What should Zimbabwe do with its Hydrocarbon Resource Potential?
With the Cleaner and Greener Future Beckoning, What Should Zimbabwe Do with its Hydrocarbon Resource Potential?
The United Kingdom is currently hosting the 2021 United Nations Climate Change Conference in Glasgow (COP26). It is, therefore, appropriate to revisit the debate on the proposed ban of fossil fuels.
By Lyman Mlambo (Chairman of the Institute of Mining Research)
According to www.debatingeurope.eu (retrieved on 31 October 2021), fossil fuels are the main cause of climate change. The Intergovernmental Panel on Climate Change (IPCC) firmly believes banning the use of fossil fuels and shifting to renewable energy is the only way to save the planet. Banning fossil fuels will reduce massive land degradation, mitigate the destruction of biodiversity, reduce the destruction of oceanic ecosystems and pollution of both drinking water and the air we breathe. This will reduce diseases and mortalities and hence save on health expenditures as well as reduce the costs of climate change mitigation in line with the Paris Agreement. However, there are many negative repercussions from banning fossil fuels for a country like Zimbabwe and other countries that still have significant deposits of these resources. Examples include millions of job losses, an increase in the cost of energy in the short term (as fossil fuels are relatively cheaper to produce than renewable energy), and the potential to cause political and civil unrest given the number of livelihoods dependent on the fossil fuel industry. In all this, it is generally the poorer nations and the poorer global citizens who will be most affected.
A recommended article for readers to check is one written by Michael Lynch, a Distinguished Fellow at the Energy Policy Research Foundation and President of Strategic Energy and Economic Research. The article, which was published online on 24 March 2021 by Forbes Media LLC (and accessed by this author from www.forbes.com on 31 October 2021), is entitled Don’t Ban Fossil Fuels: Absolutism In Climate Change Policy Is A Vice. Discussions on the dynamics in the hydrocarbons sector vis-à-vis the cleaner and greener future are now frequent in Zimbabwe, especially among environmental Civil Society Organizations. In one discussion this author had with a colleague, the latter’s main point was that Zimbabwe is going against the winds of time and technology by promoting the construction of coal-fired thermal power plants. There was an agreement to some extent, but policymaking is not that simple because it affects the lives of people, particularly that it could have negative impacts on their welfare. Zimbabwe, under the USD12 Billion Mining Industry Roadmap, launched in October 2019, is projecting hydrocarbons to contribute USD1 billion by 2023.
This article briefly visits the debate on whether or not Zimbabwe should consider the possibility of stopping exploration, development, extraction and use of fossil fuels, given the amount of known and potential resources the country has of coal, oil, natural gas and coal-bed-methane gas (CBM). The author, in his 2018 book published by the Friedrich Ebert Stiftung (FES) on Extractives and Sustainable Development II: Minerals, Oil and Gas Sectors in Zimbabwe, briefly highlights the hydrocarbons resources in the country. Coal discovery and extraction in Zimbabwe is relatively recent compared to developed countries. Coal deposits in Hwange were discovered in 1894. Later several EPOs for coal were granted in the Save-Limpopo Basin following the publication of the Geological Survey Bulletin on coalfields in the southern area of the country in the late 1940s to the 1950s. Coal resources are estimated to be around 13 billion tones at 13.50% ash content. Several companies are exploring for coal-bed-methane gas (CBM) in Lupane, Hwange, Sengwa and Gwaai areas. Just recently Government signed a Joint Venture agreement with an Australian company Jacqueline Resources (Pvt) Ltd for exploration and development of coal-bed-methane gas around the Sengwa Coalfields and Gwaai River. A very conservative estimate for CBM gas resources is over 500 billion cubic metres at 95% purity level. The country has not started extracting CBM or conventional gas. Mobil Oil exploration in the 1990s concluded potential for oil occurrence in the Zambezi Valley, and there is renewed interest by the Government with the advent of Invictus Energy in Muzarabani.
The question pitting economic growth and the environment is not new. It is one of the central questions in environmental economics and sustainable development discourses. However, the level of debate specifically on the use of fossil resources has been heightened by the climate change dynamics experienced in the last few decades. Many countries including Zimbabwe have experienced shifts in climatic seasons or significant changes in their climates, frequent droughts and flooding. Zimbabwe has had a fair share of these, resulting in food insecurity and direct destruction of lives and properties. The movement towards a cleaner and greener economy is global given the nature of the impact of pollution and global warming. Water and air pollution are transboundary. The debate has also drawn accusations between the global north and the global south. The developed countries owe their industrialization to, among other factors, the use of fossil energy. It is not controvertible that developed countries are more responsible for these environmental problems the globe is facing than the developing countries, which is why the ongoing COP26 should channel more resources to the global south for mitigation of the impacts of climate change. A ban on fossil fuel is essentially targeting the developing countries which still have significant resources of fossil fuels.
