Paper presented at the AfAA 3rd Annual International Arbitration Conference, 3rd - 5th November 2022.
Developments in the energy sector are fast-moving, particularly at this time of accelerated rates of change. I will start with a quick overview of available statistics on African energy disputes from the recent past, speak a bit about energy developments from the African union, and then focus on a few countries that should be of interest to African practitioners in general and the conference participants in particular.
2. Recent Published Statistics
Looking back over the past five years (2017 – date), available statistics from three African arbitral institutions indicate that disputes in the energy sector continue to arise but are not a dominant part of the caseload.
The Cairo Regional Centre for International Commercial Arbitration (CRCICA) reported each year a number of disputes in the energy sector (Oil &Gas and electricity).
- 2018 – 8%
- 2019 – 30%
- 2020 – 7%
- 2021 – 11% ( up to the end of Q3)
The Kigali International Arbitration Centre (KIAC) reported no cases in the energy sector since 2017, although 2 such cases had been reported previous to 2017.
The Nairobi Centre for International Arbitration (NCIA) reported energy disputes in only two of the five reporting years, with Oil&Gas and Electricity Transmission being the relevant sectors.
On the international front, regular statistics published by the International Chamber of Commerce (ICC) provided information on Africa-related disputes and energy disputes, but there was no breakdown available for African energy disputes. However, the trends in both these areas are worth sharing:
No. of new Cases
No of cases with African Claimant or Respondent
No. of cases in energy sector
Although the statistics cannot tell us specifically about African energy disputes, it is significant that energy is the second most frequent sector for all disputes registered with the ICC.
As to investor state disputes submitted to the International Centre for the Settlement of Investment Disputes (ICSID), around Africa, there have been energy cases involving Egypt, Senegal, The Gambia, Nigeria and Equatorial Guinea.
3.An African Union View - Energy projects in the pipeline
Energy is a foundational resource on which all social and economic development relies. The importance of the energy sector for Africa’s development has been articulated by the Energy Division of the African Union (AU) which has big ambitions, with specific targeted interventions including:
- Hydropower – 8 projects
- Petroleum/Gas Pipeline – 3 projects
- Power Interconnectors – 43 projects
The focus on power interconnectors come as no surprise with the integration mandate of the AU. It may be useful as arbitration practitioners to pause and think for a moment about energy security risks and the structuring of the bilateral and sometimes multilateral agreements necessary to ensure that the interconnectors provide the availability required - will we see disputes arising here?
The other initiatives which are the focus of the AU energy division are:
- “Operationalisation and Implementation of the Africa Renewable Energy Initiative (AREI) adopted at the COP21 in Paris, December 2015;
- Facilitation of Sustainable Energy for All (SE4ALL) Initiative Implementation adopted by the Conference of Energy Ministers of Africa (CEMA), in November 2012;
- Facilitation and advocacy for the implementation of the Africa Bioenergy Policy Framework and Guidelines adopted by the CEMA in November 2012 and Heads of State and Government in January 2013;
- Elaboration of a Continental Harmonized Regulatory Framework for the Energy Sector;
- Implementation of the Africa-EU Energy Partnership launched at the Africa-EU Summit in Lisbon, Portugal in 2007;
- Implementation of the Regional Geothermal Programme and Geothermal Risk Mitigation Facility;
- Implementation of the Hydropower 2020 Initiative to promote the development of Africa’s hydropower potential; and
- Facilitation and advocacy for the development of Grand Inga Hydropower project as one of AU Agenda 2063 flagship projects.”
It is encouraging that renewables ( bio-energy, hydropower and geothermal) get specific mention. Energy transition, regrettably, has not been specifically articulated. I think it is safe to say that the oil and gas sector will continue to develop in Africa. However, the sustainability agenda is driving those economies with more fiscal space to do so to start to talk very specifically about transitions.
4. Some county-specific information
I thought I would first talk about countries that don’t usually make the headlines in our African arbitration conferences, not in the context of actual disputes, but as a way of thinking about where dispute resolution, or perhaps more importantly, dispute avoidance practitioners, might want to get more exposure to. I will then speak about the hot prospects and more familiar countries.
4.1 Equatorial Guinea
With a population of less than 2 Million, this OHADA member state on the west coast of Africa has been extracting oil for many years, and is now trying to position itself as a regional gas hub. In 2020, a program to drive investment in gas resulted in the signing of memorandums of understanding with 53 companies in 17 bids.
