Côte d'Ivoire diversifies energy mix and rehabilitates infrastructure

As demand for electricity grows at home and abroad, Côte d’Ivoire continues to expand its production capacity. While these efforts require the rehabilitation and expansion of distribution and transmission networks, new regulations have also been introduced in recent years to make the sector more competitive and attract private investment. Greater involvement from private energy companies, especially on the production side, has led to increases in the nation’s electricity production capacity, which reached 2020 MW in 2017.

Investing In Capacity

Nonetheless, the government is pushing for a higher electricity generation capacity and aims to double it to 4000 MW by 2020, and 6000 MW a decade later. Upgrading the energy sector is expected to require an outlay of up to €10bn in the 2014-20 period, according to the Ministry of Petroleum, Energy and Renewable Energy Development (Ministère du Pétrole, de l’Energie et du Développement des Energies Renouvelables, MPEDER). The bulk of the spending is expected to come from the private sector, with the state aiming to attract investment from private companies by offering tax breaks and other incentives. In addition to this, the government estimates that a further €6bn will have to be invested in sector development and upgrades during the 2021-30 period.

To meet its power generation targets, the country will need to successfully diversify its current energy mix. This includes increasing hydropower production, as well as the contribution of other renewable sources, such as biomass and solar power.

Côte d’Ivoire is also aiming to boost oil and gas exploration and production, with a key objective being to tackle the current deficit in natural gas, which thermal power plants operating in the country depend on as feedstock. Electricity production is heavily reliant on hydrocarbons in Côte d’Ivoire, with 95% of the country’s natural gas production used in power plants as of 2016, according to the latest government figures.

Power Sector Structure

Following the implementation of the Energy Master Plan, the sector has benefitted from a long-term approach in terms of policy and legal framework. The plan, which was introduced in 2014, guides the production and transmission of electricity in the country, and lays down a roadmap for the rehabilitation of distribution infrastructure and the improvement of rural electrification across the nation.

Côte d’Ivoire’s electricity generation has long relied on a mix of thermal and hydropower plants. Electricity consumption is expected to increase by around 12% annually in the short term, according to data from the MPEDER, but this growth is expected to slow to 5-7% per year from 2020 onwards.

In 2017 gas-fuelled thermal power plants accounted for 80% of the country’s production, with hydropower generating 19% and just 1% derived from renewable energy sources.

However, investment is expected to reshape the country’s energy mix, with gas-fuelled energy production set to represent 57% of Côte d’Ivoire’s generation capacity by 2020. Hydropower, on the other hand, will expand to comprise 23% of generation, while other renewable energy sources are expected make up 11%. Although the country is striving to expand its renewable energy sources, it is currently building two 350-MW coal power units in San Pedro to help keep up with rapidly growing energy consumption. Consequently, by 2020, coal is expected to account for 9% of the energy mix.

“There is a strategic need to balance the energy sector’s budget situation. So the government chose coal, because in this case it was a cheaper option,” Koménan Koffi, energy specialist at USAID Côte d’Ivoire, told OBG. “It will be located in San Pedro due to easier logistics links to bring in the coal, but also because the plant will help support the power needs of the mineral exploration industry in the west of the country over the coming years,” he said.

Changing The Energy Mix

By 2030 gas-fuelled power facilities’ total contribution to the country’s energy mix is expected to be further reduced to 32%, while the share of hydropower plants is set to increase to 26% of the total.

By that point, other renewable energy sources, such as solar power and biomass, are expected to comprise 16% of electricity generation, with coal-fuelled plants making up 26% of output.

THERMAL FACILITIES: Economic growth, coupled with increasing demand for electricity, has necessitated investment in new thermal power facilities, which account for the vast majority of output.

Power generation is currently reliant to a significant degree on independent power producers (IPPs), which were first introduced to Côte d’Ivoire in the early 1990s. As of October 2017 private power generation accounted for 1182 MW of the installed capacity, according to figures from the Africa-EU Renewable Energy Cooperation Programme.

There are currently three IPPs in operation – CIPREL, majority owned by French utility group Eranove; Azito Energie, operated by the UK’s Globaleq; and UK-based Aggreko. The goal of increasing the share of renewables in the energy mix is expected to increase the number of IPPs over the coming years. The existing IPPs have been transitioning to combined-cycle operations in an effort to compensate for insufficient gas supply, but in recent years capacity-extension projects have allowed these producers to increase their output.

Signing an IPP agreement with the state in 1994, CIPREL runs a gas-fuelled thermal plant in the Vridi industrial zone in Abidjan. The plant’s production capacity has been expanded, and its latest extension – a combined cycle – was inaugurated in early 2016.

The CIPREL IV project, which commenced in 2013, increased output from 321 MW to 556 MW. The project also included the addition of a combined-cycle unit, an investment worth €340m, €200m of which was financed by the International Finance Corporation, the African Development Bank and PROPARCO, a development finance institution, which is partly owned by the French Development Agency and specialises in private investment. The remainder was provided by national and regional banks (€75m) and by the shareholders of CIPREL (€65m).

