling its entire capital. The company issurviving on waivers of debt repayments, which are beingextended to allow the completion of the strategic review.

Circle’s operations in Egypt are continuing. On 17 May, itannounced the completion of infill drilling at its North WestGemsa concession and the tying-in of a second production well.No further drilling is planned this year, and production levelswill be maintained through a workover programme.

In its Q1 2016 financial report, Dana Gas said its Egyptreceivables had marginally increased from $221m to $226m.However, the company still has large cash reserves and iscontinuing operations. TransGlobe Energy, a Canadian-basedindependent which operates entirely in Egypt, reported in itslatest results that it “now has a very manageable receivablebalance of $21.5m due from EGPC, and enjoys a 30-day cashcollection cycle on directly marketed crude oil sales to third-party international buyers”.

6 AFRICAN ENERGY • ISSUE 324 • 26 MAY 2016

Power

Disparaging comments about renewable technology byEskom chief executive Brian Molefe at the quarterly Stateof the System briefing in Cape Town on 12 May have

drawn widespread criticism from the industry. The commentscome at a time when Eskom’s financial situation and failure tocoordinate with the Department of Energy (DoE)’s IndependentPower Producer (IPP) Office have become major bottlenecks(AE 310/4).

Molefe’s motive was unclear: Eskom operates the 100MW Serewind farm and is likely to be involved in future solar parkdevelopments through a joint venture state-owned company(SOC). The timing has also aroused suspicion, with Moleferumoured to have been lined up to replace finance ministerPravin Gordhan if he is forced out of his job by a row over a so-called ‘rogue unit’ within the South African Revenue Service,where he was commissioner from 1999 to 2009.

Media reports of the briefing quoted Molefe as saying he was“disappointed” with the performance of renewable plants. “Torely on renewables on a day like today is very clumsy,” he said.Molefe’s main concern was that renewable energy did notcontribute to beating the evening demand peak. Anotherconcern is that renewable power plants being built now will

rapidly be made redundant by technological developments. “Wewill be like somebody who has an old phone, while everybodyelse has an iPhone,” he said. “We have to survive through it.”

His comments brought strongly worded statements from theSouth African Photovoltaic Industry Association (Sapvia), theSouth African Wind Energy Association (Sawea), andGreenpeace. Sapvia said Molefe’s views were “ill-informed atbest, and misleading at worst”, while Sawea asked whetherEskom had “forgotten that wind energy saved Eskom R300mduring the first half of 2015”. These savings were due toreductions in coal and diesel purchases and were identified in astudy from August 2015 by the Council for Scientific andIndustrial Research, with which Eskom has just signed apartnership agreement. As well as referring to the cost savings,Sapvia pointed out that solar PV did contribute to the morningpeak but also that a mix of technologies was needed, each withdifferent functions.

Concern stems from the reliance of many renewable energy IPPsin remote regions on Eskom’s prioritisation of funding of gridinvestments needed to connect their projects. Despite beingselected in two batches in April and June last year, some fourth-round preferred bidders only received the budget quotes needed

Eskom renewables comments leaveindustry bewilderedEskom chief executive Brian Molefe caused a stir by complaining at the State of the System briefing thatrenewables had failed to provide power when it was most needed. But his comments may be motivated moreby political than by technical considerations, writes Dan Marks

AFRICAN ENERGY • ISSUE 324 • 26 MAY 2016 7

Power

to reach financial close from Eskom over the past few weeks (AE318/7, AE 316/6). These include a number of additional costsalongside long and uncertain timelines which are likely to resultin months of wrangling, leading to further delays. The slowissuing of the quotes resulted from changes Eskom made to itstransmission plans to prioritise completion of its hugely delayedand over-budget coal power projects at Medupi (4,764MW) andKusile (4,800MW).

Industry analysts told African Energy Molefe’s attitude at thebriefing was most likely part of broader, and murkier, politicaldynamics. As rumours surfaced earlier in May that Gordhanmight be on the verge of being arrested, Molefe was thought tobe the most likely candidate to replace him. With the rulingAfrican National Congress (ANC) increasingly divided, Molefeis seen by President Jacob Zuma as more likely to support hiscause at finance, the ministry which has been most resistant tointerference from the presidency. Molefe is being positioned asthe man who turned around the Public Investment Corporation,Transnet and the energy sector, and in this narrative, renewablesare increasingly politicised as a hindrance to Eskom’s recoveryand a programme whose success creates high tariffs and doesnothing to increase black economic empowerment.

Expressions of interest for Northern Cape solar Molefe’s comments are the latest indication that, as the renewableenergy industry has matured, it has become increasinglypolitically important. The REIPP procurement programme hasbecome one of the few major sources of foreign directinvestment into the country, delivering projects at a price that isnow competitive with established markets in developedcountries. But ANC politicians are starting to question thebenefits of the programme to the country.

Ownership of projects is dominated by foreign firms and muchof the inward investment leaves the country soon after enteringvia contracts with international engineering, procurement andconstruction contractors and equipment suppliers. Long-termlocal benefits are limited to marginal equity stakes held bycommunity trusts, a small number of South African companiesand a black economic empowerment component which is smallcompared with other programmes in the country. With the ANCunder pressure from the radical left, the country’s most successfulforeign investment initiative looks worryingly uninclusive.

This is particularly the case in the Northern Cape, the politicalbase of energy minister Tina Joemat-Pettersson and where manyof the solar photovoltaic (PV) projects are located. Solar parksare one solution the DoE is looking at to address some of theseissues. A request for expressions of interest was released forstrategic partners earlier this month to develop 400MW-700MWsolar parks in the Northern Cape. The parks are intended to behubs for renewable energy manufacturing and new industryaround Upington, one of the renewable energy developmentzones approved by Cabinet but which does not yet have anadequate grid connection, as well as De Aar, Springbok andPrieska.

The programme will seek to include SOCs with a development,rather than commercial, mandate in the transaction. “We havedirected… that the IPP Office should in its structuring of the

proposed projects or programmes ensure the involvement of oneor more state-owned companies, taking into account theconstrained economic and fiscal environment of the country,”Joemat-Pettersson said at the DoE budget speech vote on 11May. “The intention remains the transfer of skills and thestrengthening of balance sheets of the participating state-ownedcompanies, whilst leveraging private sector experience andfinancial strength through the participation of strategic equitypartners.” The SOC is likely to include Eskom as part of a jointventure and will take a minority stake in the project. Youthemployment is another priority, with important elections due totake place across the country later this year.

While broadly supportive of solar parks, developers operating inSouth Africa suspect that the initiative will encounter significantchallenges. Their location in remote parts of the Northern Cape,which already only has the capacity to absorb barely half of thepower it generates from renewable energy, makes sitingmanufacturing facilities there unattractive. Furthermore, underEskom’s current grid expansion plans the area will not be openedup to evacuate power until the early 2020s while the currentIntegrated Resource Plan governing the sector, on which theDoE is basing its procurement, allocates 1,500MW to solar PVbetween 2026 and 2028. Although the plan is being revised, theDoE is asking companies to submit bids for projects which mightnot be realised for nearly a decade.

As a result, most developers canvassed by African Energy suspectthat the programme is politically motivated and unlikely to gainmuch traction in the short term. One executive suggested thatit is “political storytelling, not backed by a real and credibleprocurement programme”. A request for proposals is expectedin October 2016.

Energy minister outlines gas IPPtimetableEnergy minister Tina Joemat-Pettersson has set out a timetablefor the gas independent power producer (IPP) procurementprogramme as well as plans for legislative changes to bring gasmidstream fully under the purview of the Department of Energy(DoE). The programme has generated considerable interest fromupstream, midstream and IPP developers but the details remainto be ironed out.

Speaking at the Oil and Gas Council conference in Cape Townon 17 May, Joemat-Pettersson said a preliminary informationmemorandum would be released in Q3 2016. This will enablecompanies to finalise arrangements to organise into consortiabefore responding to the request for prequalification (RfQ),expected in Q4 2016. Joemat-Pettersson said the RfQ would befor “the supply of a floating storage and regasification unit(FSRU) or FSRU-based bundled natural gas-to-power solution”,adding that “the full scope of the solution will include not onlythe FSRU, but also LNG supply, development of jetty andassociated infrastructure, and the construction of pipelineinfrastructure to deliver gas from the FSRU to an initial gas IPPand potential desalination facility. Surplus capacity on the FSRUand associated pipeline infrastructure will be available to serve

additional gas offtakers.” Once potential bidders haveprequalified, the request for proposals is scheduled for Q1 2017,with bid submission and evaluation beginning in Q4 2017.

The minister’s comments suggest a renewed focus on thelegislative environment with the separation of gas midstream,which will operate under a Gas Amendment Bill, from theupstream, which will be governed by amendments to theMineral and Petroleum Resources Development Act as well asan Upstream Gas Bill, but the process has been stalled for anumber of years. A version of the Gas Amendment Bill wastabled in 2013. Joemat-Pettersson said the bill would “introducea mechanism that allows the energy minister to direct thedevelopment of new gas infrastructure including pipelines,storage and regasification technology for imported LNG”. Thebill aims to provide some clarity to ambiguities around gasmidstream infrastructure.

