What Is Power Africa’s Oil and Gas Governance Role?

What Is Power Africa’s Oil and Gas Governance Role?

A little discussed aspect of Power Africa is a program to help sub-Saharan nations with governance of their newly discovered fossil fuel resources that affords transparent financial management.

Of the 12 U.S. government agencies partnering on Power Africa, the work to help ensure legal and regulatory structures are in place falls under the U.S. State Department’s Energy Governance and Capacity Initiative (EGCI).

But much of that work has been rather behind the scenes.

“When Obama announced Power Africa, I know one of the initiatives was to do with the issue of governance of natural resources. But I don’t have any tangible evidence of what is going on, on the ground in terms of this,” Mwangi Kimenyi, senior fellow and director of the Brookings Institute Africa Growth Initiative, told AFKInsider. “I know what it is about, but I don’t know what has actually happened.”

To answer that question, AFKInsider gained an exclusive interview with Robert Ichord, Deputy Assistant Secretary for Energy Transformation at the State Department’s Bureau of Energy Resources.

“We are working with countries to attract private investment to the power sector and help countries manage their energy and resource sectors in a sound, transparent, and sustainable manner,” Ichord told AFKInsider.

Although many countries do have legal and regulatory structures in place governing the use of natural resources, many are often inadequate to ensure oil and gas development truly benefits the new energy producer country’s citizens.

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“The big problem with a lot of these new producers is just the lack of government capacity to negotiate big, complex deals to get the right regulatory and legal structure in place; the right fiscal regime in place,” Jennifer Cooke, director of the Africa program at the Center for Strategic and International Studies, told AFKInsider.

The trick is to ensure sound and transparent financial tracking to reduce corruption.

When the President announced the Power Africa initiative to add more than 10,000 megawatts of new, cleaner electricity generation capacity and increasing electricity access to 20 million household and business connections, it included an initial set of six partner countries in its first phase: Tanzania, Liberia, Ethiopia, Ghana, Nigeria and Kenya.

The original Power Africa announcement on June 30, 2013 also noted that “Power Africa will also partner with Uganda and Mozambique on responsible oil and gas resources management” under the Energy Governance and Capacity Initiative. This interagency effort managed by the Bureau of Energy Resources at the U.S. State Department provides country-specific technical and capacity building assistance to countries on the verge of receiving substantial financial windfalls from the development of their new oil and gas resources, particularly in East Africa.

“East Africa is rich in both conventional and renewable energy sources that, if well-managed, have the potential to contribute significantly to countries’ development and economic growth, and to make the region an important hydrocarbon supplier to global markets,” Ichord told AFKInsider.

According to Ichord, East Africa also has “tremendous potential to contribute to global energy markets” through exports of primarily natural gas to Asia.

“Countries in East Africa also have the opportunity to learn from the experiences of other resource-rich countries in Africa and around the world, to put in place laws, policies, and practices that ensure that the revenues generated from these resources are used to benefit their citizens and translate into an improvement in peoples’ lives,” Ichord told AFKInsider.

Country-Specific Help

Many of African countries – like Uganda and Mozambique – have found themselves in new regulatory territory as they suddenly became major energy producers when large oil and gas finds were recently announced by international companies working both on and off-shore.

Uganda’s Energy Ministry expects to begin commercial oil production by 2017 and also plans to build a pipeline linking its oil fields to the coastal Kenya for export.

“Among other activities, the Energy Governance and Capacity Initiative has partnered U.S. Federal agencies responsible for managing the oil and gas sector with their Ugandan counterparts to share experiences and best practices on environmental issues related to oil and gas development,” Ichord told AFKInsider.

According to Ichord, the issues covered through this coordination include information analysis for environmental studies, environmental risk mitigation strategies, handling and disposal of drilling waste, and on-the-ground observations of how U.S. regulators inspect oil and gas operations and gather stakeholder inputs for land-use decisions.

New natural gas finds off the coast of Mozambique are among the largest in the world and will likely make that nation a net exporter, possibly as soon as 2019.

“The U.S. government has engaged with the Government of Mozambique to encourage them to put in place laws and policies that result in responsible investment in the extractives sector, particularly with regard to their growing offshore gas resources, to publicly disclose natural resource agreements, and to develop strategies for responsible financial management before significant revenues begin to flow,” Ichord told AFKInsider.

Tanzania – one of the original Power Africa countries – has also experienced new natural gas finds off the coast that are expected to come online in 2019.

“In Tanzania, EGCI has worked with the Tanzania Revenue Authority to help strengthen tax investigations, to develop an overall tax compliance strategy, and to examine tax issues associated with transactions between related companies to ensure they are in compliance with Tanzania tax requirements,” Ichord told AFKInsider.

Ichord said the Energy Governance and Capacity Initiative has further worked with Tanzania and neighboring countries for managing resources across borders and boundaries.

According to the State Department, among the added benefit of this government-to-government work includes the “potential for establishing long-term working relationships that will foster institutional stability and enhancement of the U.S. Government’s ability to further diplomacy on critical issues, such as promoting sound energy sector governance.”

But according to Ichord, the primary intention of the Energy Governance and Capacity Initiative remains to ensure the success of Power Africa’s goal of helping sub-Sahara develop all their energy resources – whether oil, gas or renewable electric generation – for the benefit of each country’s economy.

“In order for African countries to maximize the value and impact of these natural resources, governments need to ensure responsible and transparent management of the oil and gas sector and create financially sound electricity sectors that can attract private investment,” Ichord told AFKInsider.