Anglo American announces a collaboration agreement to complete a feasibility study to develop a “hydrogen valley” anchored in the platinum group metals-rich Bushveld geological area in South Africa. Spearheaded by South Africa’s Department of Science and Innovation (DSI), the collaboration agreement also includes energy and services company ENGIE, the South African National Development Institute (SANEDI) and clean energy solutions provider Bambili Energy (Bambili).
The proposed hydrogen valley will stretch approximately 835 kilometres from Anglo American’s Mogalakwena platinum group metals (PGMs) mine near Mokopane in Limpopo province in the north of South Africa, along the industrial and commercial corridor to Johannesburg and to the south coast at Durban.
This collaboration follows the launch in 2020 of the South African Hydrogen Society Roadmap, aimed at integrating hydrogen into the economy by capitalising on the country’s PGMs resources and renewable energy potential to revitalise and decarbonise key industrial sectors. The study will be conducted by ENGIE Impact and will identify tangible opportunities to build hydrogen hubs and explore the potential for green hydrogen production and supply at scale.
Natascha Viljoen, CEO of Anglo American’s PGMs business, commented: “The transition to a low carbon world is an opportunity to drive the development of cleaner technologies, create new industries and employment, and improve people’s lives. Anglo American was an early supporter of the global potential for a hydrogen economy, recognising its role in enabling the shift to greener energy and cleaner transport. Our integrated approach includes investing in new technologies, supporting entrepreneurial projects and advocating for policy frameworks that enable a supportive long-term investment environment for hydrogen to deliver that potential.”
The regional PGMs industry will be central to such a hydrogen valley, with PGMs playing an important role both in Polymer Electrolyte Membrane (PEM) electrolysis used to produce hydrogen at scale and in fuel cells themselves.
Anglo American is already investing in renewable hydrogen production technology at its Mogalakwena PGMs mine and in the development of hydrogen-powered fuel-cell mine haul trucks – the world’s largest to run on hydrogen.
Dr Phil Mjwara, DSI Director-General, said: “The Department’s hydrogen valley partnership with Anglo American, Bambili Energy and ENGIE is an example of leveraging investments made in the Hydrogen South Africa Programme to create mechanisms for the uptake of publicly financed intellectual property. The hydrogen valley is among the projects that will be implemented in partnership with the private sector to support the Platinum Valley Initiative, which is aimed at supporting small, medium and micro enterprises (SMME) to take advantage of opportunities in the green economy in support of a just transition.”
The public-private partnership is aligned to the Government’s Economic Reconstruction and Recovery Plans for South Africa, with science, technology and innovation playing a key role in supporting the country’s plans to revitalise its economy.
Sebastien Arbola, ENGIE Executive Vice President in charge of Thermal Generation and Energy Supply activities, said: “ENGIE is delighted to be part of the hydrogen valley study. We are keen to share our knowledge and expertise encompassing the entire hydrogen value chain to accelerate hydrogen solutions’ deployment in South Africa and beyond. We already have a demonstration project underway to supply the hydrogen for the world’s first hydrogen mining truck being developed by Anglo American at the Mogalakwena PGMs mine.
“We believe that renewable hydrogen is key to decarbonising hard-to-abate industries and will play a fundamental role in the global economy of tomorrow. We look forward to once again joining forces with Anglo American to contribute to South Africa’s energy transition and the country’s economic recovery plan.”
Zanele Mavuso Mbatha, CEO Bambili Energy, said: “The initiative to develop the South African hydrogen valley and the collaboration between Bambili, Anglo American, ENGIE and the South African government is significant as it will build material public awareness, confidence and support for the hydrogen economy. This collaboration is illustrative of Bambili’s view that a public-private partnership is critical in the development of this industry in the South African economy.”
Anglo American’s support for the adoption of hydrogen solutions in transport
Electric vehicles powered by hydrogen fuel cells offer many benefits to the transport sector, including comparable refuelling times to internal combustion engine vehicles, long ranges and space and weight efficiency.