Joemat-Pettersson emphasised the role played by the Departmentof Trade and Industry (DTI) in planning the gas IPP programmeand positioning it within the wider context of gasindustrialisation policy. “The DoE and the DTI have set out toconduct a cohesive review of the gas industry potential in SouthAfrica, end-to-end from upstream to utilisation,” she said. “Thisreview offers a coherent and integrated view of the componentsneeded for the development of the gas industry in South Africawhich are distributed across the responsibilities of a number ofgovernment spheres and state-owned companies.” The launch ofthe Gas Industrialisation Unit (GIU) at the DTI on 16 May willassist with designing the non-power element of the programme.

Director for upstream and midstream oil and gas at the DTIKishan Pillay told African Energy that the new unit is “tasked withtaking a longer-term view on gas market development in SouthAfrica using the DoE gas-to-power programme as the initialcatalyst. Our analysis goes beyond the anchor gas-to-powerprogramme and considers potential industrial users of gas andhow best gas could be utilised in the long term to driveindustrialisation.” The unit will assist the IPP office inunderstanding the demand for gas other than for powergeneration. The GIU will play no formal role in mediatingbetween industrial and IPP gas users or allocating gas, but willhave a strategic role liaising with gas industry stakeholders andproviding feedback to the IPP Office where appropriate.

Additional 600MWJoemat-Pettersson also announced that expressions of interest(EoIs) have been issued by the DoE for strategic partners in a600MW additional determination for a gas-to-power projectwhich will be supplied using LNG or gas from a pipeline. Thisis not part of the 3,126MW allocated for gas IPPs in theIntegrated Resource Plan (IRP). Similar to the EoI for strategicpartners to develop solar parks, the intention is to use SOCs toenable knowledge and technology transfer while at the sametime using the project – and the SOCs’ development mandate –as a tool for fostering industrial development.

Although the determination is based on the previous IRP, whichspecifies that the power should be added in 2030, the DoE hasgiven itself room to manoeuvre by stating that the commercialoperation date will be determined by the revised IRP, which is

being developed. The 2013 revision of the IRP was rejected bycabinet, leaving the sector governed by the 2010 version whoseassumptions are widely considered to be out of date. It is possiblethat the plant may take up part of the gas allocation from the gasIPP programme intended for industrial use.

The EoI anticipates that the strategic partner will lead thedevelopment of the project, including identifying the site andsecuring all relevant permits. The strategic partner may also haveresponsibility for “facilitating the establishment of manufacturingfacilities, where the initial ‘anchor’ customer for suchmanufacturing opportunities within the gas-to-power valuechain will be the power generation facility”. It is expected thatthe SOC will take a minority interest in the project company.The DoE is intending to issue an RfQ in October 2016.

NAMIBIA

Enertronica purchases secondsolar power projectItaly’s Enertronica Group has acquired a second 6MW solarphotovoltaic (PV) project at Okatope, and is reported to havebegun construction on its first 6MW project at Trekkopje, aformer uranium mine in Erongo region. The plants are amongthe first of 14 preferred bidders to have signed power purchaseagreements (PPAs) with state utility NamPower under thecountry’s renewable energy feed-in tariff (REFiT) scheme,which provides a base rate of N$1.37 (US$0.088c)/kWh. Theyare the latest in a series of small-scale renewable power projectsfollowing French developer Innovent’s Namibian subsidiaryInnosun, which is developing the 4.5MW Omaruru solar PVfacility which signed a PPA late last year, and the 6MW Lüderitzwind farm (AE 313/8).

Enertronica announced earlier this month that it had completedthe purchase of a 70% stake in Okatope project company UnisunEnergy. The project had already signed a 25-year PPA.Enertronica will finance the engineering, procurement andconstruction contract – held by its South African subsidiary SaLtd – using local banks. Mono-axial tracking systems will besupplied by Enertronica subsidiary EMS Ltd. The project isexpected to cost €7m ($7.7m). According to Norton RoseFulbright, which advised on the takeover, Okatope will be thesecond REFiT IPP to be built in Namibia and will beginoperating by year-end.

In March, Enertronica acquired 70% of Sertum Energy NamibiaLtd, the project company for the 6MW Trekkopje solar PVproject which will be developed under similar arrangements toOkatope. The Namibian newspaper reported that a ceremonymarking the start of construction was held on 19 May. Trekkopjewill comprise 18,000 silicon PV panels, according to thenewspaper, and has the potential to be expanded to 27MW. Theremaining 30% of the project is owned by Namibianbusinessman Elton Katangolo and Italian Enrico Barbaglia, whohas previously worked for Schlumberger and was a vice-president and managing director of Areva Resources SouthernAfrica for 18 months. Trekkopje was an Areva mining project.

8 AFRICAN ENERGY • ISSUE 324 • 26 MAY 2016

Power

AFRICAN ENERGY • ISSUE 324 • 26 MAY 2016 9

Power

While the REFiT has begun to show signs of bearing fruit, therest of Namibia’s power sector does not look so promising. Thehearing for an application to the High Court by Arandis Powerfor a review of a tender award to Xaris Energy for a 250MWpower plant at Walvis Bay has been postponed until 7 Junefollowing an agreement between lawyers. The case citesirregularities in the selection process and names President HageGeingob and the cabinet among the respondents (AE 317/4,315/12, 313/1). Former NamPower managing director PaulinusShilamba has agreed to drop a case challenging his suspensionover the affair. In the renewable sector, a tender awarded to AltenRenewable Energy for a 35MW solar PV plant was cancelled inJanuary following a High Court challenge by Italy’s Enel GreenPower. The challenge came following a change to the tender partway through the procurement process.

ETHIOPIA

Salini signs €2.5bn deal to build2,200MW Koysha damOn 24 May, Italy’s Salini Impregilo announced that it had signeda €2.5bn contract with Ethiopian Electric Power (EEP) to buildthe 2,200MW Koysha dam on the Omo River. The projectcomprises a 170-metre-high roller-compacted concrete damwith a reservoir volume of 6bcm. It is expected to produce6,460GWh/yr electricity. The project is expected to be financedby Italian banks and underwritten by Italy’s Servizi Assicuratividel Commercio Estero (Sace). Ethiopian newspaper The Reporternoted in April that Sace had agreed €1.5bn of export creditfinancing. The financing package was finalised during a visit toItaly by a delegation led by EEP chief executive Azeb Asnake,and announced by Ethiopian Prime Minister HailemariamDesalegn on the fifth anniversary of the start of construction ofthe 6,000MW Grand Ethiopian Renaissance Dam. In March,Italian President Sergio Mattarella led a delegation to Ethiopia,in the first visit from an Italian president in 20 years.

As part of its 2015-2020 development plan, Addis Ababa wantsto raise power generation capacity to 17,346MW from just over2,200MW now, from hydropower, wind and geothermal sources,to boost manufacturing and industrialise its agrarian economy.

EEP issued a request for prequalification (RfQ) on 20 May forthe 1,700MW Tams hydroelectric dam, located 750km south-west of Addis Ababa. Tams will be structured as a build, operate,own and transfer project. Bids are due on 1 July. On the sameday, EEP released RfQs for two 100MW solar PV projects atMekele and Humera, both in Tigray State. The solar PV plantswill be developed on a build, own, operate basis and bids are dueon 17 June.

On 12 May, EEP released RfQs for three wind power projectson an engineering, procurement and construction (EPC) plusfinance basis. The Aysha I wind power project in Somali Statehas the potential to generate up to 300MW. Average wind speedsin the area, 698km east of Addis Ababa, are 7-8 m/s at a heightof around 40 metres. Debre Birhan is located 85km north-eastof Addis. Reconnaissance studies estimate potential for a 100MWwind farm from winds averaging 5-7.5 m/s at a height of 50

metres. At Adama III, located at Iteya some 150km south-east ofAddis, there is potential for a 150MW project from average windspeeds of 6.5 m/s at a height of around 50 metres. The selectedcontractors for all three wind farms will need to undertake adetailed investigation of the wind potential and carry out afeasibility study. Submissions are due by 10 June.

Prequalification bids from companies to build the 280MWChemoga Yeda hydropower plant closed on 30 April, after beingextended from an initial deadline of 15 April. Prequalificationalso closed for an EPC plus finance arrangement for the250.8MW Genale Dawa VI hydroelectric power plant on 18May. Genale Dawa VI will comprise an asphalt concrete corerock fill dam with a maximum height of 60 metres and a crestlength of 650 metres. It includes two vertical 125.4MW Francisturbines with two 150MVA synchronous generators, two step-up transformers, a 400kV outdoor switchyard and a 75km 400kVtransmission line connecting the dam to the substation at GenaleDawa III.

EEP also gave an update on its 50MW Reppi waste-to-powerproject 10km south-west of Addis (AE 247/10). The project willuse energy recovery techniques to produce power from thetreatment of dry waste which EEP claims will be the first of itskind in Africa. Based on a 37ha site, Reppi currently holdsaround 900 tonnes of dry waste. Civil and electromechanicalworks are reported to be making good progress and the projectis 80% complete. The plant will connect to a new 132kVsubstation with a 3km transmission line to connect to theMekanissa-Sabetta grid network. The Ethiopian government isproviding 2.6bn birr ($119m) of financing for the project.

GUINEA

AfDB focuses on energydevelopmentAfrican Development Bank (AfDB) president AkinwumiAdesina’s visit to Guinea on 16-17 May was focused ondeveloping the country’s energy sector. Guinea plans to harnessits hydro potential to power domestic mining and supply theregion. The estimated cost of its planned energy schemes totalssome $4bn.