A project to prepare a Gas Master Plan was awarded in May 2020. In November 2020, a contract was awarded Italy’s Saipem to build a 70 km pipeline from the Alen field to the Punta Europa complex, which hosts a methanol and LNG complex. Marathon Oil and Chevron both feed gas to this complex from the Alba and Alen-Aseng fields. In 2022, Nigeria and Equatorial Guinea signed a MoU to see Nigerian gas transported to Punta Europa for processing.
In terms of potential disputes, the usual types of disputes we see in oil and gas sector internationally are gas-price review arbitrations from market shifts. In turbulent times, the triggering of request for price-review by either party can be anticipated. To the extent that parties fail to agree, specialist arbitrators in this space could be quite busy – and we need more African expertise here.
It was interesting to observe that Equatorial Guinea has had two ICSID cases from the oil and gas sector under the Additional Facility Conciliation rules, one in which Equatorial Guinea was claimant.
In terms of renewables, there is not much happening in the county. Only 10% of the energy supply is from hydropower, although there is still untapped capacity. There has been no legislation enabling Independent Power Producers enacted yet.
Staying on the Atlantic coast of Africa, but in the Southern Hemisphere, Namibia also has a small population of less than 3 Million people. Although the country is large, with an area of more than 800,000 sq.km, much of it is desert.
Namibia produces less than 40% of the energy it consumes, so it is at present an energy importer. The state utility is the generator as well as the sole buyer of electricity. It is therefore seeking additional power generation sources.
The oil and gas industry is still at a very early stage of development, with prospecting continuing onshore and offshore.
According to the Namibia’s Ministry of Industrialisation and Trade, “renewable energies, especially wind energy along the southern coast, have great potential in Namibia while solar radiation maps indicate that the country has proven solar resources and are particularly suited for solar energy projects such as concentrated solar power (CSP)”.
In order for independent power producers (IPP’s) to participate in the renewable sub-sector, in the Namibian market which operates under a single-buyer model, a Renewable Feed-in Tariff (REFIT) scheme has been formulated. Currently, there is a program to acquire 70MW of renewable energy (solar PV, wind and biomass) from 14 IPPs under 5MW generation licenses.
American interest in the solar potential of Namibia has seen the involvement of USAID in its Mega Solar initiative, “a commitment to large-scale solar development collaboration between Power Africa, the Governments of Botswana and Namibia, the African Development Bank, the African Union Development Agency (AUDA-NEPAD), the International Bank for Reconstruction and Development, and the International Finance Corporation”. This multi-phased procurement program envisions up to 5 gigawatts of renewable solar energy, to be sold regionally when inter-connections are available.
Perhaps the most exciting news out of Namibia in recent years has been the signing of the Belgium -Namibia MoU on green hydrogen during the COP26 in Glasgow. Namibia will produce hydrogen from solar energy which will be sold to Belgium to produce electricity, thereby reducing Belgium’s carbon footprint as no green-house gases (GHG’s) are produced from the combustion of hydrogen - only water vapour.
In terms of Namibia’s record of international energy disputes, neither the ICSID register nor the Permanent Court of Arbitration (PCA) register revealed any cases. However, looking at the active and enforceable BIT’s that Namibia has, which are mostly older generation types, many of the potential investors are coming from those (European) countries. The risk therefore remains of exposure to claims if and when the State considers it necessary to make regulatory changes.
When we look at the Indian Ocean side of the continent, Mozambique is the new hot market prospect for oil and gas. With an area of almost 800,000 sq km, it is similar in size to Namibia, but is has a population of more than 31 Million people.
Mozambique’s 2022 Economic Update (World Bank) notes “growth is expected to accelerate in the medium term, averaging 5.7% between 2022 and 2024, as demand recovers further and the economy benefits from the start of LNG production in 2022 and anticipates the resumption of larger LNG projects”.
Mozambique holds 100 trillion cubic feet (Tcf) of proven gas reserves as of 2017, ranking 14th in the world and accounting for about 1% of the world's total natural gas reserves of 6,923 Tcf. (Nigeria is 9th place and Algeria is 11th. Egypt ranks 16th.)
The big news from Mozambique is in the northern sector and the Rovuma basin in particular, after significant discoveries in 2010. All the majors are in Mozambique now including ExxonMobil, Andarko, Eni, Total and Shell. The Total project is notable for the $20 billion Final Investment Decision for an LNG project taken in 2019.
