enhancing african energy security by creating better markets lamon rutten joint managing director...
TRANSCRIPT
Enhancing African energy security by creating better markets
Lamon RuttenJoint Managing Director
Multi Commodity Exchange of India
11th African Oil and Gas, Trade and Finance Conference & Exhibition23-25 May 2007,Nairobi
NOT AN OFFICIAL UNCTAD RECORD
Discussion points
The African energy sector now: full of promises, empty on delivery
Unlocking the potential: the key to sustainable, inclusive, secure growth
It can be done!
The African energy sector… the reality
In 2005, 12% of global production came from Africa (which has 13% of the world’s population), but the region only consumes 3.4% of global oil. Africa’s share of global gas consumption is only 2%.
Poor regional and intra-regional energy infrastructure exacerbates the cost of domestic supplies especially in land-locked countries.
“On the outskirts of Accra, Ghana, business plans are only as final as the next electricity outage permits. In July, food tins at the Prime Pak canning factory were positioned on the assembly line, ready to be sealed before export. Without warning, the machines came to a screeching halt, leaving entrepreneur Cyril Francis standing helplessly in the dark. Thirty per cent of the consignment spoiled.”
"The worst part is not knowing when the blackouts will hit. When you least expect it, everything comes to a standstill," Mr. Francis told Africa Renewal from his factory, based in Dodowa, on the fringes of Ghana's capital city. "It is so frustrating and damaging to business production, not to mention our reputation with people who depend on us to deliver orders on time.”
Africa Renewal, Vol.18 #4 (January 2005)
Is this energy security?
But local demand is unmet. Only 23 per cent of people in sub-Saharan Africa have access to electricity. In rural areas, 92 per cent of people have no electricity.
Without a dramatic turnaround, by 2030 there will be 650 million Africans living without electricity compared to 509 million today.
Africa exports more energy than it consumes
Africa at night… the dark continent
Actually, this is the
light of gas flaring, not city lights
Let’s be blunt…currently, energy is not empowering Africa.
It is time to convert energy resources into human development
Civil strife, violence and regional conflict will be the result of a failure to get energy policy right.
Decisions made now on the way energy is handled in the continent are critical if Africa is finally to realize its potential… and this is not merely a national issue, but a pan-African one.
Policy makers: take heart. It is time to act.
Global demand for African energy resources is rising, and the potential for new energy projects is huge.
Here lies a chance to supercharge African development… Create both the financial and energy resources needed to create a virtuous cycle of growth.
But this will require a radical new organization of the sector.
The African energy sector: the potential
• Under-explored for oil, gas and coal
• Massive hydropower potential, at costs that are among the world’s lowest
• The large potential for solar, geothermal and wind power is hardly tapped
• Large energy demand, which will only grow larger when economic growth in the continent really starts taking off.
Realizing Africa’s energy potential will be much easier when leveraging the power of markets
Will the African energy sector support the growing needs of the African economy? Not unless you “change the wheels”.
New tools, new mechanisms are required to make investments worthwhile.
A re-think has started
In the Declaration adopted at the meeting, the African Union Commission was requested to rapidly organize African solidarity in respect of oil, notably by establishing an African Stabilization Fund and a preferential supply mechanism in favour of African non-oil producing countries akin to the "Caribbean Contract" as well as an oil demand and supply information system.
– First African Union Conference Of Ministers Responsible For Hydrocarbons (Oil And Gas)
11-15 December 2006, Cairo, Egypt
A radical reform
Creating a pan-African market, an African commodity exchange for energy products, will do much more for linking net energy exporters and importers than Funds and other special arrangements.
It will also give a boost to energy investments in the region, ensure more transparent pricing, and make risk management easier.
In practice, this will be a step-by-step process
At the country level, use of a commodity exchange for: - More transparent and efficient tenders both for procurement and sales- Trade and risk management for oil products, gas & electricity
At the regional level, use of a commodity exchange for:- Better linking sub-regional markets- Accessing global markets- Supporting large-scale regional projects.
Changing the competitive landscape
An energy exchange is an empowerment tool.
It opens up choices – and freedom to choose is power.
It is the glue that will connect potential investors in energy generation and the entrepreneurs desiring access to reliable energy, driving a mutually beneficial process of inclusive growth.
Is this all just a fantasy, a dream?
We are doing it in India.
And we believe the potential for success exists in Africa too.
It’s science, not fiction!
Independent and fully electronic multi commodity futures exchange with permanent recognition from Govt. of India. Started operations in November 10, 2003
Daily turnover: US$ 2.5 to 3 billion
Operations from 800+ centers with over 1600+ members & 12000+ Trading Terminals – plus many private networks, and trade through Internet terminals.
In 1st quarter of 2007, the world’s 6th largest futures exchange
World’s fastest growing commodity futures exchange, 2005 & 2006
Three national level agri marketing and infrastructure initiatives – National Spot Exchange, Safal Exchange (perishables) and National Bulk Handling Corporation
About MCX
Using technology, MCX and its parent company, FTIL, are bridging the rural-urban divide.
We have trading stations in places
where roads do not reach…
“Technology is stepping out of its elitist closet and shaking hands with the bricks-and-mortar infrastructure of the Indian countryside. It has thepotential to touch and change the lives of at least 100 million Indians.” Jignesh Shah, MD/CEO of MCX, and the
driving force behind the FTIL Group
A modern exchange can be a catalyst
Just like the EC was built on coal and steel…
a true African Union can be built on its energy sector.
There is Nothing so strong, as an idea whose time has come.
Victor Hugo
"Every morning in Africa, a gazelle wakes up. It knows it must outrun the fastest lion or it will be killed. Every morning in Africa, a lion wakes up. It knows it must run faster than the slowest gazelle, or it will starve. It doesn't matter whether you're a lion or gazelle - when the sun comes up, you'd better be running."
Like the rest of the world, Africa must move on
Inspirational sign on a runner's office wall