There had been reports that differences emerged betweenAdesina and Guinean President Alpha Condé during December’sCOP21 climate talks in Paris about the best way to manage thefunds promised by donors. Some 10GW of new and additionalrenewable energy capacity is planned by 2020, and the AfDB isactive in a number of energy initiatives launched to channeldonor funds.

“The president does not want all these funds to be held by theAfDB because he fears a large proportion will be spent onconsultancy fees, travel and hotels,” a source close to thepresidency told African Energy.

The Guinean authorities have already expressed disappointmentat the slow pace of disbursement of funds pledged to managethe Ebola epidemic, which killed at least 2,500 people in Guinea,out of 11,300 recorded deaths in West Africa as a whole.

10 AFRICAN ENERGY • ISSUE 324 • 26 MAY 2016

Power

However, Adesina was received by a beaming Condé in Conakry,and talks were said to have been cordial. “We are going toparticipate in financing energy projects in Guinea,” Adesina toldreporters.

On 18 May, the AfDB board approved the 2016-2025 Strategyfor the New Deal on Energy for Africa, setting out the bank’spriorities. It aims to spur the transformation of Africa’s energysector, promoting inclusive growth and the transition to greengrowth by increasing energy production, scaling-up energyaccess, improving affordability, reliability and energy efficiencyas well as the sustainability of energy systems. The AfDB has$260m of active programmes in Guinea, of which $100m are inthe energy sector.

“The AfDB is planning to be involved in the construction ofhydroelectric plants in Guinea, where there is very significantpotential,” a senior Guinean official told African Energy.

In September 2015, the AFDB approved €121.5m ($137m) offinancing for the €937.5m Gambia River Basin Organisationenergy project. This consists of construction of the 128MWSambangalou hydropower plant, and an interconnection networkcomprising 1,677km of 225kV transmission lines, 15high/medium voltage substations and two load dispatch centres(AE 309/8).

The 240MW Kaleta dam, which came on stream in 2015, wasbuilt by China International Water & Electric Corporation(CWE) at a cost of $526m, funded 75% by Export-Import Bankof China and 25% by the Guinean state. CWE is now buildingthe 515MW Souapiti dam, which is expected to cost some$1.5bn. Condé said $900m of the total would come from China,while the Guinean state and the AfDB would provide guarantees.Funding will also come from the Abu Dhabi Fund forDevelopment and other donors. “We have learned our lesson.We should not have financed the Kaléta dam on our own,”Condé said.

He said studies were under way for the 600MW Amaria dam onthe Konkouré River, while the 300MW Koukoutamba (AE323/9) and 90MW Fomi projects and several others were atvarious stages of preparation.

RWANDA

KivuWatt plant inauguratedPresident Paul Kagame on 16 May officially inaugurated theKivuWatt methane-to-power plant at Kibuye. The plant has beenoperating since December, supplying 25MW to the grid fromthree Wärtsilä 34SG engines running on methane gas extractedfrom Lake Kivu (AE 296/1). ContourGlobal said the technologywas working better than expected and it aimed to be producing34MW by year-end.

“Our design and technology are performing even better thanexpected and we are pleased to announce today that the gasextraction facility will support at least an additional 9MW ofpower generation. We are undertaking the works to transformthis unexpected gas into additional electricity for Rwanda’s gridby year-end,” said ContourGlobal executive vice president and

chief operating officer Karl Schnadt. Wärtsilä said it would supplya fourth engine to process the additional gas.

By reducing the amount of methane in the lake, the powerscheme also reduces the risk of a catastrophic release of the gas.Gas-laden water is extracted from the lake and passed through agas separator where gas bubbles are extracted from the water.Raw gas is then washed in four wash towers, producing cleanmethane, which is transported to the power plant through apipeline. The gas extraction facility sits on a barge anchored13km offshore, and phase 2 of the project will add two or threebarges to this configuration on the lake to generate an additional75MW by 2019.

Wärtsilä’s installed capacity in Rwanda is now 46MW, or abouthalf of the country’s available power generation capacity.

REGIONAL

Endeavor lines up schemes tofill West African demand gapsBacked by the US Power Africa initiative, Endeavor Energy hasfour projects close to sanction in West Africa aiming to fill shortto medium-term demand gaps with a mix of imported anddomestic gas and heavy fuel oil. Two of the projects are in Ghana,where there is urgent need for new capacity. The 344MWBridge Power fast deployment scheme at Tema aims to tacklethe problem of limited gas supply in Ghana’s eastern hub byusing imported liquefied petroleum gas (LPG). Chief executiveSean Long told African Energy in an interview that LPG was

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AFRICAN ENERGY • ISSUE 324 • 26 MAY 2016 11

Power

cheaper than crude oil or diesel in the short term and the plantwas designed to switch to natural gas once it became available,whether via the West African Gas Pipeline (WAGP) or Ghanaiandomestic gas. The west to east reverse flow project, which isunder construction, aims to supply domestic gas into the WAGP,to enable excess supply from the Jubilee field and futuredevelopments to reach plants at Tema.

Long said the LPG import, transport and storage infrastructuredeveloped for the project would still be valuable once the switchwas made, to supply gas for domestic markets.

He said Endeavor expected parliamentary approval for thescheme by the end of H1 2016, and the 138MW first phaseconsisting of six GE TM2500 gas turbines in open-cycleconfiguration would probably be online by year-end.

The first stage will be funded through partner equity, and Longsaid Endeavor was talking to potential financiers for the secondstage, which will consist of a 206MW power block with fourGE LM2500 gas turbines and a purpose-built GE steam turbine,converting the plant to combined-cycle operation.

Endeavor is also a partner in the Ghana 1000 scheme nearTakoradi, whose 375MW initial phase will be powered by gasfrom Eni’s Sankofa field, which is due to start producing oil nextyear and gas in 2018. Future phases are planned to use importedliquefied natural gas (LNG) but Long said the partners could beflexible if more domestic gas was developed.

Endeavor is lead shareholder in Ghana 1000, with partnersEranove and Ghanaian oil trader Sage Petroleum. GE is expectedto supply the turbines, and Excelerate Energy is the floatingstorage and regasification unit (FSRU) supplier. Long said thegovernment was working on a list of priority projects with theWorld Bank to decide how to allocate domestic gas. Once thatis clarified, the Ghana 1000 project will be presented toparliament for approval, and development can go ahead inearnest. A power purchase agreement for the scheme wasinitialled in 2015 and needs only minor amendments, he said.

The 375MW phase 1a, comprising two gas turbines and onesteam turbine, will be followed by a similar phase 1b, then asecond phase adding 550MW to make about 1,300MW in total.

Long said President John Dramani Mahama had expressed hissupport for the two projects many times, and they also had thebacking of the US Power Africa initiative. “The two projectswere designed to address different needs in different parts ofGhana,” he said.

In Côte d’Ivoire, Endeavor has partnered with local companyStarenergie 2073, part owned by Israel’s Telemenia, for a1,200MW combined-cycle power project using imported LNG(AE 318/9). Long said that while Côte d’Ivoire’s power needswere largely met at present, the country would need morecapacity by 2018 and demand would continue to grow. Thegovernment has set a target of doubling supply by adding2,000MW of capacity by 2020.

Long said the partners in the Songon scheme were about to issuea request for proposals for an engineering, procurement andconstruction contract for the first phase, which will consist of

375MW of combined-cycle generation, due online by end-2018. BNP Paribas has been appointed as financial adviser, andalso advised on the highly successful Azito scheme,commissioned in 1999.

The government is planning LNG import infrastructure basedon a FSRU and pipeline that could potentially supply more than3000MW of power generation. Endeavor has carried out a bidprocess for potential LNG suppliers and given a shortlist to thegovernment.

Long said the partners were targeting financial close in H1 2017.The date has been pushed back a few times, but while the powerplant element is straightforward, the LNG aspect adds an extralayer of complexity. “It’s a very important asset for Côte d’Ivoire,”Long said. “There are a lot of complex issues to sort out – thebest location, suppliers, pricing, it’s not a simple analysis. If it wasjust power and the gas was already there, we’d be in theconstruction phase already.”

In Guinea, Long said the 50MW Tè Power project wasadvancing well and aiming for financial close by year-end orsooner. The project aims to supply short-term emergency powerto Conakry using heavy fuel oil, and a five-year power purchaseagreement was signed in late 2015 as Guinea prepared forelections held in October. Long said Tè was a short-termsolution while Endeavor looked at other opportunities in thecountry. “The government has asked us to look at hydro andhybrid solar,” he said. Tè has an estimated cost of $100m, andLong said it offered cheaper power than the emergency solutionscontracted previously.

Endeavor pulled out of the Bumbuna Phase II hydro scheme inSierra Leone in April, transferring its stake to the originaldeveloper, Joule Africa. Long said Endeavor’s resources were fullystretched with four schemes in development. Bumbuna II is alonger-term prospect, the Freetown government is still discussingdifferent potential development configurations, and the projecthas a minimum four-year construction period.

Further ahead, Endeavor is looking at potential opportunities inSouth Africa’s gas IPP programme, in Morocco and elsewhere.

GHANA

USTDA grant for solar schemeThe US Trade and Development Agency has awarded a $704,815grant to Ghanaian solar power developer Home Energy AfricaLimited, for technical assistance to help bring a 100MW solarphotovoltaic (PV) project at Sankana towards financial close.

