OIL & GAS MONTHLY ARTICLE
INDUSTRY PROFESSIONALS AND EXPERTS GATHER IN BRAZZAVILLE TO DELIBERATE ON THE FUTURE OF THE ENERGY, OIL AND GAS SECTOR IN CONGO.
AME Trade Ltd, in partnership with the Ministry of Hydrocarbons of the Republic of Congo, are organizing the 5th edition of the Congo’s International Oil & Conference and Exhibition, CIEHC 2022 from November 30 – 2 December 2022 in the Centre International de Conférence de Kintélé Brazzaville, Congo. This edition follows the previous one held in 2021 in which over 650 delegates from 22 countries participated and over 45 companies exhibited their products to the delegates.
The main theme of this year’s edition is “Congo’s energy transition: opportunities & challenges” is very apposite given the recent developments with climate change and the clamour for energy transition and the reduction in the exploration and exploitation of fossil fuels to reduce global Greenhouse gas emissions. Such developments will, no doubt, affect the oil and gas sector of producing countries which calls for the need for experts and professionals to deliberate on the challenges and prospects of this strategic sector in order to ensure the sustainable development and growth of the countries.
- Energy Transition and Congo’s Oil and Gas Sector.
The Republic of Congo is currently the 3rd largest oil producing country in sub-Saharan Africa, and the CIEHC is the official platform for the government to share and discuss its vision for the future of the national oil and gas industry with the key stakeholders in the country in the light of the global demand for energy transition to low carbon alternatives. The energy transition is happening as the world is slowly moving away from fossil fuel. While African oil and gas producing countries will benefit from the planet’s temperature being kept under control, the transition away from fossil fuels is likely to be very difficult for a country like Congo that derives a substantial part of its foreign exchange and government revenues from the sector.
As both the IEA and IRENA outline, this transformation of the global energy system is posing critical questions for many of the world’s largest oil and gas producing countries. International climate policies and low-carbon technology advancements might indeed imply sustained pressure on development models that rely heavily on hydrocarbon revenues. For instance, the International Energy Agency (IEA) estimated that in a scenario consistent with the objective of the Paris Agreement, hydrocarbon producers would not only face structurally lower oil prices, but a slower demand as a result of more rigorous policies on fuel efficiency. This could lead to a vast loss in revenue (between 25-40%) for oil and gas producers over the period to 2040. Without economic reforms, this would translate into a large current account deficits, downward pressure on currencies and lower government spending. A situation where over 80% of Congo’s revenues are derived from oil and gas sales could lead to social and political destabilization of the country.
Moreover, Congo will need to urgently reassess the investments in oil and gas projects that it continues to make. This is because the risk of stranded assets, oil and gas projects that are no longer economically viable, will grow as the energy transition accelerates. Given the increasing uncertainty around future oil and gas revenues, maintaining public investments in oil and gas projects exposes the country’s dependence on these revenues to considerable economic and financial risk. In addition, these investments will be at odds with international commitments to reduce carbon emissions as set out in the Paris Agreement and hence are only viable if these targets are not met.
So, while demand may still be growing for now due to the ongoing war between Russia and Ukraine, the decisions on investing in oil and gas projects that governments make today may put their public finances at risk in the future. Oil and gas producing countries are exposed in particular through their National Oil Companies (NOCs). But governments can reduce the risk of short-sighted decisions by improving planning and public reporting of the key data that underpins investment decisions.
It must be pointed out that the transition towards clean energy could be both a challenge and a benefit for Congo. First, the challenge is that it could affect investment in exploration and production of oil and gas resources. The beneficial effect is that it could also open up opportunities for the country because it requires equipment, technologies, and various services, thereby offering significant employment opportunities in the energy sector. Globally, this increased transition-related job demand is predicted to lead to, on average, 1 percent higher employment throughout the transition (until 2050). The additional jobs peak around 2030 at 51 million (26 million in the energy sector alone). Congo would also benefit from ancillary job opportunities that would be created through legal matters, taxation, logistics and safety and environment, as well as skilled labourers such as truck and crane drivers, are among those that will also play an important part of the transition. Therefore, in Congo, the energy transition will contribute to positive impacts on the wider human welfare through the improvement of human health and access to energy.
- The CIEHC 2022 Programme.
The CIEHC is a strategic event covering the opportunities and challenges associated with doing business in the Republic of Congo’s hydrocarbons sector. It will feature a three days of conference sessions, a trade exhibition, interactive workshops as well as technical and touristic excursions. Since its first edition in 2011, CIEHC has proved itself as the Republic of Congo’s and Central Africa’s largest and longest running oil and gas trade event. The principal goals of CIEHC are to encourage and promote the implementation of projects that will help the oil and gas sector achieve the government’s objectives of using the country’s hydrocarbon resources to sustainably diversify the economy, generate employment, technology transfer, build local capacity, improve the welfare of the people, stimulate itself energy transition and make Congo the oil and gas hub of the subregion.
The global drive for energy transition has made it imperative for producing countries to reassess their economic growth and development strategies so as to accommodate the future challenges and opportunities that the transition will offer them. This is the idea behind the theme of this year’s edition of the CIEHC programme. In the programme, there is a high-level ministerial session that will discuss “The challenges in the oil and gas sector and the way forward for African producing countries for the next four decades”.
The session which will assemble Ministers of energy, oil and gas from Africa and who are directly in charge of managing the challenges and opportunities that recent developments in the oil and gas sector pose to their countries are in the best position to chart the way forward for the producing countries. Their deliberation on this topic is to create awareness for governments and ensure that they are not caught off guard by unexpected national, regional, or global policy changes due to energy transition. The likelihood of a radical shift in legislation in major oil-consuming countries, while hard to predict, should not be underestimated in a rapidly changing context, given mounting international pressure and the urgency of the climate crisis. Moreover, the oil and gas industry is under growing pressure from governments, investors, and the public to support the decarbonization of the global energy system and policy makers need to be conversant of the issued involved and design policies to address them. The ministers will deliberate on the viability of a total abandonment of fossil fuels and the short, medium, and long-term impact this may have on sustainable development and economic growth of African oil and gas producers.
Like all oil and gas producing countries, Congo is not immune from the current global developments with respect to energy transition which might turn out to be a positive input for oil and gas exporters, a stimulus to consider economic diversification as an unavoidable pathway, to be pursued in order to guarantee future economic prosperity a low-carbon regime. While the government of Congo should be working on diversifying its economy away from the fossil fuel industry, it should also be clear about the assumptions and guidelines on which to base its future strategy for the oil and gas sector and public investment decisions. It is expected that during this year’s edition of the CIEHC, the industry experts and professionals that have been assembled to deliberate on the various topics in the programme will find solutions that will help the Congolese government to mitigate the impact of energy transition on the sustainable development and growth of their economies.