Anglo American is leading initiatives to promote the adoption of fuel cell electric vehicles (FCEVs) for commercial uses, in particular, facilitating the creation of consortia to promote the development of hydrogen freight corridors in a number of geographies, including the UK, South Africa and China. These projects aim to accelerate the uptake of heavy-duty FCEVs by aligning end-user demand locations and specifications with the supply of suitable vehicles and access to the requisite hydrogen infrastructure along key freight routes.
Anglo American takes an active role in several industry-led platforms established to facilitate the advancement of hydrogen solutions in key industry sectors. These include the Hydrogen Council, a global CEO-led initiative of 100+ leading companies with a united and long-term vision to develop the hydrogen economy; the UK H2Mobility consortium, established to facilitate dialogue on hydrogen mobility in the UK; the International Hydrogen Fuel Cell Association, created under the guidance of China’s Society of Automotive Engineers to advance fuel cell scalable applications.
The Department of Science and Innovation (DSI) will on Wednesday, 19 August 2020 unveil seven hydrogen fuel cell systems which are being used as the primary power source for the field hospital established at 1 Military Hospital in Pretoria as part of the government’s response to COVID-19.
The project is a public-private partnership between the DSI, the Department of Public Works and Infrastructure (DPWI), the Department of Defence (DoD), local companies Bambili Energy and HyPlat, and international companies PowerCell Sweden, Horizon Fuel Cell Technologies (Singapore) and Element 1 Corporation (United States). Further contributions, in the form of methanol and hydrogen fuel for the fuel cell units, were also received from Air Products South Africa, Protea Chemicals and Sasol.
Bambili Energy focuses on the hydrogen economy, providing solutions to complement various forms of alternative energy, and is committed to commercialising intellectual property developed through the Hydrogen South Africa (HySA) programme.
The COVID-19 pandemic has highlighted the need to respond with speed and flexibility, particularly in providing high care facilities for those who need them most. Containerised hydrogen fuel cells can be deployed at short notice to provide a clean source of energy, even when the need is only temporary.
The support provided to 1 Military Hospital will be complemented by hands-on training to ensure that the skills required to operate and manage the fuel cell systems are institutionalised within government. The first two phases of training will focus on officials from the DoD and DPWI, while the third phase will involve unemployed TVET college graduates with N4 electrical and light and heavy current qualifications.
Hydrogen fuel cell technology is globally recognised for its potential to decarbonise the energy and transport sectors. Hydrogen fuel cells produce electricity by means of a chemical reaction, using hydrogen as the basic fuel together with platinum-based catalysts. They are efficient, reliable, safe and quiet, ensuring a non-intrusive standby and primary power solution. Being modular in nature, they can be deployed rapidly and scaled up easily as the need arises, and their maintenance cost is relatively low.
The event will take place as follows:
Venue: 1 Military Hospital, Pretoria
Time: 09:00 – 12:00
Date: 19 August 2020
*Issued by the Department of Science and Innovation
For media enquiries, please contact Veronica Mohapeloa at 083 400 5750 or Thabang Setlhare at 072 659 9690.
Bambili Energy, part of South African investment firm Bambili Group, will provide guidance on accelerating the deployment of hydrogen fuel cell technologies in South Africa.
South Africa’s Department of Science and Innovation (DSI), formerly the Department of Science and Technology, has invited South African hydrogen fuel cell specialist Bambili Energy and other companies to participate in the South African Hydrogen Society Roadmap development process that commenced in June 2020 for a period of six to twelve months.
The Roadmap is seen as South Africa’s pathway towards its vision of integrating hydrogen within its economy, motivated by the benefits that would accrue as a result. The DSI, with the support of an interdepartmental committee, is embarking on a process towards the development of a South African Hydrogen Society Roadmap.
“As a valued key stakeholder, the Bambili Group’s contribution and participation is vital given the potential impact that the hydrogen economy could have on South Africa’s economic recovery post-COVID-19. In addition, the use of platinum group metals (PGMs) based value added components in hydrogen and fuel cell technology has the potential to increase the demand for PGMs and local beneficiation,” said Phil Mjwara, Director-General of the DSI, in a letter to Executive Chairperson of Bambili Group Zanele Mavuso Mbatha.