Home Energy Africa has selected New York-based GreenMaxCapital Advisors to carry out the technical assistance, includingpreparation for power purchase agreement negotiations, servicescontracts and financing arrangements. Home Energy Africa,distributor for Dutch solar products manufacturer Home EnergyInternational, has agreed to transfer the licence for the projectto Dubai-based developer Access Power (AE 323/1). The GhanaEnergy Commission gave Home Energy a 100MW provisionalwholesale supply licence in February 2014, and a siting permitfor the 200ha site in November 2014.

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Power

VRA to start building coal plantnext AprilThe Volta River Authority (VRA) aims to start construction ofa 2x350MW supercritical coal-fired power plant in the coastaltown of Aboano in April 2017. “Based on the project timelines,we expect to start construction on April 17, 2017. But that isalso dependent on getting a permit from the EnvironmentalProtection Agency (EPA). We are working closely with EPA toensure that all the stringent environmental requirements aremet,” local media reported VRA environment and social impactmanager Ben Sackey as saying.

The plant is being developed by VRA and Shenzhen EnergyGroup, with $1.5bn of funding from the China-AfricaDevelopment Fund. A second phase will add another 4x350MWor 2x600MW supercritical coal-fired generating units. Theproject includes the construction of a coal port dedicated totaking delivery of imported coal, mainly from South Africa, anda 15km double-circuit 330kV transmission line connecting theplant to the grid. Sackey said sites at Domunli, Akwidaa andKomenda had also been considered for the plant.

The government announced a year ago that it was turning tocoal to provide additional baseload capacity to meet Ghana’sgrowing power demand. Former power minister KwabenaDonkor said the government was looking to attract investors tobuild a minimum of five 1GW coal-fired plants along the coast(AE 300/1). VRA argues that domestic gas and limited supplyfrom the West African Gas Pipeline are insufficient to meetdemand for new generation capacity and renewables are unableto offer baseload supply.

GABON

Government to end SEEGmonopolyThe government has presented a bill to parliament that wouldremove the monopoly of power and water utility Sociétéd’Energie et d’Eau du Gabon (SEEG) and open up both sectorsto private investment.

France’s Veolia, which owns 51% of SEEG, signed a 20-yearconcession contract in 1997 with the Gabonese state, whichowns the other 49%.

“The adoption of this text is justified by the urgent need of thestate to modify Law 93 establishing the legal framework forgeneration, transmission and distribution of electrical energy,which provides only for the concession as a means of publicservice delivery, so as to include other modes of public servicedelivery,” said energy and water resources minister Guy BertrandMapangou. He told parliament the bill aimed to open up thewater and electricity sectors to other economic operators, sayingthere were already potential investors lining up foropportunities.

Relations between the government and SEEG have not alwaysrun smoothly. The government blames the utility for inadequate

power and water supply in Libreville, while SEEG complainsthat state institutions do not pay their bills on time.

The new law aims to improve water quality and customer serviceand increase power and water supply, as well as reducing costsand creating jobs. Mapangou said it also encompassed areas notcovered by Law 93, such as renewable energy, power and waterimports and exports, and treatment of waste water.

COUNTRIES AND MARKETS

NIGERIA/BENIN: $1.9m AfDB interconnector grant

On 23 May, the African Development Bank (AfDB) signed a $2m grantagreement with the West African Power Pool (WAPP) for a project toreinforce the Nigeria-Benin interconnector. The funds will be puttowards the construction of a 200km, 330kV double-circuittransmission line from Erukan in Nigeria to Sakété in Benin. Theexisting single-circuit interconnection between the two countries,commissioned in February 2007, is expected to soon reach capacity.Alongside the transmission line, work will include the extension orconstruction of 330kV substations at Erukan and Sakete and installationof Scada and fibre-optic systems. The feasibility study was prepared byNew Partnership for Africa’s Development Infrastructure ProjectPreparation Facility. The project is a priority for the WAPP to ensurethe stable integration of electricity networks in the EconomicCommunity of West African States, forming part of a wider effort toput in place a transmission link between Côte d’Ivoire and Nigeria viaPrestea, Aboadze, and Volta in Ghana, Lomé in Togo and Sakété inBenin.

RWANDA/BURUNDI/DR CONGO: €15m grant for Ruzizi III

Rwanda’s Ministry of Finance and Economic Planning on 18 Mayannounced that it had signed a bilateral agreement with the Germangovernment for German development bank KfW to provide a €15mgrant for the 147MW Ruzizi III hydropower project. The $650mproject is being developed by the Agha Khan’s Industrial PromotionServices and US developer Sithe Global, under a contract awarded in2014, and will supply Burundi, the Democratic Republic of Congoand Rwanda with 49MW each (AE 315/7). Ruzizi I and II produce28MW and 44MW respectively but the river has potential to supplyup to 400MW. Financing for the project is being provided by theAfrican Development Bank, Agence Française de Développement, theDevelopment Bank of Southern Africa, the European Investment Bank,the World Bank Group, and $68.5m equity funding each from thegovernments of Burundi, DRC and Rwanda.

TANZANIA: Symbion to provide 30MW gas plant for mine

Australian mining company Magnis Resources announced on 16 Maythat it has signed a power development agreement with the US’Symbion Power to provide a 30MW gas power plant, substation and132kV transmission line for the Nachu graphite project. Symbion willbe responsible for funding, developing and building the electricalinfrastructure. Tanzania Electric Supply Company (Tanesco) has givenits approval in principle for the deal to proceed. Magnis will nowcomplete an environmental impact assessment and technical andeconomic feasibility studies. “Magnis has closely studied a variety ofpower supply options for Nachu and we believe this agreementrepresents the most attractive and viable pathway to provide a stablepower supply for Nachu,” said Magnis chairman Frank Poullas.Symbion operates 50 and 55MW diesel power plants at Arusha andDodoma respectively and the 120MW Ubungo gas power plant in Dares Salaam.

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Upstream oil and gas

Marsa Al-Harigah blockade lifted butconflict continuesThe lifting of a blockade at a key oil terminal has averted a total production shutdown and major economic andpolitical crisis, but the standoff between rival leaderships is no closer to resolution, writes John Hamilton

The resolution of a blockade at the Marsa Al-Harigahterminal in mid-May averted what many expected to bea highly damaging financial and political crisis. However,

it leaves unresolved the main grievances that provoked leadersin Cyrenaica to shut the port and deprive Tripoli of revenuesearned from the sale of crude produced in the east of thecountry. The continued political disagreements and the expecteddelivery by a Russian company of LYD4bn worth of bank notesto the Benghazi-based administration will provide fertile groundfor further disputes over both money and oil.

The chairmen of the rival managements competing forrecognition as Libya’s legitimate National Oil Corporation(NOC) met in Vienna on 15 May while the foreign ministersof the US, UK and other European nations decided to supplyarms to militias supporting the Tripoli-based Government ofNational Accord. According to an NOC-Tripoli statement, thiswas the pair’s fourth meeting. For many months they havevariously negotiated, threatened and fought each other withinthe extremely unstable political context created by the existenceof competing administrations at either end of the country (AE323/1, 321/4, 316/1).

The Benghazi-based NOC chairman Naji al-Maghrabi, whoseinstitution has struggled to exert meaningful control over anyaspect of the sector and who is regarded as illegitimate by theUnited Nations, the US and most European governmentssigned a memorandum of understanding with his Tripoli-basedrival Mustafa Sanalla calling for the unification of the sector.They agreed to resume crude exports “to avoid damage topipelines, avert a financial crisis, and ensure power supplies arenot interrupted further”. On 20 May, the Seachance tankerwhich had been shut in the port for about two weeks left witha 660,000 bbl cargo under a contract agreed between Sanalla’sinternational marketing department and Glencore. Arabian GulfOil Company (Agoco) has increased production from its Sarirand Messla fields, taking national production back above300,000 b/d.

One factor in forcing the Cyrenaica-based NOC to reopen theport may have been the threat of sanctions under UN SecurityCouncil Resolution 2259 which outlaws “parallel institutions”.But while this has been frequently repeated by US special envoyto Libya Jonathan Winer and other officials, the sanctions threatpredates the blockade. It is therefore hard to see why it wouldhave made a decisive impact.

Pressure on Maghrabi – who is not normally regarded as a keydecision-maker – to agree a compromise is more likely to havecome from other directions and may indicate divisions withinthe political leadership of the east. Some sources suggested toAfrican Energy that Maghrabi had signed the deal on his own

initiative. However, the decision may also have been supportedby senior figures within Agoco, which operates the Sarir andMessla fields and the Harigah terminal. In a statement issued on23 May, Agoco management committee member Saleh al-Manfisaid the company was seeking to return to previous productionlevels assuming “the availability of liquidity and budget”.

The statement confirming compliance with the Viennamemorandum strongly implied that it was contingent oncontinued payment of Agoco’s cash calls by the Central Bankof Libya via NOC in Tripoli. Manfi said the managementcommittee was “making every effort to overcome the mainproblems caused by lack of budget and liquidity, which hinderaccess to previous production levels”. He described a shortageof spare parts at the Sarir and Messla fields, where newcompressors and electric power turbines are needed to pumpthe required quantities of crude through the 400km longpipeline to the coast.

