The year 2008 was a great win for Kenya in the energy sector. A county government report unveiled the untapped potential of the Mui Basin – an estimated 400 million metric tonnes of coal, valued at a KShs. 3.5 trillion in 2010. This valuation, considering the current dollar exchange rate and rising coal prices, may double, underscoring the significance of Kenya’s indigenous energy resources. As the nation reveled in this newfound energy wealth, subsequent years brought another breakthrough – the discovery of oil in the Lokichar Basin. This discovery carried a sigh of relief, considering Kenya’s substantial expenditure on importing petroleum products.
Despite the initial promise, Kenya now faces a looming threat – the risk of stranded assets in its fossil fuel reserves. Regulatory delays, sustainability concerns surrounding fossil fuel operations, and a decline in exploration funding pose substantial challenges. The fear is that Kenya might be left with vast fossil fuel resources that cannot be converted into fuels or exported.
The Energy Dilemma
Kenya, like many African nations, grapples with the dual challenge of addressing energy poverty and mitigating climate change. While fossil fuels contribute to greenhouse gas emissions, the revenue generated from their exploitation plays a crucial role in combating energy poverty. As the manufacturing and industrial giant of East Africa, Kenya’s economy, to a large extent, is dependent on energy. The country currently imports all of its coal for the cement and steel industries, while possessing significant coal reserves.
African countries have yet to capitalize on their fossil fuel discoveries, despite the calls for energy transition. Besides the discovered resources, much of the continent is still underexplored, with unknown or undervalued resource potential. In terms of clean energy investments, Africa also has a share that is quite underwhelming. According to the International Energy Agency (IEA) report published in September 2023, the continent attracts only 2% of global energy investments, though hosting roughly 17% of the world population. Africa therefore needs to invest in itself within the energy sector to foster some semblance of growth.
Navigating the tightrope
The transition away from fossil fuels requires a delicate balance. The government needs to take caution when imposing policies that discourage the use of its natural resources, fossil fuels included, as this might impede investment in associated industries. With the current definition of energy transition, Africa is poised to limit its development ambitions. Is Namibia, a country that saw its first commercial oil and gas discoveries within the last one year willing to forgo its resources in the name of energy transition? What will be of Angola and Nigeria, the top crude producers in Africa, whose economies depend on its export? Wouldn’t the continent, which is highly vulnerable to climate change, benefit from such revenues and utilize them for climate mitigation measures? Besides, Africa’s contribution to global greenhouse gas emissions is quoted to be less than 4%. Africa still has room to utilize its natural resources efficiently and sustainably using modern technology and proper monitoring of operations.
Wealthier countries should place more restrictions on fossil fuel projects within their homes, to pave way for African countries to fill their gaps in energy demand with their resources. This increase in demand for Africa’s energy resources will see the continent generate significant revenue while fossil fuel prices are still well priced, while responding to the risk of having stranded assets. Policy makers should also be made aware of the risk that comes with stranding energy resources and assets. Contrary as it may sound, Kenya needs more energy to fight climate change effectively. More energy implies quicker adaptation to cleaner sources of energy as well as much needed revenue for our economies.