Why You Should Care about Africa Energy Week

#AfricaEnergyWeek is going full roar. A very curious fist-pumping, “comrade” calling, group of protesters coalesced in Johannesburg last month to stop it. The spoken words were something out of 1984, where reality was quite inversed. If you have ever been to Africa Energy Week, there is EVERYTHING Africa about it and African voices are indeed heard.

But these protestors believed their own woes were the fault of nebulous multinational corporations and particularly banks and financial institutions, such as the IMF and World Bank.

Ironically, these institutions are not doling out money for O&G in developing nations and their global lending would be about 0.1% of what is needed. https://www.ief.org/focus/ief-reports/upstream-investment-report-2023

The demonization of domestic #fossilfuels resources can stop countries’ economic development in their tracks. While environmental concerns always need addressing for any interaction with the material world, the outright vilification of these resources overlooks their potential to fuel #industrialization and economic growth.

So, what role can #OilandGas play in transforming developing countries? Are there successful cases from oil and gas-rich nations? How about the development of non-energy-rich countries?

#Norway has used its oil and gas resources to build a robust welfare state. The country established the Government Pension Fund Global, which invests oil revenues to ensure long-term economic stability. This approach has allowed Norway to provide high-quality public services and maintain a strong economy. https://www.dhirubhai.net/posts/cyrus-brooks-03274713_norways-oil-empire-chartr-data-storytelling-activity-7111769663474208768-2jec/

Russia's economy heavily relies on its vast oil and gas reserves. These resources have been pivotal in funding the country's modernization efforts, including infrastructure development and military capabilities. Disregarding questionable political decisions, Russia continues to leverage its energy resources for economic growth as shown in the long-term trend of GDP per capita: https://www.macrotrends.net/global-metrics/countries/RUS/russia/gdp-per-capita

The U.S. used every possible energy source from coal (and does still) to hydro, nuclear and oil and gas to fuel industrialization and economic growth. The #shale revolution launched the US into the stratosphere of energy independence, and they even beat out #OPEC and Russia’s attempt to bankrupt the fledgling industry in a fascinating tale, putting the nail in the coffin of reliance on foreign oil and boosting the economy through job creation and technological innovation. https://www.forbes.com/sites/simonlack/2018/06/04/americas-path-to-energy-independence-the-shale-revolution/

Saudi Arabia's economy is almost entirely based on oil revenues. The country has used its oil wealth to invest in infrastructure, education, and healthcare, significantly improving the quality of life for its citizens. The Vision 2030 plan aims to diversify the economy, but oil [and soon gas] remains a crucial foundation.

https://rbac.com/saudi-arabia-bets-big-on-gas-and-lng/

How about Non-Energy-Rich Nations?

Not all successful industrialized nations are rich in energy resources.

Countries like Japan and South Korea have achieved remarkable economic development without rich resources such as found in the US or the Middle East.

Post-World War II, Japan focused on rebuilding its economy and rapidly industrialized. From the 1960s until the oil crisis, their consumption increased seven fold. They had the same as others, coal, oil and natural gas. They were the second largest economy in the world by 1968 until 2010 when overtaken by China (another example). Their standard of living was equivalent to the West by the 1980s. https://www.britannica.com/money/economy-of-Japan

South Korea's transformation from a war-torn country to an economic powerhouse is a story worth reading. It required a lot of energy, but despite limited natural resources, South Korea focused on education, technology, and industrialization. The government did get the country going, fostering an export-oriented economy and energy played a big role.

https://rbac.com/the-role-of-natural-gas-in-south-koreas-miracle-rise/

Resource Curse?

What about the famed “resource curse”? Well, as pointed out in this article, there are solutions to this; to name a few: partial privatization (Petrobras), direct citizen dividends paid out right away, so more scrutiny (Alaska), transparency (East Timor).

https://www.carnegiecouncil.org/media/series/39/20120301-the-oil-curse-how-petroleum-wealth-shapes-the-development-of-nations

What good can come?

1)????? For developing nations, these resources can provide the revenue needed to build infrastructure, improve public services, and stimulate job creation. They can also attract foreign investment, bringing in the technology and expertise required for modernization. (e.g. China)

2)????? Oil and gas exports can generate significant revenue for national governments. This income can be used to fund public services, such as education, healthcare, and infrastructure development, laying the foundation for long-term economic growth. (e.g. Norway)

3)????? Domestic production of oil and gas reduces reliance on foreign energy imports, enhancing energy security and stability. This can be particularly important during global energy crises or political instability. (e.g. USA)

4)????? Access to affordable and reliable energy is essential for industrialization. Oil and gas can power factories, transportation, and urban development, driving economic growth and raising living standards. (e.g. Japan, Korea)

So, what of the opposite?

5)????? Without tapping into domestic energy resources, countries may miss out on significant economic opportunities. This can lead to continued poverty and underdevelopment. (Argentina, Venezuela)

6)????? Over-reliance on imported energy can leave countries vulnerable to global market fluctuations and geopolitical tensions, leading to energy insecurity. (Europe)

7)????? Industrialization is key to economic development, and energy is a critical component. Demonizing domestic oil and gas resources can hinder the industrialization process. (Sub-Saharan Africa)

It goes (almost) without saying that leadership plays a pivotal role in a country's development.

But it wouldn’t take much research to find that some leaders worked successfully with (or at least failed to prevent the success of) industry and commerce, which utilized people, energy and innovation to create success.

It takes leaders with a long-term vision can guide a country towards sustainable development. The beginning is always rough because it is in terms of BARE SURVIVAL.

Think of energy like water. In the desert, if you are looking for water, you are not concerned about how perfectly clean it is. Like it or not, you need enough to stay alive. In time, you develop methods to extract enough water to do so. Given more time, you will find a way to make it cleaner and more healthy. Finally, you will do so in a way that is lasting.

And so it is with energy.

No one should criticize Africa for industrializing, beyond simple assistance in doing so.

When leaders have clear goals, which include building an economy wish includes the local one, investment in human capital (education, training), infrastructure (transportation, energy, and communication), transparent and accountable governance (where is the money), supporting and promoting innovation, then support such leaders.

Let’s make better energy decisions. And with them, we can drive development and improve living standards for the rest of the world.

RBAC, Inc. rbac.com