During the DSI’s budget vote which took place on 24 July, Hon. Blade Nzimiande, Minister of Higher Education, Science and Innovation, highlighted that the department was hard at work to ensure that it fully participates in the establishment of a Platinum Valley economic industrial project which will cover the Johannesburg-to-Durban corridor, the OR Tambo International Airport to King Shaka Airport.
“This special economic zone will contribute to energy security in the automotive, materials handling, mining, and electrification industries, while contributing to the beneficiation of platinum group metals,” he stated.
Meanwhile, the DSI is implementing the Cabinet-approved Hydrogen South Africa (HySA) strategy through the 15-year research, development and innovation HySA Program, which is aimed at developing hydrogen and fuel cell technologies, with a focus on beneficiating South Africa’s platinum group metals (PGMs) resource base.
Bambili is focused on the beneficiation of South Africa’s PGMs through the development of the fuel cell industry in South Africa, as well as the development of a ‘hydrogen valley’ in the country. The company will be part of the Industry Reference Group that will actively engage with a leading consulting firm to provide guidance on accelerating the deployment of hydrogen fuel cell technologies in South Africa.
On May 15th, 2020 Africa Oil & Power and the African Energy Chamber held a webinar on the theme Driving African Energy Investment – Private Equity, LNG and African Oil & Gas Operations. Speakers included Nyonga Fofang, Managing Director of Bambili Group. Watch the webinar here:
The fallout of the COVID-19 pandemic has certainly rattled both the oil and gas and finance sectors. Investors and business owners will face new obstacles in getting projects off the ground in the coming years, with only the most competitive oil and gas projects and well positioned companies moving forward. Despite the challenges, private equity is set to play an important role in the development of Africa’s energy sector for years to come. How has the private equity market been affected by COVID-19? Has the recovery started for private equity? What projects will attract investors in the current climate? What role will LNG play in developing Africa’s economy and recovering from the economic ramifications of COVID-19? What is the way forward for African independents and service companies post-COVID-19? How can these companies access investment and continue to thrive?
Nyonga Fofang, Managing Director, Bambili Group
Kola Karim, Managing Director and CEO, Shoreline Energy International
Steve Brann. Senior Investment Manager, Vitol
Shawn Duthie, Managing Director, Inyani Intelligence
James Chester, Acting CEO, Africa Oil & Power
With the energy transition underway, the global community is progressively making the move from fossil-based energy sources towards a zero-carbon emission future. The last year has proven to be quite interesting for the global oil and power sectors, particularly as the spotlight on renewable and alternative energy and its impacts on economic growth and development continues to brighten.
In most of the recent conferences the Bambili Group attended in 2019 and participated in, we noticed there were more panel discussions on renewable energy and its potential to transform energy economies. These discussions covered key aspects of the clean energy value chain, including project funding, development, enabling policy frameworks and challenges in this transition, signaling a uniform global shift towards renewable and alternative energies.
Beyond the United States, Canada and some western European countries like Sweden and Germany, the last few years have seen escalated activity in the renewable and alternative energy space, mostly in Asia, with China and Japan leading the way in the automotive fuel cell sector. Some standout examples include the Re-Fire Technology in Shanghai, Horizon Fuel Cell Technology in Singapore and Ballard Power System in Shandong making some of the first moves in the deployment of hydrogen powered trucks and buses for commercial use. China, meanwhile, is rapidly becoming a world leader in the transition away from fossil-fuel powered transport.
The general view from some of the conferences last year with a renewable energy focus was that innovative financial funding models would be the option going forward to deal with the challenging funding issues in the fuel cell sector.
In China, we noticed that most of the renewable energy companies at start-up stages tended to have government presence either at municipal or state levels as equity partners. This equity presence was crucial at these stages due to the capital-intensive nature of the businesses at start-up as a result of the absence of funding at that level. Thus, confirming that public-private sector collaboration is required if developments in the renewable energy sector are going to scale up in emerging economies with limited access to angel or qualitative venture funding.