A source close to Agoco said that it and other NOC subsidiarieswere “crying out for cash”. He said that NOC expenditure hadbeen cut to about 30% of the original budget and that itemshad been cut “even if they look crucial or important”.Influential members of Agoco’s management committee,including the chairman Mohamed Ben Shatwan and boardmember and crisis committee chairman Sami Abar are believedto lean towards continued pragmatic cooperation with Tripoli,although they have not made their views on the political dividepublic. A source close to the company described Abar as “astrong man” within Agoco, owing not only to his respectedprofessional standing but also to the backing of his powerfulfamily and tribe – the Awaghir. This is one of the largest tribesin Benghazi and, according to several sources, is now exerting adominant influence within Agoco.

While the decision whether or not to blockade Harigah mayto some extent lie in the hands of Agoco’s senior management,pressure to wrest control over eastern oil production andrevenues from the GNA in Tripoli will continue to mountunless a genuine political resolution is found. The expectedarrival in Benghazi of a cargo of Libyan currency, printed inRussia with different serial numbers, security details andwatermarks from the currency issued in Tripoli will potentiallypush the governments further apart.

A large number of Libyan activists and political observerscanvassed by African Energy regard the UN-backed GNA andits leader Faiz Serraj as illegitimate and unconstitutional. Thedecision to partially lift the arms embargo to allow the supplyof weapons to Tripolitania is also seen as evidence that the UNhas decided to back Islamist and Misratan militias, whilecontinuing to reject the Tobruk-based House of

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Upstream oil and gas

Representatives’ choice as chief of staff, General Khalifa Haftar.In fact, ammunition and other equipment will probably besupplied to armed groups in which western special forces arealready embedded. The objective is to strengthen these units forexpected assaults on Islamic State and on people smugglinggroups. However, before such operations can begin, Serraj needsto invite western militaries to intervene, something he is notyet strong enough to do.

According to one respected North Africa analyst, this invitation,rather than rhetoric about the long term unification of thecountry, is the prime objective of the current internationalpolicy towards Libya. So although the West’s stubborn backingof the GNA and its rejection of fundamental Cyrenaicanconcerns over security and political control of the armed forcesrisk creating an irresolvable breach between the two sides, thereis no chance of a change in direction. Further squabbles overthe control of oil are therefore inevitable.

SENEGAL

Cairn completes drillingCairn Energy has successfully completed the SNE-4 appraisalwell in the Sangomar Offshore Block and released the OceanRig Athena drillship. The well is being plugged and abandonedfollowing drilling, coring and logging. The SNE-4 well wasdrilled to appraise the eastern extent of the SNE field discoveredin 2014 and to confirm the nature of the upper reservoirs in theoil zone (AE 322/11). Cairn said the well confirmed theextension of reservoirs in the eastern extent of the SNE field,more than 5km to the east and downdip of SNE-3, andconfirmed oil-bearing Upper Reservoir sands of similar qualityto those encountered as gas-bearing elsewhere in the field. Thewell encountered a 100-metre oil column similar to SNE-1,SNE-2, SNE-3 and BEL-1, with initial indications confirmingsimilar 32° API oil quality to the rest of the field.

The SNE-4 well is the joint venture’s sixth well offshore Senegal

COUNTRIES AND MARKETS

EQUATORIAL GUINEA: Bid round to launch in June

The government will officially launch a new oil and gas licensing round,known as EG Ronda 2016, at the Africa Oil & Power conference on 6-7 June at the Westin Hotel in Cape Town. The Ministry of Mines, Industryand Energy said in October 2015 that it planned a bid round this year,offering all remaining deep and ultra-deepwater blocks. The last bid roundin 2014 offered all the country’s open acreage, with four blocks next toexisting discoveries offered for direct negotiation and the others forcompetitive bidding.

NIGERIA: ExxonMobil cancels drillship

ExxonMobil has cancelled a contract with Norway’s Seadrill Partners forthe West Capella drillship. Seadrill said it had received an early notice oftermination for the unit, which was contracted until April 2017 at adayrate of $627,500. Seadrill will receive a payment of around $125mplus other direct costs incurred as a result of the early termination. TheWest Capella is being marketed for new work and is expected to be inTenerife during its idle period, Seadrill said.

SOUTH AFRICA: New oil and gas law planned

The government is planning a new law that will separate parts of itsregulations governing oil and gas from legislation governing the miningindustry. “The plan involves separating from the mineral regulatoryframework those elements that relate to the petroleum value chain,”energy minister Tina Joemat-Pettersson told parliament in a budgetspeech on 11 May. Proposed amendments to the Mineral and PetroleumResources Development Act had been criticised by the oil and gasindustry for attempting to treat mining and hydrocarbons exploration inthe same way. Concerns had focused on plans to transfer authority fromthe Petroleum Agency of South Africa to the Department of MineralResources’ regional managers, but the minister said the new legislationwould include a Petroleum Agency of South Africa Establishment Bill tofacilitate the concessioning, licensing and exploitation of resources.Investment has suffered from legislative uncertainty since the bill wasintroduced in 2012 (AE 321/1).

TUNISIA: Cooper Energy exits Nabeul

Cooper Energy said on 12 May it had agreed terms with the governmentto pull out of the offshore Nabeul permit. The joint venture will paycompensation of $3.2m to fulfil its remaining permit obligations, whichincluded drilling a well. Cooper operated the Nabeul permit with an85% stake. Cooper, which has no other African assets, put its Tunisiaoperations up for sale in 2014 but the collapse in the oil price meant ithas been unable to find a buyer and the Nabeul licence was allowed toexpire last year (AE 277/12). The company retains its 30% operating stakein the Bargou permit, but announced in March that it was withdrawingfrom the Hammamet permit operated by Storm Ventures International.

COMPANIES AND PEOPLE

SDX ENERGY: AIM listing

SDX Energy, formed in 2015 by the merger of Sea Dragon Energy andMadison PetroGas, has raised £7.6m ($11m) with a listing on London’sAlternative Investment Market. SDX, whose shares also trade on theToronto Venture Exchange, has assets in Egypt and Cameroon. Chiefexecutive Paul Welch said the new funds raised would enable SDX toincrease production from the Meseda concession and to complete theexploration work programme on South Disouq.

TECHNIP/FMC: Merger

French oilfield services supplier Technip and US subsea equipmentspecialist FMC Technologies announced a merger agreement on 19 May.The companies said the merger would create “a global leader that willdrive change by redefining the production and transformation of oil andgas”. The combined company will be called TechnipFMC and will havean equity value of $13bn based on pre-announcement share prices. Thecompanies said they had signed a memorandum of understanding tomerge in an all-stock transaction whereby Technip shareholders wouldreceive two shares of the new company for each Technip share, and FMCshareholders would receive one share of the new company for each FMCshare. Each company’s shareholders will own close to 50% of the combinedcompany, Technip said. The transaction is expected to close early in 2017,subject to the approval of Technip and FMC shareholders, regulatoryapprovals and consents, and other customary closing conditions.

AFRICAN ENERGY • ISSUE 324 • 26 MAY 2016 15

Upstream & Downstream hydrocarbons and markets

and the fourth completed this year as part of a programme tohelp delineate the shape of the structure and establish thepotential of the field. The Ocean Rig Athena will now be de-mobilised and the JV will continue integrating the significantamount of data collected from the four wells, including two drillstem tests and more than 600 metres of core.

GABON

Vaalco puts back maintenanceUS independent Vaalco Energy has postponed routinemaintenance work on its Etame Marin facilities until 2017 tosave cash. The company said a planned maintenance turnaroundfor the Etame field was completed in February. Inspectionsshowed no need for further maintenance “and all facilities weredeemed to be in good operating condition. As a result, thecompany will defer its planned September 2016 turnaround until2017,” Vaalco said.

The company announced in February that it had dropped plansfor further drilling offshore Gabon this year and terminated thecontract for the Transocean Constellation II jack-up rig fivemonths early (AE 318/12). “Due to the continued sharp declinein oil prices, additional drilling was determined to beuneconomic at this time,” Vaalco said.

The Etame Marin facilities consist of four platforms tied backto a floating production, storage and offloading vessel. A three-well workover was carried out on the Avouma platform in Q1.Two were successful, while a third was suspended due tomechanical issues. In March, another Avouma well suffered thefailure of an electric submersible pump, leaving two wells

producing. “Based on technical analysis, the loss of this well willnot have a significant impact on annual production or ultimaterecovery,” Vaalco said.

MOZAMBIQUE

Wentworth takes over RovumaOnshoreWentworth Resources is to take over as operator of the RovumaOnshore concession and carry out appraisal of the Tembo-1 gasdiscovery. The company said it had applied to the Ministry ofEnergy and Minerals for approval of a proposed appraisalprogramme for Tembo-1, and to increase its holding in RovumaOnshore from 11.59% to 85%.

Current operator Anadarko, Maurel & Prom and Thailand’s PTTExploration and Production have all notified the NationalPetroleum Institute (INP) of the relinquishment of their interestsin the block with effect from 31 August 2015.

In Q1 2016, Wentworth reached an agreement with EmpresaNacional de Hidrocarbonetos (ENH), the other remainingshareholder in the block, on assigning the interests of thecompanies pulling out, appointing Wentworth as operator,determining an appropriate appraisal area for the Tembo-1 gasdiscovery and agreeing an appraisal plan. The Tembo-1exploration well was drilled in 2014 to a total depth of 4,553metres and a gas discovery was made in Cretaceous-aged sands.A subsequent well, Kifaru-1, was unsuccessful (AE 295/14).

Wentworth, whose shares are listed in Oslo and on London’sAIM, took over Canada’s Artumas Group in 2010.