The security situation in 2021 in the north of the Cabo Delagdo Province in Mozambique led Total Energies to withdraw all LNG project personnel from their Afungi site and to declare force majeure.
For now, we will have to wait and see how the relationship develops. It has been reported that ENI has shipped the first consignment of LNG from Mozambique to Europe in November 2022.
For arbitration practitioners in the energy sector, Tanzania has had some interesting cases. In the sphere of investors bringing claims in different fora arising out of the same transaction, we have two disputes brought by Symbion power against Tanzania from a transaction involving the acquisition of 120 MW natural gas-fired power plant in Ubungo, Dar es Salaam. First there was an ICC case in 2016, alleging contractual claims against the state-owned power company TANESCO, and then there was an ICSID dispute registered in 2019 invoking theUnited Republic of Tanzania - United Kingdom BIT (1994). The ICSID case has now been discontinued. For African practitioners, it is really important to think about how one would address these “parallel claims”. The approach of applying abuse of process considerations, following the RSM v Grenada ICSID case, and the subsequent Orascom v Algeria ICSID case may be gaining traction.
With Ghana hosting the 2022 Africa Arbitration Association conference, it is only fitting to talk about energy disputes in Ghana. Two current disputes are worth following, one arising from a tax assessment and the other from a unitisation order.
The tax dispute is with Tullow. According to Tullow Ghana Limited (TGL), in August 2018 it received a direct tax assessment from the Ghana Revenue Authority (GRA) for the financial years 2014 to 2016 which it considers breaches “TGL’s rights under its petroleum agreements, applicable Ghanaian law and double taxation treaties, and, in some cases, have arisen as the result of the errors in the GRA’s calculations”. Following a Notice of Dispute lodged by TGL with the Ministry of Energy (MoE), and a revised final tax audit report from MoE in September 2021, TGL filed a Request for Arbitration with the International Chamber of Commerce (ICC) in October 2021 disputing aspects of the tax assessment. The Parties have agreed a procedural timetable for the arbitration under which hearing will commence in October 2023.
The second Ghanaian dispute arose out of an order for the Unitisation of Eni and Springfield blocks by the Minister of Energy. This has resulted in a notice of arbitration being filed at the Stockholm Chamber of Commerce by ENI and its joint venture partner Vitol Upstream Ghana Limited against Ghana and the Ghana National Petroleum Corporation (GNPC). The unitisation order was addressed to ENI and Springfield Exploration and Production Limited, as data analysis presented to the Minister by GNPC indicated an overlap in the resource fields in the contract areas awarded to the two companies. ENI is resisting the unitisation, and court processes have been brought by Springfield to enforce the Minister’s order. The matter has worked its way up to the Supreme Court, which has upheld lower courts decisions that ENI should place 30% of its revenue in an escrow account until the matter is finally determined.
In the arbitration, “ the Claimants are seeking, among other things:
a declaration that certain directives of the minister and steps taken to implement those orders are a breach of the Offshore Cape Three Points petroleum agreement;
an order that the respondents take no further action to unitise the Sankofa field and the Afina discovery; and
an order for damages arising from breach of the Offshore Cape Three Points petroleum agreement, Ghanaian law and international law, on a joint and several basis.”
*Director, Rankin Engineering Consultants
https://au.int/en/directorates/energy, accessed October 2022
 Hess Equatorial Guinea, Inc. and Tullow Equatorial Guinea Limited v. Republic of Equatorial Guinea (ICSID Case No. CONC(AF)/12/1) and Republic of Equatorial Guinea v. CMS Energy Corporation and others (ICSID Case No. CONC(AF)/12/2).
https://mit.gov.na/energy-sector, accessed 3 October 2022.
https://www.usaid.gov/powerafrica/mega-solar, accessed October 2022
https://www.worldbank.org/en/country/mozambique/overview, accessed October 2022
https://www.worldometers.info/gas/gas-reserves-by-country/, accessed October 2022
https://mzlng.totalenergies.co.mz/en, accessed October 2022
 Richard N. Westbury, Paul D. Hinks and Symbion Power Tanzania Limited v. United Republic of Tanzania (ICSID Case No. ARB/19/17
 RSM Production Corporation and others v. Grenada (ICSID Case No. ARB/10/6)
 Orascom TMT Investments S.à r.l. v. People's Democratic Republic of Algeria (ICSID Case No. ARB/12/35)
https://thelawreviews.co.uk/title/the-oil-and-gas-law-review/ghana, accessed October 2022