A new business proposition for IOCs working in Africa

  • Nov 24, 2021
  • Newsbase

Norway’s EW&P shows interest in helping Africa’s oil-producing states use associated gas to power data centres on offshore drilling platforms

WHAT: EW&P has signed letters of intent with several African states on offshore data centres.

WHY: These data centres would be powered with associated gas that might otherwise be flared.

WHAT NEXT: These projects could help bolster Africa’s technological infrastructure while also supporting the energy transition and generating extra revenue.

International oil companies (IOCs) working in Africa have compelling reasons to go beyond the scope of their core activities and make economic contributions to their host countries and host communities.

Some of these reasons are legal or regulatory in nature – for example, local-content laws that require investors to create a certain number of jobs for local workers or award a certain percentage of contracts to local companies. Others fall under the political or diplomatic umbrella – for example, subsidies for job training and education initiatives in host communities that have a history of opposition to oil and gas projects (or to the governments that sign the contracts for oil and gas projects). Others can be traced back to public relations campaigns or demands from activist shareholders – for example, investments in carbon credits or renewable energy that are in line with publicly announced environmental, social and governance (ESG) commitments.

But there are also entrepreneurial reasons to do so. Norway’s Earth Wind & Power (EW&P) is hoping to open up a new avenue of opportunity for IOCs to support the establishment of new data centres in Africa. If its plan comes to fruition, it could help strengthen the continent’s digital infrastructure while also reducing associated gas flaring and laying the groundwork for future renewable energy projects.

EW&P’s CEO Ingvil Smines Tybring-Gjedde outlined her company’s plans in an interview with DataCenterDynamics.com (DCD) that was published on November 23. She indicated that EW&P was ready to help African oil producers explore the possibility of establishing data centres on offshore oil platforms and using associated gas that might otherwise be flared to generate electricity for these power-hungry facilities.

In the interview, she reported that her firm had signed several letters of intent (LoIs) with African governments during the African Energy Week (AEW) conference, which took place in Cape Town earlier this month. She did not divulge the details of these letters, but DCD noted that EW&P had already agreed to carry out a feasibility study for UK-based Rapid Oil Production on the construction of a modular data centre at Ryne, a field in the North Sea. Presumably, the Norwegian company is prepared to do something similar in Africa.

One country that might benefit from such a project would be Nigeria, DCD noted. It drew attention to the West African state’s extensive offshore exploration and production operations and noted that Nigeria had a track record of flaring off associated gas rather than going to the trouble of separating it from crude oil and reserving it for other uses.

Smines Tybring-Gjedde didn’t say which African oil platforms might be able to accommodate data centres. However, she did point out that EW&P’s business model could serve as a template for the construction of such facilities in connection with renewable energy projects.

Just as data centres on oil platforms could make use of electricity generated from associated gas that might otherwise be wasted, she explained, data centres linked to renewable generation units could use excess power produced from wind or sunlight. Moreover, she said, they could do so without diverting electricity from local communities.

“Data centres could pay for energy on sunny days when the town doesn’t need all the electricity the solar farm is making,” she told DCD. “With wind production, we can buy energy at night when it is windy and people need less energy. We don’t want to cannibalise the energy [supplied] to the people around [the area]. We take the excess.”

Small-scale projects of this type can lay a foundation for the building of larger renewable generating facilities, she added. Wind and solar plants can use the payments they receive from the data centres for electricity supplies to invest in expansion, she said.

These projects wouldn’t just make more power available, though. They would also serve to expand Africa’s digital infrastructure, which is still relatively undeveloped despite the widespread availability and use of mobile telephones – and despite African consumers’ growing interest in smart phones capable of connecting to the internet.

In a report published earlier this year, the African Data Centres Association (ADCA) and US-based Xalam Analytics noted that more than 30 new multi-tenant data centres classified as Tier III or higher had been launched in Africa since 2016. These facilities have doubled the continent’s hosting capacity, the report stated, but they are likely to prove inadequate in the face of expectations that Africa’s broadband user base will double by 2030.

Moreover, the report said, existing data centres don’t provide even coverage. Among the 80 or more cities in Africa with populations in excess of 1mn, only about a third are home to at least one data centre that meets the Tier III standard, it noted. Around two thirds of the continent’s hosting capacity is concentrated in just a handful of countries, including South Africa, Kenya, Nigeria and Morocco, it added.

The report concluded that Africa would need to build 700 new data centres in order to bring continent-wide levels of internet usage up to the same level as South Africa. It also said that the continent would have to add 1,000 MW of new generating capacity in order to keep all these data centres running.

These figures indicate that data centre construction has the potential to be a good business proposition in Africa. If so, IOCs that use their platforms and their associated gas to host and power data centres stand to earn greater profits.

At the same time, though, they’ll also be making important contributions to African economies beyond the scope of their core operations. That is, they’ll be helping their host countries gain the capability needed to handle heavier internet traffic – and to support all the opportunities that can flow from increased internet access.

Furthermore, they’ll be doing these things with the help of a company that wants to extend its pattern into the realm of renewable energy. And as such, they’ll be able to claim that they helped lay the foundation for the eventual transition away from fossil fuels, even as they continue to extract the oil and gas that Africa requires to meet its own needs and earn export revenues.