NIGERIA

Protests over fuel price riseA two-thirds increase in fuel prices has sparked protests, but thegovernment says it can no longer afford to subsidise fuel amida deepening economic crisis as the slump in world oil pricesslashes national income. Tankers bringing in fuel have beenstranded offshore, unwilling to dock and unload as importerscannot source dollars to pay for their cargoes.

The government on 11 May announced an increase in thepump price of petrol from N86 to N145. Minister of state forpetroleum Ibe Kachikwu said the main reason for the currentproblem was the inability of importers of petroleum productsto source foreign exchange at the official rate due to the massivedecline of foreign exchange earnings.

He said that “as a result, private marketers have been unable tomeet their approximate 50% portion of total national supply ofpetrol”, and that it had become obvious the only option opento the government was to remove the subsidy. Diesel is alreadyderegulated. He advised importers to use the parallel market,and said any Nigerian company would be allowed to importfuel.

The measures are being seen in some circles as a form ofcurrency devaluation by stealth while the government resistscalls to formally devalue the naira. The central bank hasmaintained the official rate of N197 to the dollar since March2015, but the naira has traded at 30% below the official rate onthe parallel market for several months. However fuel importsare now priced at N285, and central bank governor GodwinEmefiele said on 24 May the bank would adopt a flexibleexchange rate system. The central bank will make dollarsavailable to key importers, while others will have to buy foreigncurrency in the market, he said.

President Muhammadu Buhari’s visit to China in April secureda $6bn loan for infrastructure projects and an increase in theamount of foreign reserves that can be held in yuan, which willreduce pressure on dollar supplies, but this has been criticisedas a short-term fix (AE 322/15).

“The current problem is not really about subsidy removal. It isabout the fact that Nigeria is broke. Pure and simple,” informationminister Lai Mohammed told an 18 May news briefing.

He earlier described the increase as a “necessary evil”, arguingthat it would eliminate chronic fuel shortages by ensuringavailability of the product across the country, reduce hoarding,smuggling and diversion of products, and stabilise the price.

16 AFRICAN ENERGY • ISSUE 324 • 26 MAY 2016

Downstream hydrocarbons and markets

Now in its third year, AIX Power and Renewablesaddresses the challenges facing investors and theinnovative structures emerging from deals along theelectricity value chain.

Sponsored by Denham Capital and BioThermEnergy, the meeting serves a high-level constituencyof corporate and o�cial players who are directlyinvolved in project development and �nance, and thestructuring of policy.

Proceedings will be held under the Chatham HouseRule and are structured around interactive panel-ledsessions and roundtable discussions.

Contact us for the latest agenda

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A general strike called by labour unions on 18 May to protestagainst the increase was only partially followed. In 2012, theprevious government of president Goodluck Jonathanabolished the fuel subsidy completely then backed down inthe face of protests, leaving prices 50% higher (AE 223/1).Cynics suggested the lower rate had been the target all along.

Kachikwu has said he hopes to bring in private partners toimprove the performance of state-owned refineries, which havesuffered from decades of inadequate maintenance. A 650,000b/d greenfield refinery being built by Dangote Group will notbe available before 2018.

Nigerian National Petroleum Corporation (NNPC) is talkingto international oil companies to swap more of its crude forrefined products, but lower output due to unrest in the NigerDelta, as well as oil companies taking more physical cargoes aspayment for services when prices are low, means NNPC hasless crude to swap for fuel.

Imports of refined products were affordable when Nigeria wasselling its crude at over $100/bbl, but production has fallen as wellas the price. Kachikwu told the lower house of parliament on 16May that the country’s crude oil production had declined from2.2m b/d to 1.4m b/d, a 20-year low. He said the loss of 800,000b/d was due to “incessant attacks and disruption of productionin the Niger Delta”. Four of the country’s 19 export terminals,Bonny Light, Qua Iboe, Escravos and Forcados, are closed orreceiving reduced supply due to damage to oil infrastructure.

A new group called the Niger Delta Avengers is behind thelatest surge in attacks after several years of relative peace that

followed the introduction of an amnesty programme underJonathan. The Avengers claimed responsibility for an attack onChevron’s Okan platform on 4 May, and sophisticated sabotageof a Shell underwater pipeline in February which interruptedoil flows and forced the company to shut down its 250,000 b/dForcados export terminal. Forcados is expected to be backonline in June.

TANZANIA

Fertiliser plant to startconstructionTanzania plans to start construction this year of a fertiliser plantin the south of the country, using some of its newly discoveredreserves of natural gas. “The plant, which will become Africa’sbiggest fertiliser producer, will have a capacity of producing3,800 t/d and will employ up to 5,000 people,” a presidencystatement said.

Tanzania Petroleum Development Corporation entered into ajoint venture last year with a consortium of Germany’sFerrostaal Industrial Projects, Denmark’s Haldor Topsoe andPakistan’s Fauji Fertilizer Company. Topsoe will deliverengineering design, licensing, proprietary hardware, catalysts andadditional services, while Ferrostaal is the engineering,procurement and construction service provider. The new plantis expected to begin operation in 2020.

AFRICAN ENERGY • ISSUE 324 • 26 MAY 2016 17

Finance and policy

AEEP reports mixed progress on targets In its latest report on energy trends and progress towards meeting its targets, the Africa-EU Energy Partnershipnotes strong progress in solar power and some other sectors, but only limited advances in others, including keyenergy security and efficiency targets. To make up for lost time, the AEEP is working for greater co-ordinationamong proliferating initiatives, writes Jon Marks in Milan

Two reports published at the Africa-EU Energy Partnership(AEEP)’s Second Stakeholder Meeting, held in Milan on17-18 May, showed key sectors of the continent’s energy

industries in a period of transition. The AEEP’s Status ReportUpdate 2016 records some achievements, but also severalworrying shortfalls in performance. This means some of theAEEP’s 2020 Political Targets agreed at the Africa-EU Lisbonsummit in 2007 might not be met.

The AEEP drew attention to the urgent need to co-ordinate themultiplicity of new global initiatives intended to give Africa amore sustainable energy future. The AEEP’s new Mapping ofEnergy Initiatives and Programmes in Africa report concluded that amore systematic exchange of information and increased co-ordination are needed to harmonise the growing number ofmulti-country, multi-stakeholder initiatives and aid programmesthat have emerged in recent years. The AEEP will give thispriority in the next phase of its activity, driven by a SteeringGroup now made up of the African Union Commission,European Commission (EC), Common Market for Eastern andSouthern Africa (Comesa), Egypt, Germany and Italy.

Generation data provide the Status Report Update’s mostoriginal features, drawing on the AEEP Monitoring Tooldatabase, which contains basic data on more than 3,250generation projects, along with details of transmission lines, cross-border connections and export markets. This was created for theFrankfurt-based AEEP Secretariat by the African EnergyConsultancy arm of African Energy’s publisher Cross-borderInformation. This updated work began in 2012 and waspresented in the first AEEP Status Report in February 2014.

The data show that all areas of renewable energy generationcapacity have been increasing (see graphic below), but some morequickly than others. In some sectors – such as the installation ofsolar capacity – developments have largely surpassed the AEEP’s2020 Political Targets, which were agreed in 2007 when theglobal renewables industry was at a very different stage ofdevelopment. Other sources of energy, such as biomass, aremoving ahead much more slowly.

Hydroelectric power can be a victim of climate change, butremains the dominant renewable technology in volume terms,

2020targets

GW

45

201520100

40

35

30

25

20

15

10

5

6GW

0

2

4

8GW

0

2010 2015 2020

GW

0

2010 2020

2010 2020

GW

2010 2020

60

20

40

6

4

2

3

0

1

2

2015

2015

2015

75% scenario: 8.30

AEEP target: 6.1250% scenario: 6.62

25% scenario: 4.93

Source: AEEP Power Project Database

Hydroelectricpower

WindOtherrenewablesSolar

Installed capacity in 2010 and 2015,and AEEP 2020 targets

33.01

35.18

43.01

1.123.13

6.12

0.981.50

2.94

0.10

1.55

0.60

75% scenario: 55.30

AEEP target: 43.0150% scenario: 48.63

25% scenario: 41.97

75% scenario: 5.96

AEEP target: 0.60

50% scenario: 4.6125% scenario: 3.25

75% scenario: 2.98AEEP target: 2.9450% scenario: 2.49

25% scenario: 2.00

Linear trend: 37.36

Linear trend: 5.14

Linear trend: 2.05

Linear trend: 2.99

18 AFRICAN ENERGY • ISSUE 324 • 26 MAY 2016

Finance and policy

providing clean, sustainable baseload energy. Between 2010 and2015, 2,174MW of hydro capacity was added, but with schemessuch as the Grand Ethiopian Renaissance Dam underconstruction, the AEEP’s target of adding 10GW of capacity“should be comfortably met as a number of large projects aredue to come online over the 2016-20 period”, the report says.Rehabilitation work at a large number of dilapidated facilitieshas significantly improved ageing units’ performance andreliability. “With much of the continent’s 35,304MWhydropower capacity very old and operating well below itspotential output, rehabilitation has the potential to add largeamounts of power to the grid,” the AEEP concluded.

Large projects dominate the database, but “the AEEP is wellaware that smaller projects can have a very big impact inproviding energy for a large portion of the rural population inAfrica”. The report points to improving commercial prospectsfor small run-of-river systems for rural electrification. It says that“in several countries, such as Rwanda and Uganda, considerableprogress has been made, supported by European instrumentssuch as KfW’s [Global Energy Transfer Feed-in Tariffs] GET FiTscheme”.

