The Petroleum Authority of Uganda (PAU) says the Africa Energy Bank that is expected before this year ends will free Uganda in particular and Africa in general from expensive energy related funding which feeds off a perceived increase in risk.
The bank will be a partnership between African countries subscribing to the African Petroleum Producers Organisation (APPO) and the African Export-Import Bank; attracting investment from oil and gas expert countries like Saudi Arabia, the United Arab Emirates (UAE), Qatar and Kuwait.
APPO has finalised plans to establish the Africa Energy Bank before this year elapses, according to reports.
Mr Ali Ssekatawa, the PAU Legal and Corporate Affairs Director, says the bank is a welcome idea that will counter the global trend against financing oil and gas projects that he says has hindered Africa’s progress.
According to the International Energy Agency, Mr Ssekatawa says funding energy projects in Africa is currently seven times more expensive than in Europe due to the funders’ perceived higher risk resulting in expensive energy infrastructure projects.
“European funders often impose onerous terms such as political insurance cover and the application of foreign law as well as external dispute resolution mechanisms like international arbitration which do not recognise African jurisdictions,” he says.
Mr Ssekatawa observes that the Africa Energy Bank will provide an equitable and fair alternative for African countries and companies in the overall scheme of energy transition.
Uganda is yet to subscribe to APPO.
However, Ms Irene Bateebe, the Permanent Secretary of the Ministry of Energy and Mineral Development, says apart from increasing its engagement with other oil-producing countries, Uganda is evaluating the process of joining APPO.
“As a country, we are not yet subscribers. But we are evaluating the process and criteria and we will definitely join soon,” she says.
The move to form the Africa Energy Bank comes at the time when many international funders like HSBC, Standard Chartered Bank and Standard Bank among others withdrew from financing oil projects many of the in Africa including the East African Crude Oil Pipeline (EACOP) expected to run from Hoima in Uganda to Tanzania.
The financiers’ withdrawal follows a lot of pressure from climate activists over carbon emissions and the need to shift to cleaner energy.
There is declining investment in hydrocarbons (oil and natural gas) because of the global emphasis on shifting to green energy that has left Africa untethered to explore fossil fuels.
However, African leaders have stuck their feet in the mud saying they should be allowed to transition to green energy using resources from oil.