What you need to know:
What remains abundantly clear is that by 2050, the energy world will look completely different...
“In the name of the Joint Venture Partners and on behalf of TotalEnergies, I announce Final Investment Decision for the Lake Albert Development Project”, declared Patrick Pouyanné, the chief executive officer of TotalEnergies SE, in a ceremony held on Tuesday, February 1, at Kololo Independence Grounds in Kampala.
Described by many as “historic”, the announcement was met with great excitement and anticipation from government officials and a large section of Ugandans. It has literally given the country’s development journey a new lease of life.
Several oil and gas sector experts and analysts have predicted that this Final Investment Decision will massively boost the Ugandan economy, creating over 160,000 jobs for Ugandans. Relatedly, the Petroleum Authority of Uganda has ring-fenced some 25 fields, including hotel and catering, transport and logistics, security, civil works, and provision of labour, among others, for only Ugandans.
I hate to be the bearer of bad news but, I think, these magical expectations could be all for nothing. According to Wood Mackenzie, an Energy Research & Consultancy firm, oil demand will fall by 70 percent by 2050. The decline in oil output would lead to asset impairments and bankruptcy for oil companies.
These fears have also been expressed by President Museveni who recently said Ugandans should not be worried about the Okudiba (lack of market) of our crude oil, noting that there are multiple ways it can be deployed for the benefit of the economy. Of course, the bleak future of the global oil and gas sector is being driven by climate change. Research indicates that the burning of fossil fuels – including oil, coal and gas – has been responsible for 86 per cent of carbon dioxide emissions in the past 10 years. The International Energy Agency (IEA), in its special report issued in May 2021, describes a roadmap through which the world could bring global energy-related carbon dioxide emissions to ‘Net Zero’ by 2050. But to attain this goal, the global oil demand alone would need to collapse by 75 per cent.
The IEA Roadmap sets out more than 400 milestones to guide this global journey. In part, these milestones include, from today, no investment in new fossil fuel supply projects and by 2035, there are no sales of new internal combustion engine passenger cars. These efforts were also echoed during the COP26 Summit held in the United Kingdom (UK) last year. For instance, 34 governments and five development banks agreed to end financial support for fossil fuel projects, including oil and gas, by the end of 2022, shifting billions of dollars away from fossil fuels.
Furthermore, the Summit saw a declaration on zero-emissions cars, committing signatories to work towards 100 per cent zero-emissions vehicle sales by 2040 globally. On its part, the UK confirmed plans to end the sale of all new diesel trucks between 2035 and 2040. Well, I should also mention that, as it is today, oil remains the dominant source of energy in lots of countries and still enjoys significant government support. But in light of the above resolutions, a major worldwide push to demonstrate and deploy clean energy technologies is on the horizon.
In the end, what remains abundantly clear is that by 2050, the energy world will look completely different and countries such as Uganda may find themselves stranded with huge chunks of worthless oil. But the only glimmer of hope could come from adaptation: Uganda’s oil business model should be restructured to adapt and prioritise management of carbon emissions across the value chain. So, let’s cut the celebrations and get back to work once more!
Mr. Mukalazi is the Country Director of Every Child Ministries Uganda.