Solar shines outSolar capacity was very low when in 2007 the AEEP set its targetof Africa adding 500MW by 2020; the report records 1,546MWof installed solar capacity at end-2015, compared with only103MW in 2010. Thus, solar’s potential to exploit some of theworld’s strongest irradiation levels “is now being confirmed, fromthe implementation of world-scale projects in Morocco andSouth Africa, to impressive growth in the rooftop solar market”,the report says. Given this performance, “the AEEP’s PoliticalTarget was met only four years after the 2010 baseline was set –and is expected to have been met four times over by the end of2016”.

However, the report adds a note of caution: “While progress isundoubtedly being made, away from the major markets of NorthAfrica and South Africa there is much to do before solar andwind power plants make a significant input into feeding nationalgrids.” East Africa’s largest operating solar unit remains GigawattGlobal’s 8.5MW Agahozo-Shalom Youth Village solarphotovoltaic (PV) development in Rwanda; there are fewprojects of note operating in West Africa (Masdar’s 15MW PVin Mauritania and BXC Ghana’s 20MW PV unit are ground-breakers). But projects like the KfW-sponsored GET FiTprogramme pioneered in Uganda are having an impact, with the10MW Soroti PV plant starting construction and a 10MW plantat Tororo expected to follow later this year.

Among important initiatives, the report notes that the EC andNetherlands development finance company FMO have begunimplementation of the Electrification Finance Initiative(ElectriFI). Speaking in Milan, deputy head of the EC’sDirectorate-General for International Co-operation andDevelopment (Devco), Felice Zaccheo, said the first round ofElectriFI applications closed in early May, with over 150 bidsreceived for work in a significant number of countries. “Therecouldn’t be a better time to reaffirm our commitment to theAfrica-EU partnership,” Zaccheo said.

The database shows that 2,132MW of wind power was addedin 2010-12, more than doubling the 2010 capacity of 1,120MW.“Analysis of the project pipeline suggests the AEEP PoliticalTarget of adding 5GW by 2020 can be met if 43% of the plannedprojects are completed on time,” the report says. Wind’s “gains

Interconnections key to energy security

The Africa-EU Energy Partnership (AEEP)’s 2020 Political Targets callon Africa and the EU to take joint action to improve energy securityby doubling the capacity of cross-border electricity interconnectionswithin Africa and with Europe, and doubling the use of natural gas inAfrica and of African gas exports to Europe by building natural gasinfrastructure, notably to bring currently flared gas to market. TheSecond Stakeholder Meeting’s energy security session, in Milan on 17May, focused on electricity interconnections, where much is expectedfrom projects that have dragged on. However, significant progress isexpected in cross-border trading in the period to 2020, notably in EastAfrica.

The AEEP Power Project Database shows that approximate maximumtransfer capacity in Africa almost doubled between 2005 and 2011,from 5.48GW to 9.33GW, but no new operating lines have been builtsince 2011. However, “while projects could have moved more quickly,there has been progress on a number of major regional schemes…[which] are expected to create a spike in interconnection capacity overthe short to medium term”.

The AEEP reports that interconnections with a combined 4.5GW-plus capacity are expected to be completed in East Africa, includingthe 220kV Rwanda-Uganda HV line, where the transmission linkbetween Kagitumba, Mirama and Shango was completed in October2015, but delays in building the Birembo and Shango substationsmean the interconnection is not expected to be operational untilOctober 2016. Meanwhile, a 2GW capacity 500kV transmission lineconnecting Ethiopia to Kenya, first conceived in 2006, is movingcloser to reality with a construction start expected this year; and a400kV transmission corridor linking Kenya, Uganda and Rwanda –expanding existing interconnections – is also in development, to allow500MW of electricity trade between the three countries.

East African Community (EAC) energy expert Peter Kinunia sees thisopening the way for regional energy trading, as envisaged in the long-term action plan drawn up by the EAC and East Africa Power Pool(EAPP). This explains Uganda’s decision to develop the 600MWKaruma and 183MW Isimba hydroelectric projects – currently in atroubled construction phase (AE 322/1) – “whose capacity will gowell beyond domestic demand, but they will have customers oncethere is an interconnection”, Kinunia said.

The EAPP’s development will enable cross-border trading (as opposedto the few current strictly bilateral deals) later in the decade. By end-2017, most of East Africa should be interconnected and the regulatoryframework to start trading in place. “At least we will haveinterconnectivity within two years, but we need to go beyond that,”Kinunia said. National governments and regional authorities areputting in place a regional grid code, harmonised legislation for cross-border trading and certification, “so when the system is in place we areall on the same page”. The EAPP and other institutions are workingon the “soft instruments” that will allow electricity to be traded. Butmore hard infrastructure investment is also required; Kinunia said eachproject involved single connections. “There needs to be significantalternative capacity if the system is really to be secure,” he said.

AFRICAN ENERGY • ISSUE 324 • 26 MAY 2016 19

Finance and policy

Yearly sum of globalirradiation incident onoptimally-inclined equator-oriented photovoltaicmodules, 1985-2004 periodaverage, kWh/m2

More than 2,600

2,400 – 2,600

2,200 – 2,400

2,000 – 2,200

1,800 – 2,000

1,600 – 1,800

Less than 1,600

1,600

2010 2011 2012 2013 2014 2015

MW

1,400

1,200

1,000

800

600

400

200

035 25 1

209

841

368

102 127 128

337

1,178

1,546

Photovoltaic solar electricity potentialSolar generation capacity, 2010Ð15

Average solarcapacity added each

year, 2010-15:246MW

Total installedsolar generation

capacity in Africa

New solarcapacity

Sources: HelioClim-1database;

PVGIS, EuropeanCommunitiesSource: AEEP Power Project Database

are heavily concentrated in the continent’s most industrialisedcountries… [and a] regional breakdown shows that mostcountries are being left behind”. While North Africa has capacityof 1,807MW and South Africa 1,070MW, East Africa has only223MW, West Africa 31.4MW, and Central Africa and SouthernAfrica (excluding South Africa) have less than 1MW betweenthem.

Brussels-based industry association WindEurope’s chiefexecutive, Giles Dickson, told AEEP stakeholders that projectsin Africa, such as Lake Turkana Wind Power, remained heavilydependent on public finance, but with “long-term vision…capital costs can be significantly reduced”. “We can also reducedevelopment risk through simple and transparent permitting,”he said. Dickson also advocated the EU following the US andWorld Bank in underwriting power purchase agreements.

In too many cases, projects to install other renewables are alsomoving too slowly. Some 1,410MW must still be added to meetthe AEEP’s 2020 target of tripling the amount of generationfrom biomass and geothermal resources from their 2010 levels.Because timelines for some Kenyan geothermal projects haveslipped, the AEEP calculates 73% of projects in the ‘otherrenewables’ pipeline must be completed for this target to be met.

Lead times for biomass projects can be potentially quite short,and the industry is responsive to positive regulatory and financialreform, but projects are faltering – reflecting how far biomasshas fallen out of fashion in many countries and among potentialinvestors. While biomass in 2015 still had more capacity(950MW) than geothermal (554MW), the latter is expected toovertake biomass in 2017-18 as projects in East Africa gathermomentum.

Harmonising initiativesThe AEEP uses external sources to benchmark other key targets– for energy security, energy access and energy efficiency. Thistrend is likely to continue, given the AEEP’s determination toalign international initiatives such as the United Nations-ledSustainable Energy for All (SE4All), US President BarackObama’s Power Africa and the African Renewable EnergyInitiative (AREI). The SE4All Global Tracking Framework,driven by a steering group led jointly by the World Bank Group’sEnergy Sector Management Assistance Programme andInternational Energy Agency, is the source of data for energyaccess and efficiency.

The ever-growing international effort to lift Africa out of energypoverty is reflected in the AEEP’s mapping exercise, which listed58 significant multi-country initiatives and programmes. This iscomplemented by increasing levels of financial support, as shownin data for African and European contributions to energyprojects, drawn from statistics produced for the Abidjan-basedInfrastructure Consortium for Africa and calculations made bythe AEEP Secretariat. This shows increased allocations to energyin African governments’ annual capital spending budgets, as wellas growing European public finance.

With industries in transition, the AEEP’s political targets are nowlikely to be revised, and its approach refreshed, reflecting its statusas a pioneer in the sector, whose ideas have been adapted bymajor initiatives such SE4All, AREI and Power Africa, all ofwhich – like the UN’s Sustainable Development Goals – have ashared target date of 2030.

