Bloomberg: African Banks, Trafigura Partly Fill Oil-field Financing Gap on Continent

*OPEC sticks to 2024 oil demand growth forecast

Emmanuel Addeh in Abuja

African banks and traders, including Trafigura Limited are filling some of the financing gap for oil projects on the continent following the exit of European lenders from fossil fuel development, Bloomberg reported yesterday.

Funding from traditional sources had dried up as decarbonisation policies are implemented to mitigate climate change. That has left a smaller pool of financing options for oil and gas companies and the countries they operate in.

“It’s pointless to think about the way things used to get done,” Matthieu Milandri, Trafigura’s head of upstream finance said at a Cape Town conference.
“ European banks are unlikely to come back , but that’s OK, because companies like Trafigura offer flexibility and various debt options in exchange for production. We need the barrels to trade — that’s always a condition for us,” he said.
Chief Financial Officer, Africa Oil Corporation, Pascal Nicodeme, said there are no longer European lenders and the company only has financing from African banks.

Also, crude originator for BP’s trading and shipping business,  Tamoor Ali, said :“The African banks are there and they’re doing deals,”.
Lending institutions on the continent are also are coming under increasing scrutiny for their involvement with new projects that will extend the use of fossil fuels.
At the same time, they are under pressure to help fund nascent oil and gas fields as their host governments defend the right to extract their own resources.

The African Export-Import Bank is planning to bring together partnership arrangements with traders, wealth funds and other institutions to fill more of the need for oil and gas financing, according to Babajide Bode-Harrison, a senior manager at Afreximbank. “We’re creating an energy transition bank,” he said.

Meanwhile, the Organisation of Petroleum Exporting Countries (OPEC) yesterday stuck to its forecast for relatively strong growth in global oil demand in 2023 in 2024, citing signs of a resilient world economy so far this year and expected further demand gains in China.

World oil demand will rise by 2.25 million barrels per day (bpd) in 2024, compared with growth of 2.44 million bpd in 2023, the OPEC said in a monthly report, as per a Reuters report. Both forecasts were unchanged from last month.
A lifting of pandemic lockdowns in China has helped oil demand rise in 2023. OPEC has consistently forecast stronger demand growth for next year than other forecasters such as the International Energy Agency (IEA).

“In 2024, solid global economic growth, amid continued improvements in China, is expected to further boost oil consumption,” OPEC said in the report.
OPEC and its allies, known as OPEC+, began limiting supplies in 2022 to support prices.
The report also said that demand in the rest of this year and next could take a hit in some parts of the world and trimmed its forecasts for total world demand in the current quarter and the first three months of 2024.

“Looking ahead and despite the usual seasonal rise in heating oil demand, ongoing uncertainty and economic developments in OECD Europe and other areas are expected to impact oil demand in the remainder of 2023 and in 2024,” OPEC said in reference to Organisation for Economic Co-operation and Development nations.

The OPEC report also said OPEC oil production rose in September despite pledged OPEC+ supply cuts, driven by increases in Nigeria, Saudi Arabia and Kuwait.