Encouraging the pace of the transition in China is its need to accelerate the deep decarbonization process, given its air quality challenges attributable to the massive use of coal in its industrial sector, which is responsible for over 65% of the nation’s consumption and over 70% of its carbon emissions.
In tune with this, Japan has also been very active on its mission to implement a clean and sustainable energy future as a means to reduce its dependency on nuclear energy. In achieving this, a number of private sector companies and government have furthered their commitments to hydrogen and fuel cells. The nation has set its vision on the latter being a source that will allow it to diversify and strengthen its energy infrastructure. Recently, in a move to study and expand fuel cell vehicle technology, Honda and Isuzu Motors signed an agreement to conduct joint research on fuel-cell powered heavy-trucks.
The complimentary two-year collaboration will see Isuzu utilize its expertise in the development of heavy-duty trucks and Honda’s in the development of fuel cell systems, allowing the Japanese manufacturers to prepare the technology for use in a wider range of vehicles. This is on the backdrop of seemly collaboration by fuel cell technology company PowerCell Sweden AB, with Swedish truck manufacturer Scania, and the truck superstructure company JOAB, where they built an electric refuse truck, where both the propulsion and compactor ran on electricity produced by fuel cells. The project was granted funding by the Swedish Energy Agency.
South Korea, Malaysia, and India are also gradually beginning to embrace renewable energy as a complimentary source in their energy mix with major benefits such as long-term cost effectiveness and accessibility being massive draw cards.
The Energy Transition in Africa
Africa is also seeing an increased undertaking of renewable and alternative energy sources, specifically in the solar photovoltaic (PV) sector, where it boasts over 1.4GW of new installations, a significant leap from the 786 MW brought online in 2017.
In 2018, the International Renewable Energy Agency recorded a combined installed PV capacity of 1,067 MW in South Africa, Kenya, Egypt, Namibia and Ghana naming these countries the fastest growing PV markets on the continent. On a particular note, recently in South Africa, beer maker, South African Breweries and its parent company AB InBev Africa decided to have solar facilities at its breweries across South Africa which will partially power each facility. According to press reports, the intention is to ensure that by 2025 100% of its electricity use will come from renewable energy sources as part of its global renewable energy commitment.
Notwithstanding the presence of renewable and alternative energy, particularly fuel cell as an alternative source of energy supply, its adoption has been hampered by the initial intensive capital requirements on start-up and, the prohibitive nature of hydrogen in its huge transportation and storage costs in most parts of the world, though readily available.
In South Africa the government has identified renewable energy as an important sector in its new industrialization campaign as it aims to spur growth in the local economy. It has put in place programs through the Department of Trade and Industry to facilitate the adoption by potential manufacturers and end-users of the various energy mix, PV or fuel cell system. Some of these include rebates, and tax incentives amongst others. This is to complement the increasing countrywide energy shortages due to capacity challenges state-owned Eskom, the country’s primary electricity supplier, is currently facing.
Naturally, it is difficult to predict what 2020 will hold for the power sector, more specifically the renewable and alternative energy sector, however, notwithstanding the unsettling geo-political posturing in the middle east, and uncertainty of the global impact from the US – China trade impasse, we believe that the move towards adopting renewable and alternative energy is irreversible, and with innovation, the cost of adoption will keep declining. According to industry experts, positive issues like performance, cost reduction, and sustainability will have a big impact on the industry this year, and particularly so in the automotive industry.
OPEC keeps up its attempts to manage oil price fluctuations amid an unpredictable global trade environment.
The close of the recent OPEC meetings in Vienna, Austria, were a bit anti-climatic for some of us. Delegates saw the session close with a continuation of the ‘Declaration of Cooperation’ – an agreement to coordinate crude production and supply, and indirectly attempt to manage oil price swings.
The meeting began against the backdrop of a potential no-deal Brexit deal, and fall-out from America’s unilateral departure from the Iran nuclear agreement and its potential geo- political ramifications, given the fact the Iran is a major oil producer. OPEC and non-OPEC members met amid a cacophony of noise from politicians and business leaders, primarily from the United States, China and India, asking for oil prices to be brought down and for producers to prevent another situation that could hurt the global economy.