20 AFRICAN ENERGY • ISSUE 324 • 26 MAY 2016

Finance and policy

9-10 June: AIX: Transport and Infrastructure, London

Web: http://africa-investment-exchange.com/aix-transport-infrastructure-2016

13-16 June: Nigeria Power Conference & Exhibition, Abuja

Web: www.nigeria-power.com/

21-24 June: Africa Energy Forum, London

Web: http://africa-energy-forum.com

23-24 June: Zambia International Mining & Energy, Lusaka

Web: http://www.zimeczambia.com/

28-29 June: Africa Rail, Johannesburg

Web: www.terrapinn.com/exhibition/africa-rail/index.stm

29-30 September: MENA Investment Exchange: Energy

To be held in London. Web: cbi-meetings.co.uk/mena-investment-exchange

11-13 October: Mauritania Mining and Oil & Gas, Nouakchott

Web: http://mauritanides-mr.com

31 October-4 November: Africa Oil Week, Cape Town

Web: http://aow.globalpacificpartners.com/events/?fa=overview&id=966

8-10 November: Senegal International Mining, Dakar

Web: http://simsenegal.com

21-22 November: AIX: Power and Renewables, London

Web: http://africa-investment-exchange.com/aix-power-and-renewables-2016

23-24 November: MSGBC Basin Summit and Exhibition

To be held in Senegal. Web: www.theenergyexchange.co.uk

NIGERIA

SFO investigates Rolls-Royce’sdeals with PSLThe UK’s Serious Fraud Office (SFO) has begun investigationsinto Rolls-Royce’s operations in Nigeria, following accusationsthat the London Stock Exchange-listed engineering groupfiltered payments through intermediaries such as Unaoil to windeals in Indonesia, China, India and Brazil. As with previousinvestigations, the deals under scrutiny were transacted by Rolls-Royce’s previous management, headed by Sir John Rose. TheTimes newspaper reported on 20 May that the Nigerian dealsinvolved Rolls-Royce’s alleged use of an intermediary company,PSL Engineering and Control, to influence the sale of gasturbines.

Rolls-Royce said it was co-operating with the authorities butwould not comment on current investigations, nor on thecountries involved.

PSL – with whom Rolls-Royce was involved in the much-delayed 116MW Oghareki gas-fired power plant in EthiopeWest, Delta State – is owned by the Gwarzo family from KanoState and built up a stellar list of international company clientsfollowing its establishment in 2008. PSL’s largest shareholder isSani Murtala Gwarzo, a brother of Alhaji Ismaila Gwarzo, whowas national security adviser to General Sani Abacha (also fromKano State) during the late military dictator’s rule in the 1990s.

Its other partner at Oghareki is engineering, procurement andconstruction contractor Davnotch (AE 312/11). When it waslaunched, the project was to be financed solely from privatecapital; United Bank for Africa and Oceanic Bank were leadarrangers, supported by an international banking syndicate ofUBS, Barclays and BNP Paribas.

Research by African Energy’s parent Cross-border Information(CbI) suggests this was a highly political project, which for severalyears has been the subject of considerable controversy and

allegations of corruption in Nigeria. It was linked to formerDelta State governor James Ibori, who is serving a 14-year prisonsentence in the UK for defrauding the Nigerian state. Ogharekiis Ibori’s home town. Rolls-Royce delivered the turbines, butno gas supply contract was signed. PSL also worked with theBayelsa State government and Rolls-Royce on a contract todesign, build and commission the Kolo Creek power plant.

According to corporate records accessed by CbI at the CorporateAffairs Commission in Abuja, PSL Engineering was establishedin Lagos on 18 December 2008. The records name its directorsas Murtala Gwarzo (40%), Mansur and Bello Gwarzo (SaniMurtala’s brothers, 5% each), Stephen Doughty (25%) and AthielGreenidge (25%). Nigerian sources believe the Gwarzos are themain decision-makers and beneficiaries, with the expatriateowners having little influence. Sources in Delta State havepointed to PSL’s links to Ibori, Ismaila Gwarzo (who featured inthe Halliburton corruption scandal) and former Delta Stategovernor Emmanuel Uduaghan, Ibori’s cousin, who replacedhim as governor and signed the Oghareki deal. At the time, Iboriand Uduaghan’s alleged role in inflating prices and facilitatingdeals at Oghareki was openly criticised by Delta State elders andother stakeholders.

PSL has a minority stake in the 972MW Ughelli project in DeltaState, as part of the Wood Rock consortium, which includesSymbion Power (technical partner), Luxemburg-based MedeaDevelopment and Oman-based Thomassen Services andContracting Company (AE 310/10). Leading the project, inpartnership with Wood Group, is the publicly quoted Transcorpconglomerate, which rose to prominence during OlusegunObasanjo’s presidency; its largest shareholder is Tony Elumelu’sHeirs Holdings. There is no suggestion that the Ughelli projectis involved in the current investigation.

Rolls-Royce has been out of the industrial gas turbines businesssince it sold that division to Siemens in 2014. Before that, it hada substantial business in Nigeria, which included selling RB211gas turbines for use on offshore platforms operated by companiesincluding Total, Royal Dutch Shell and ExxonMobil.

Held under the Chatham House rule, MENAInvestment Exchange: Energy (MIX: Energy) willbring together investors, developers, �nanciers,policy-makers and analysts for a frank discussion ofthe Middle East and North Africa region’s diversi�edgas-to-power (GTP) and renewable energy (RE)industries.

• The plenary and breakout sessions will explore the development of new industries and innovative policy options across the region’s varied economies.

• Experts will stress-test government policies and investors’ responses to a range of challenges.

• The meeting will conclude with Hardball – a political risk strategy round table, which examines issues including the capacity of governments to deliver on projects.

MIX: Energy builds on CbI Meetings’ AfricaInvestment Exchange (AIX) series of events whichhas attracted sponsorship from Actis, DenhamCapital, DLA Piper, FMO, Globeleq and InfraCoAfrica.

Attend MIX: Energy to:

Explore innovative �nancial structures, commercialreturns, entry and exit strategies.

Engage with experts, to better understand thesector’s outlook and the structure of deals.

Expand your network of industry contacts, �nanciers,investors and policy experts.

Analyse key markets, including, Algeria, Dubai,Egypt, GCC, Iran, Jordan, Morocco, Saudi Arabia.

The agenda for all our Investment Exchanges aredeveloped by consultants and analysts at CbI whowork closely with the project developmentcommunity on issues that a�ect public and privatesector investment decisions.

African Energy subscribers are eligible for a 35% discount

Contact usLauren AndrewsT: +44 (0)1424 721667E: lauren@cbi-research.comW: africa-investment-exchange.com

CbILNG and gas

Security of supply

Renewable models

Monetisation strategies

Bankable projects

O!take agreements

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MENA Investment Exchange: EnergyThe Middle East and North Africa’s Gas-to-Power & Renewables Dialogue

29-30 September 2016, RSA House, London

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African Energy View

Cameroon may be the Central African Economic and MonetaryCommunity’s largest economy, but it remains a political and commercialenigma. Decision-making can move at a glacial pace, in a political systemdominated by President Paul Biya, whose apparent aspirations to be re-electedto a fourth seven-year term are a cause of concern, not least for a youthfulpopulation living in poor economic and social circumstances (AE 297/1).However, progress has been made in delivering services, reflected in theenergy sector by national utility Eneo, owned by UK private equity investorActis, and Victoria Oil and Gas’s growing business selling gas to industry andconsumers in commercial hub Douala (AE 317/14).

Big efforts were made to fill the room for Biya’s flagship Invest in Cameroonconference, held in Yaoundé on 16-17 May. Biya personally welcomeddelegates, including more than 80 journalists and businesspeople flown in ona charter flight from Paris for the event. This followed a two-year marketingdrive to attract investment while also convincing a restless population thateconomic issues are being addressed; local news was saturated with coverage.

Biya highlighted Cameroon’s “strategic position at the crossroads betweenWest and Central Africa, and at the intersection between the Ecowas andCemac zones”. Macroeconomic indicators could be worse: government netdebt was 28% of GDP in 2014, according to the International MonetaryFund (compared with 66% in Ghana); GDP growth is around 6% andinflation less than 3%. Boko Haram is still a threat, but Cameroon believes itscores well when compared to potential rivals blighted with even greatersecurity concerns and economic volatility. Biya concluded: “Above all,Cameroon is determined to encourage private investment.”

Businesspeople who spoke to African Energy in Yaoundé believed thegovernment was sincere about making Cameroon attractive for privateinvestors, reflected in a gradually building project pipeline. Perenco aims tostart up a floating liquefied natural gas scheme in Q2 2017, with Gazprom

as buyer (AE 313/13). Lafarge is developing a CFA23bn ($39m) cementplant at Nomayos, near Yaoundé, which is expected to start producing500,000 t/yr by 2018. Plans to open a fifth plant in the north are complicatedby intermittent grid power. A former director said that, after years of inertia,the government had been very supportive when Lafarge produced a clearexpansion plan.

A financial adviser involved in several projects said “the government certainlyseems genuine in its efforts to bring investment into the country”, but added“it is probably not going about it the right way”. Decision-making remainshighly centralised, which means developments may not move ahead quickly,even if they are favoured by ministry officials.

In the electricity industry, relations between companies and the authoritiescan be choppy, despite much of the sector moving into private hands.Globeleq’s project to expand the Kribi gas-fired power plant continues to bedelayed by state company Société Nationale des Hydrocarbures duCameroun’s demands that the UK-based developer pays substantially morefor gas supplied to its new plant than was agreed for the operating facility.Yaoundé also appears uncomfortable about reshaping the distribution sectorthrough revamped utility Eneo, which is 56%-owned by Actis and 44% bythe government.

Cameroonian businesspeople are concerned about issues of succession.Although appearing in good health – and with the military flooding thecapital to remind everyone who is in charge, and media and civil societyunder a heavy hand – there are signs that the 83-year-old Biya is planning tostay in power; elections must be held by 2018. More investors seeking outnew markets in sub-Saharan Africa may find Cameroon’s significant potentialan attraction, but much depends on how the country transacts generationalchange in its political leadership and business environment.

Cameroon remains an enigma for investors

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