The question then is: Should Zimbabwe consider stopping exploration, extraction and use of its fossil resources, in light of the global trend towards cleaner energy? In the FES book alluded to earlier, the author defines a natural resource and that sheds some significant light on whether or not fossil deposits in Zimbabwe are still resources and the implications of that on this debate. A natural resource possesses three characteristics:
(i) it naturally occurs;
(ii) demand exists for its use; and
(iii) there is an appropriate technology to exploit it. The last two characteristics are not constant, which makes the natural resource a dynamic concept. For example, uranium was not a resource until towards World War II when there was demand for and technology to exploit uranium in the production of nuclear weapons. It is also possible for natural resources to lose their resource status, when either demand or technology changes. This is what we might be witnessing in the future in the hydrocarbons sector as electric cars replace petroleum-powered cars, and renewable energy technology develops. With no technological advancement that eliminates emissions from use of fossil fuels, the demand for hydrocarbons will inevitably go down and eventually disappear. That will render all hydrocarbon deposits in Zimbabwe neutral staff or useless material.
However, it is important to note that the stage described in the above paragraph has not yet been reached. We still have about two decades or more before fossil energy can be phased out completely. Therefore, Zimbabwe’s coal, oil, natural gas and coal-bed-methane gas are still natural resources by any economic or legal measure. The demand still exists and the technology being used in their extraction and use is the most appropriate existing at the moment. Cleaner energy product industries are still in their nascency in most countries, particularly developing ones. The wisest thing to do, when the long-term market outlook for a resource is dim, is to accelerate its production, move volumes and gain maximum economic benefit as soon as possible. The situation that Zimbabwe faces in the hydrocarbons sector demands that approach. Most developed countries have exhausted their fossil deposits, but Zimbabwe has a great potential for new discoveries, and hence the need to expand and accelerate exploration and development of these deposits, and extract them within the next decade or so.
The argument for accelerated exploitation of hydrocarbons should also be viewed from an equity perspective. Natural resources belong to every citizen of Zimbabwe in the present and future generations. It would be unfair to the current citizens to miss development opportunities that hydrocarbons offer because their exploitation is halted by reason of advocacy ahead of the market itself. That would be economically and socially imprudent, in the author’s view, given the level of poverty and regional development disparities that need to be addressed currently. Thus, there is the intragenerational equity argument, which says, Zimbabwe needs to exploit any coal, oil and gas deposits to alleviate poverty and regional development disparities in the current generation. When we consider the fact that future generations are co-owners of these resources, the argument becomes bigger. Prudence demands that depletable resources should be used to develop new alternative capital forms that are capable of yielding income streams that extent into the long-term. This is how the future generations claim their part in the current minerals being depleted. This is the demand for inter-generational equity. How can a government watch while resources get sterilized without exploiting them or decides to sterilize them instantly by listening to advocacy for immediate stoppage to their exploitation? Future Zimbabweans will have the right to demand of this generation why they will have to inherit useless materials when opportunities had actually existed to convert them into some useful economic bequest.
There are also two interesting aspects about this issue:
(i) the developed countries (the global north), which are mainly driving the agenda to stop use of fossil fuels, have already used the same fuels to develop their economies and secure the welfare of their future generations; and
(ii) the global north is actually the one currently investing into fossil resource exploitation in the global south. Some things are apparent here. Developed countries have largely exhausted their fossil resources. With the cleaner future beckoning (which would per se be good for everyone), the north, prudently, has seen an opportunity to further secure its future by accelerating investment into extraction of the extant fossil resources in the south and convert the proceeds into alternative cleaner capital. The best way for Zimbabwe, since we need that investment to develop, extract and use our fossil resources, is to craft win-win contracts in this subsector, including closure scenarios. That requires competent contract negotiating teams on our side, which is probably one area where we are lacking greatly. That also requires transparency and accountability so that there is multi-stakeholder oversight on these contracts and their implementation, as well as how the resultant revenues are used.
The real question is not whether or not we should consider stopping extracting coal, oil and gas resources, but how we should manage their extraction (contracts) and how we should use the revenue from their extraction to build national wealth. We have to be more cautious in this sub-sector than we are in other sub-sectors that are not so threatened. The government should not be overexcited about the big potential revenue figures from this sector and jump into the consumption mode, but should understand that poverty and regional development disparities are extreme, and that the future is very long and so are its corresponding needs. Those countries which have done well in managing oil revenues have basically ensured broad-based development and investment into the future through creation of local or offshore funds that could generate interest going into the future. They have also allocated a large portion of the proceeds into development of infrastructure and other alternative forms of capital (economic diversification). There are still many countries in the world that are mainly dependent on oil and other hydrocarbons, and they cannot afford to come to an abrupt stop in use of these resources. Thus, the real option to consider for Zimbabwe is accelerated extraction of its hydrocarbons, use them to meet its current energy deficits, use the income to facilitate economic transformation and creation of long-term investment funds. The question of when and how Zimbabwe should stop the extraction of hydrocarbons is largely irrelevant.