A little over two years ago, we saw the precipitous fall in the price of crude within a very short period of time. The oil price went from from $107 in June 2014 to below $28 per barrel of Brent crude in February 2015 – the biggest price reduction in 12 years. The ensuing ‘lower for longer’ oil price from 2014 to 2017 had a massive negative impact on many oil producers, including those in Africa. This extended to an array of oil services companies, suppliers and the builders of related infrastructure. In those challenging economic conditions, with reduced access to traditional funding, markets were noticeably unstable, making investing in the oil sector difficult. Nevertheless some major oil producers did continue to pump oil and re-invest, while those projects that couldn’t break-even at the low oil price range stalled or had to be mothballed. Most investors without clarity on their potential return on investment sat on their cash.
The current price of oil has been driven by a combination of factors, including a drop in Venezuela’s output; high oil demand from China and India; and generally from steady economic development in other Asian countries. The upward swing in oil prices is likely to continue, with the US focusing its efforts on isolating Iran, both politically and economically, hence disrupting supply.
The stability or instability of the market seemed to be major motivating factor that influenced the recent OPEC gathering, and influenced the desire to find a way of extending cooperation. Another motivating factor was the re-introduction of trade barriers, through higher tariffs introduced by the US and retaliation by affected countries. According to some panelists, this new market environment is creating a lot of instability, and the lack of predictability is damaging in the long term. This is leading to a call for constructive market intervention schemes.
The challenge is dealing with supply overhang from primarily large producers. At lower prices, many small producers feel the pinch, with lower revenue streams and stalled projects. While generally good for consumers and larger economies like India, China and others, it certainly isn’t sustainable for the long run. The absence and influence of Venezuela and Libya means that large producers like Saudi Arabia and non-OPEC parties like Russia will hold sway, irrespective of price swings. Regarding the issue of market unpredictability, the Saudis called for elastic sensibility from other members when it comes to production quotas. In other words, though influenced by sovereign obligations, producers will need to be flexible in their attempts to comply with OPEC’s agreement to control production.
At the moment, the continuous rise in the oil price and increased global trade tensions are creating a narrative where investment capital is paranoid about long term focus – especially in developing or emerging markets.
The African oil and gas industry is increasingly turning to private equity for financing. What kind of investor is looking at African energy, and how can they best unlock value in the sector?
At last month’s Africa Oil & Power conference in Cape Town, an overwhelming theme was the role of private equity investment in the African oil and power sectors. Most questions were centered around the quality of private equity investor appetite for opportunities in African oil and gas against a background of the so-called “Africa Rising” narrative. The narrative assumes the continent, given its abundant potential, is on an upswing, potentially attracting significant investment dollars across many sectors, and is buoyed by its youthful population and increasingly solid institutional, regulatory and democratic frameworks. Unfortunately, this is an exaggerated expectation of some African leaders and their commitments to speedy political and economic reforms. And following the collapse in oil prices, slow growth in the US, Europe, and an economic slowdown in China and to some extent India, Africa’s rise began to look a little less stellar.
According to panelists on the Private Equity panel session, many opportunities do exist in the oil and gas sectors. However, investors with an African focus, particularly in oil and gas, will need to have a nuanced approach. Each country has its own regulations, and is at its own individual level of development of its petroleum resources. Most governments are inclined to promote an existing state monopoly or locally established producers. Investments in the oil and power sectors tend to be politically sensitive, capital intensive and labour intensive, making the barriers to entry very high. This gives existing companies a serious advantage over new entrants. The resultant minimal competition does, in fact, create opportunities for those private equity firms with deep pockets, open-ended investment structures and those who are comfortable with long term annuity income expectations.
To invest successfully, companies have to navigate between the portfolio investment expectations and the reality on the ground. In most Sub-Saharan African countries, oil companies that are in need of expansion or growth capital are primarily on-shore local producers, and are oftentimes owned by family-led business owners. There is a tendency for these businesses to have a very wary attitude towards private equity-type funding, and its various expectations — such as seats on the board, line of sight to monthly management accounts, etc. This is due primarily to insufficient exposure to capital market realities and the variety of available funding sources. Most of these companies have tended to rely on traditional bank financing. In situations where the opportunity to invest is clear, closing a transaction has required a lot of “hand-holding” throughout the negotiations.
