Africa’s oil exporters struggle as cost of climate change soars

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Africa’s oil exporters struggle as cost of climate change soars

Africa’s oil exporters struggle as cost of climate change soars
Africa’s declining oil output and its collision course with climate imperatives must be tackled head-on. (Reuters)
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Africa’s major oil-producing countries face an ironic predicament. Despite high global oil prices, their production is on a steep decline, hemorrhaging economic opportunities, and impeding overdue transitions to low-emission economies. These petrostates, including Nigeria and Angola, have lower trade surpluses today than in 2010, even though oil prices are significantly higher. It raises the question: Why aren’t these resource-rich nations reaping the benefits of the current oil boom?
On the surface, the answer appears to be multiple years of under-investment and systemic challenges. Outdated legislation, strained relations with local communities, and competition from emerging oil exporters such as Guyana have stymied anticipated growth. Countries such as Congo Brazzaville and Equatorial Guinea have seen significant contractions in oil output, while nations such as Nigeria have recorded dramatic declines. Meanwhile, non-African OPEC peers such as Saudi Arabia and Russia have increased oil production, further accentuating the disparity.
More worryingly, the rapid decline in global oil demand growth in recent months, particularly driven by China’s economic slowdown, has triggered a sharp sell-off in oil markets. This sudden drop is already having crippling effects far beyond Asia. In Africa, where petrostates have already been grappling with long-standing issues, including obsolete infrastructure and fluctuating political stability, the consequences are even more acute. Countries such as Nigeria and Angola, which are heavily reliant on oil revenues, now face a double-edged sword: diminishing demand globally and internal production challenges. This dual pressure is destabilizing their already over-burdened economies, impeding their ability to invest in critical sectors, while also facilitating a transition to more sustainable energy sources.
Furthermore, shrinking global oil demand has also led to reduced investments in the African oil sector, further exacerbating challenges posed by decreasing output. With global financial institutions and oil companies diverting their capital elsewhere, African countries are left with few options but to rely on aging oil fields that yield less and less each year. For instance, Nigeria’s oil production fell to record lows in recent years, unable to compete with more efficient oil jurisdictions. The struggle is not merely about maintaining output, but about surviving in an increasingly competitive and shifting global oil market landscape. A sustained fall in demand means lower revenues, making it even more difficult for the continent’s oil-dependent countries to finance necessary upgrades and exploration projects.
Moreover, the impact stretches beyond mere economic concerns. With dwindling oil revenues, African petrostates struggle to fund public services, social programs, and infrastructure projects. Worse, debt levels in many African nations are already alarmingly high, often hovering around 85 percent of gross domestic product. The reduced fiscal space from ballooning repayments curtails governments’ ability to invest in alternative energy sources and sustainable development initiatives, thereby risking their long-term economic stability. The plummeting oil demand globally and production deficits intrinsically tie these countries’ fates to an increasingly uncertain oil market, raising vital questions about their future economic strategies and resilience in a transitioning energy economy.
Thus, what can African petrostates and, similarly, the continent’s less affluent, oil-importing neighbors do to manage this impending crisis?
Equatorial Guinea presents a compelling case study of a petrostate grappling with the dual pressures of declining oil output and the urgent need for economic diversification. The country’s economic boom, heralded by the discovery of oil in the mid-1990s, has seen a marked shift from agriculture-led growth to an economy heavily dependent on hydrocarbons. This transformation was bolstered by substantial foreign direct investment, thanks to favorable fiscal terms and promising prospects. Infrastructure projects flourished, accompanied by substantial investments in social and civil amenities. Yet, the precipitous drop in oil production in recent years paints a troubling picture of Equatorial Guinea — and by extension, other oil-dependent African nations. 

African countries are left with few options but to rely on aging oil fields.

Hafed Al-Ghwell

The multifaceted issues bedeviling African petrostates go beyond aging infrastructure or dwindling investments. A lack of new discoveries, and high exploration costs are also complicating prospects of even finding stop-gap solutions to this complex and enduring challenge.
In Equatorial Guinea’s case, oil production has dwindled, ranking among the lowest in OPEC, primarily due to declining output from mature fields, such as Aseng and Alba. The country’s production peaked just over a decade ago, but the absence of new discoveries has rendered the sector extremely volatile to the combined impact of declining output and decreasing global consumption. Meanwhile, increased domestic demand for natural gas, contrasted with decreasing export capacity, showcases the inherent contradictions within the hydrocarbon sector. As governments scramble to attract new investments through tax incentives and policy revisions, the long-term sustainability of these initiatives remains uncertain.
African petrostates, albeit wealthier in some respects, face perplexing challenges in transitioning to low-emission economies without undermining the financial backbone provided by crude exports. It is several magnitudes worse for poorer oil-importing countries on the continent, struggling with socioeconomic challenges, complicated further by frequent climate change-induced extreme weather events — increasing pressure on oil exporters to accelerate their ambitious plans to lower their own emissions footprint. Thus, while Africa’s wealthier petrostates, replete with resources, face fewer financial hurdles in funding transitions — declining outputs, revenues, and shrinking global demand are placing more pressure on less affluent countries.
Yet, the need for substantial investment persists. Equatorial Guinea, for instance, has embraced an “open door” policy to draw smaller players into the sector, mitigating risks of failed bidding rounds. However, this strategy, though pragmatic, highlights the desperate measures required to maintain economic equilibrium, which may require stalling climate related interventions.
In turn, the burden of climate change weighs even more heavily on poorer African nations which contend with the worst impacts of a warming planet without the buffer of oil wealth. Excessive rainfall, unprecedented floods, prolonged heat waves, and escalating droughts exacerbate water insecurity and food scarcity. These challenges force these countries to divert increasingly scarce resources toward immediate relief and recovery, leaving little room for building resilient, low-emission infrastructure. The stark juxtaposition between cash-strapped states and oil-rich equivalents emphasizes the disproportionate impact and uneven opportunities across the continent, which demands serious attention not just at a continent level, but globally as well.
The next opportunity to deal with this perplexing challenge is most likely the 29th UN Climate Change conference in Baku, Azerbaijan. Here, Africa’s declining oil output and its collision course with climate imperatives must be tackled head-on. Otherwise, efforts by countries such as Nigeria to diversify their economies away from oil are doomed.
In sum, the paradox faced by Africa’s petrostates is as complex as it is urgent. Without intervention, countries risk falling into a financial and environmental trap, caught between the dwindling wells of today and the uncertain, greener horizons of tomorrow.

Hafed Al-Ghwell is a senior fellow and executive director of the North Africa Initiative at the Foreign Policy Institute of the Johns Hopkins University School of Advanced International Studies in Washington.
X: @HafedAlGhwell

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