Written by 4:00 am Europe Economy

Eni calls for south-north energy axis between Europe and Africa

The chief executive of one of Europe’s biggest oil and gas companies has said the EU should look to Africa rather than the US as it seeks to replace Russian energy imports.

Claudio Descalzi, who has run Italy’s Eni since 2014, said closer collaboration with countries in Africa on energy matters offered the potential for a new “south-north axis” connecting the continent’s abundant renewable and fossil fuel resources with the energy-hungry markets of Europe.

“We don’t have energy, they have energy. We have a big industry, they have to develop it . . . There is a strong complementarity,” Descalzi told the Financial Times.

Eni has operated in Africa since 1954, has operations in 14 countries and has continued to invest while several of its US and European rivals have reduced their presence on the continent in favour of other parts of the world.

That footprint meant Africa was the first port of call for Descalzi last year as he sought to replace the 20bn cubic metres of gas that Italy previously imported annually from Russia.

A man looks on as flares burn from pipes at an oil flow station in Idu, Nigeria
Eni has operations in 14 African countries, including Nigeria © George Osodi/Bloomberg

In April, Descalzi secured approval from Algeria to increase the gas it exports via pipeline to Italy from 9bn to 15bn cubic metres a year in 2023 and 18bn in 2024. Two days later, Eni signed a deal to export 3bn cubic metres of liquefied natural gas from Egypt to Europe in 2022.

In the same month, it reached an agreement with the Republic of Congo to accelerate the development of a planned LNG project to provide 1bn cubic metres for export in 2023 and 4bn cubic metres by 2025.

Eni was able to access these opportunities as it had “invested a lot [in Africa] in a period where no one invested”, said Descalzi, adding that some rivals had chosen to invest in US shale gas instead, while Europe had allowed itself to become too dependent on Russian supply.

In November, Eni shipped the first cargo of LNG from Mozambique. The $7bn project — a partnership with ExxonMobil, CNPC, Galp and Korea Gas Corporation — is the first of several giant Mozambique gas projects planned since discoveries were made more than a decade ago.

Europe has exploited Africa’s resources for centuries, often paying royalties to export commodities while doing little to foster the development of local economies.

An effective south-north energy alliance would require a different attitude and approach, said Descalzi. For example, in 2021 about 85 per cent of the gas Eni produced in Africa was used to supply local markets, compared with 78 per cent worldwide.

“When you do something like that you take more risk . . . because it is much easier to export all of the gas you produce,” he said. “[But] we must be sure that we are creating value for them.”

Whether or not European companies and lenders should provide funds to develop new fossil fuel projects in developing regions such as Africa has become an increasingly fraught debate since world leaders signed the Paris climate agreement in 2015.

While environmental groups have lobbied companies, including Eni and France’s TotalEnergies, to halt new hydrocarbon projects in Africa, many African leaders argue they have a right to develop their national resources to drive economic growth and improve access to energy.

Even if Africa were to use all its known reserves of natural gas, the continent’s share of global emissions would only rise from 3 per cent to 3.5 per cent, Nigerian president Muhammadu Buhari wrote ahead of the COP27 climate meeting in Egypt in November.

Claudio Descalzi and Alassane Ouattara
Claudio Descalzi, left, with Ivory Coast’s president Alassane Ouattara © Eni

Descalzi said that new oil and gas projects, if they can be developed quickly, could provide governments with a revenue stream that could be reinvested in clean energy projects.

Eni discovered oil off Ivory Coast in September 2021 and has fast-tracked development to start pumping in the first half of 2023.

The company said the emissions from the oilfield and the energy it uses — known as scope 1 and scope 2 emissions — would be offset with forestry and clean-cooking initiatives that would make it the first “net zero” hydrocarbons development in Africa. All of the associated gas in the field will be used locally for power generation.

“There has to be good cash flow for the country to develop a different energy mix during the transition,” said Descalzi.

In Kenya, where Eni is also exploring for oil and gas offshore, it opened a plant in July to process vegetable oil as a feedstock for its European biorefineries and sent the first shipment from the port of Mombasa in October.

Eni has two refineries in Italy producing biofuels and proposals for a third by 2025, by which time it plans to get 35 per cent of its biorefinery feedstock from agricultural hubs in Africa.

The production of feedstock crops such as castor, croton and brassica on “marginal land” that did not interfere with food crop production could become “the new upstream”, said Descalzi.

Eni is not the only European energy major diversifying its activities in Africa. BP has signed memorandums of understanding to explore the development of green hydrogen for export in Mauritania and Egypt.

TotalEnergies, which has one of the biggest portfolios of African oil and gas assets, is also running solar power projects in Egypt, Burkina Faso, Uganda and South Africa.

Almost half of Africa’s 1.4bn people lack access to electricity. The continent produces only 6 per cent of global fossil fuels from 4 per cent of global reserves, but has access to 39 per cent of global renewable energy potential, according to energy think-tank RMI.

The right investments, based on mutual “respect”, could help address energy security in Europe and energy access in Africa at the same time, said Descalzi. “Respect, what it means for me is that you have to take a risk with them together.”

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