Notwithstanding that there is a present surplus of oil production in the market keeping prices at $50 per barrel and less, the demand for oil and gas is not going away anytime soon. While alternative and renewable energy is growing, the world today still depends on oil and gas, and that is not slowing down.
Additionally, the issues African focused oil and gas investors face are not dissimilar from those of other investment categories. Clearly, on a risk adjusted basis the African oil and gas opportunities should make sense for the sort of investor who is comfortable with a particular risk profile with potentially high returns. These investors also should not have a ‘one size fits all’ style of de-risking strategy. To potentially unlock value, investors will have to closely shadow their investments through improving corporate strategy and governance.
There is increasingly a larger presence of Africa-originated funding in the African oil and power space, including private equity, in the form of African-owned family offices and development finance institutions like the African Development Bank and African Export-Import Bank. The involvement of development institutions can also encourage private equity firms to seriously consider investment opportunities, as their role oftentimes helps mitigate issues of sovereign risk guarantees.
With a year of political upheavals in the US and Europe behind us, but predictions of further disruption ahead, what is the outlook for companies in the African energy space?
It’s a new year, 2017, following Brexit, the US elections and gyrations in the oil and gas sector, among other sources of turmoil. Despite uncertainty, it’s time for African oil and gas firms to look forward.
Political disruption in the US and Europe
Clearly, the election result in the United States was a case of an American version of ethnic nationalism triumphing over hope, inclusiveness and liberal progressiveness. It was also a statement of the impact of new technology and globalization on labour markets, and a testament to the political power of social media. We now have a new US president with a pedestrian knowledge of Africa. What does it mean for the continent and what should we expect?
It’s also that time of year again – the season for planning the way forward through the coming 12 months. 2016 was a turbulent year politically, business-wise, and even socially. Europe and the USA, once beacons of stability, became poster children for political and economic risk. Previously fringe right wing groups are now moving to occupy the political centre in most of Europe. The implications are not yet clear.
African energy in uncharted waters
In the African energy space, 2016 was a disruptive year for big and small independent oil and gas operators due to collapsed oil prices and fallen revenue streams. 2017 is going to present most oil and gas companies with new challenges as the industry moves further into uncharted waters. Given the impact of last year’s overall performances in the sector, most African oil companies, from juniors to large corporations, will have to optimise their operations, rationalizing costs due to the need to realize value while contemplating new business opportunities.
“The markets are in for a rough phase as we move ahead, and lack of clarity in the regulatory environment governing the oil and gas sector will lead to more uncertainty.”
Most businesses will have to refine their business models, and start using progressive financial funding models based on efficient service delivery. Perhaps we will see increasing use of smart technologies, such as drones, which can be used to collect and assess data from problematic land assets or offshore rigs. There are certainly ways to reduce some of the prevailing high human and material costs entailed in oil and gas exploration.
Change has got to come
As per funding options going forward, rising oil prices will give investors some comfort. However, potential targets will be those companies that have used the downturn to rework their business models, fine-tuning operational efficiency, managing costs downwards, and embracing new technology like cloud computing.
Cloud-based infrastructure, aside from its low cost of entry, will also enhance value if utilized efficiently. However, given that the energy sector is highly sensitive in terms of information, politics and capital, the jury is still out in the African space on the speed with which cloud technology can be embraced.
During the recent West Africa Energy Assembly conference (January 17, 2017) in Lagos, Nigeria, the prevailing theme was regulatory environment and the impact of the new US president. According to most participants, the markets are in for a rough phase as we move ahead, and lack of clarity in the regulatory environment governing the oil and gas sector will lead to more uncertainty. Donald Trump’s policies will no doubt have an impact on supply and demand in the global oil industry. On the impact of the new president on Africa and its oil and gas sector, we’ll need a lot more information before making predictions. The business of oil and gas production in Africa is no way coming to an end; however, some dated modes of operating will have to change.