World Bank ‘optimistic’ about giant African hydro project

Hello and welcome back to Energy Source, coming to you from New York and South Africa today.

I interviewed Petrobras chief executive Jean Paul Prates this week about his $100bn plan to prepare the Brazilian energy giant for the “fade-out” of oil. A return to exploration, international expansion and offshore wind are top of his agenda, as the former politician ditches the minimalist strategy pursued by Petrobras under the previous right-wing government of Jair Bolsonaro.

He told the Financial Times that his “biggest mission” is to reassure investors that past mismanagement and political interference would not occur under his watch. (Read more here)

Meanwhile, ExxonMobil has taken a legal sledgehammer to green shareholder groups by suing Follow This and Arjuna Capital, alleging their climate petition breached US securities rules. But my FT colleagues have a scoop detailing how this aggressive tactic has alarmed one of Exxon’s top-10 shareholders.

“We think it’s very aggressive and we are concerned about the implications for shareholders rights,” said Nicolai Tangen, chief executive of the $1.5tn Norwegian oil fund, which is the world’s largest sovereign wealth fund.

Our main item today is from South Africa, where our Energy Source correspondent Rob Rose reports on renewed hopes for one of Africa’s most ambitious and long-planned energy projects.

Thanks for reading. — Jamie

Can a giant African hydro project be revived?

The plan to create the Grand Inga Hydropower Project, a project of magisterial scope whose proponents say could provide power to half of Africa, is back on the table. 

In 2016, plans to build an $80bn dam and hydroelectric plant at Inga Falls on the Congo River — with the potential to generate 40,000 megawatts of electricity — was mothballed after the World Bank withdrew its $73mn of initial funding, citing strategic differences with the Democratic Republic of Congo government. 

Now, eight years later and with Félix Tshisekedi having replaced Joseph Kabila as Congo’s president in 2019, it seems the World Bank has regained its appetite.

This week, the World Bank’s global director of energy and extractives, Demetrios Papathanasiou, told a panel discussion at the African Mining Indaba in Cape Town that the plan had been revived. 

“We’re really trying to get it off the ground again,” he said. “This is going to be a tremendous transformative process for Africa.”

There is much scepticism, not least since Inga has been touted for seven decades as a shortcut to electrifying a continent in which 43 per cent of people — about 600mn — have no access to electricity. Mobutu Sese Seko, the dictator of what was then Zaire, completed the first two phases of Inga in 1972 and 1982. But Inga 3 would be far larger — the largest hydropower dam in the world, once built — with output roughly double that of China’s Three Gorges Dam.

Papathanasiou said that while it was too early to discuss specifics of the plan, he believed the prospects for Inga were better than for many years. “I think it’s the first time that I feel more optimistic. I almost believe that we can get it done,” he said.

But while the utility of the project is evident, it’s unclear what specifically has changed to justify the World Bank’s U-turn. Papathanasiou said much of the delays in energy projects in Africa were due to “governments and politics going the wrong way”.

In 2016, South African think-tank, the Institute for Security Studies, said the strategic differences that led to the World Bank pulling out may have been related to then-president Kabila’s plans to oversee Inga, “rather than to have it function as an autonomous authority reporting to the prime minister, as was originally agreed in 2014”.

International Rivers, an environmental lobby group, said in 2018 that in addition to the estimated 10,000 people that would be displaced to build the dam, the Inga project was “overpriced and susceptible to corruption”.

With Tshisekedi having taken office, promising to fight corruption, this may have changed. 

Last July, South Africa’s President Cyril Ramaphosa pledged his country’s support to reviving Inga 3, which had been “lying dead”. South Africa, which has been battling crippling power shortages that have eroded its GDP growth, signed an agreement at the outset of the project in 2014 to buy 2,500 megawatts from Inga once it’s up and running.

There have been other changes in the African energy landscape since the project was stalled — not least a greater realisation of the economic potential of the continent’s renewable resources and a steep reduction in the costs of producing that renewable energy.

“Over the past decade, the cost of wind and solar has decreased markedly,” said Rebecca Maserumule, a chief director for hydrogen and energy in South Africa’s Department of Science and Innovation.

Papathanasiou said this presented a fantastic opportunity for African countries.

“What most countries are struggling with is: how do you get production, and industrial production, to [go] green. How do you get clean energy supplies, so that whatever you produce has a small carbon footprint. The great opportunity we have in many countries in Africa is that you really can try and develop industrially, and get things done, including on the mining side, with a really low carbon footprint,” he said.

Dr Paul Jourdan, an independent consultant, agreed, arguing that solar and hydroenergy could allow Africa to leapfrog other continents when it comes to development. “There even could be surplus for Europe,” he added. 

“Hydro is the cleanest energy, compared to all the renewables. But it [requires] massive investment. That’s where we really hope that the multilateral [organisations] like the World Bank and African Development Bank [invest],” he said.

Plans for Inga have failed more than once, so there is justifiable scepticism. But the revival of the project seems more likely now that it has been in years. (Rob Rose)

Job Moves

• Anglo-French oil and gas company Perenco SA has appointed Armel Simondin as chief executive, effective March 15. Outgoing CEO Benoît de la Fouchardiere will join the board of Perenco Group and become chief executive of affiliate Dixstone.

• Nikola Energy appointed Ole Hoefelmann as president on Monday, replacing Joseph Cappello, who started in September. Hoefelmann previously served as global head of infrastructure operations at Nikola Corporation and has worked in executive positions at Air Liquide.

• Opito appointed Stephen Marcos Jones as chief executive of the energy safety and skills organisation on Monday, following the departure of John McDonald last year.

• BP appointed Kate Thomson as its permanent chief financial officer on Friday. Thomson was named interim CFO of the oil major in September following the management upheaval prompted by the sudden resignation of chief executive Bernard Looney. 

• Natural Gas Services Group appointed Justin Jacobs as chief executive of the Midlands, Texas-based gas equipment provider, effective February 12, last week. Jacobs previously served as managing director of Mill Road Capital and will replace Stephen Taylor, who was interim chief. 

Power Points

Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu and Tom Wilson, with support from the FT’s global team of reporters. Reach us at [email protected] and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.