Azito Energie started operating a single-cycle thermal power plant near Abidjan in 1999. The facility is 79.6% owned by UK-based power company Globeleq. In 2015 the firm converted the existing 288-MW single-cycle plant to a 426-MW combined-cycle power facility, boosting capacity to 426 MW. The project cost $430m. A further extension programme being implemented currently at the plant is expected to increase generation capacity to 707 MW in the near future.

Côte d’Ivoire’s third thermal IPP, Aggreko, began operations in its Abidjan gas-fuelled thermal power plant in 2010. Capacity was extended in 2011 and 2013. The group’s power plant, located in Abidjan’s Vridi industrial area, currently produces 200 MW.

In addition to the three IPPs, a fourth thermal plant is maintained and operated by Compagnie Ivoirienne d’Electricité (CIE) and owned by the state: the Vridi 1 gas-fuelled thermal station has a generation capacity of 100 MW, and it is mainly used during peak consumption.

Oil Production

Although increasing electricity production capacity is a key part of the government’s energy policy, it also emphasises a continued rise in hydrocarbons output. The authorities announced in July 2016 that the goal is to double the country’s crude oil and natural gas production by 2020. The US Energy Information Administration (EIA) estimates Côte d’Ivoire’s oil reserves stand at 100m barrels. Over recent decades production levels have fluctuated due to depletion of existing reserves, as well as production interruptions as a result of maintenance and expansion operations. There are currently four oil fields in operation.

According to the US EIA, crude oil production stood at 31,000 barrels per day (bpd) in 2016, down from 34,000 bpd in 2015. Government figures differ from EIA data, with industry officials telling international media in mid-2016 that average production had been raised from 30,000 in 2015 to 53,000 bpd.

For the January-September 2017 period, authorities announced that production was 34,609 bpd, down 22% compared to the same period in 2016. The fall was due to the natural depletion and production shutdowns in the Espoir and Baobab fields during the annual maintenance periods.

The full-year crude output figure for 2017 was slightly less at 34,000 bpd, according to a press statement made in early 2018 by Cissé Sabati, director-general of energy in Côte d’Ivoire.

Crude Targets

To succeed in raising output to 200,000 bpd by 2020, authorities have revised the sector’s regulatory framework, which has helped attract new investment in exploration and production, including deep and ultra-deep-sea efforts. “Deep and ultra-deep projects require substantial capital investments. Notwithstanding a certain recovery in oil prices, attracting oil and gas investments, especially in deep and ultra-deep waters, remains difficult,” Ibrahima Diaby, director-general of state-owned oil company Société Nationale d’Opérations Pétrolièrs de la Côte d’Ivoire (Petroci), told OBG. “In this context, Côte d’Ivoire has the advantage of a competitive regulatory framework that is flexible and attractive to stimulate investments in exploration and production activities.”

According to Daouda Doumbia, CEO of Soudure Industrielle et Pétrolière, a welding and steel assembling company located in Abidjan, due to the drop in global oil prices, companies in the petroleum industry have increasingly sought to sub-contract activities to local providers in an effort to lower their costs. “The requirement to sub-contract locally needs to be emphasised more during the government’s upstream negotiations,” Doumbia told OBG.

Growing Network

The marketing of oil in Côte d’Ivoire is divided between two associations: the Oil Professionals Group – which includes Shell’s Vivo Energy, Total, Corlay and Pétro Ivoire, and which dominates the market with approximately 80% of market share – and the Côte d’Ivoire Oil Professionals Association, which comprises a number of smaller, mostly local companies. In recent years a number of operators have begun expanding their operations across the country to respond to growing demand. The two largest players in terms of market share are Total and Vivo Energy, and by the end of 2017 had developed their network to 170 and 205 service stations, respectively. Smaller operators are also continuing to push ahead with investments, such as Pétro Ivoire – the largest local owner of petrol stations with 70 stations and plans to reach 80 by 2020 – and Oryx Energies, which aimed to grow its network to 11 stations by the end of 2017.

As part of the government’s overarching privatisation policy, which began in 1990 and broke new ground with another wave of privatisations in 2013, Petroci announced the sale of its network of 37 stations to multinational Puma Energy, a subsidiary of Amsterdam-based Trafigura, which will hold 80% while Petroci maintains a share of 20%. The announcement was made in June 2017; however, as of early 2018 details on the sale of assets had yet to be made public. In the same context, Petroci has claimed that it will also let go of all – or part – of its Gaz liquefied petroleum gas branch.

Refining & Logistics

The Ivorian Refining Company (Société Ivoirienne de Raffinage, SIR) has the exclusive right to import refined petroleum products for domestic and international markets, which primarily include liquefied petroleum gas products, since the SIR’s output of petroleum products exceeds demand. Exports to other nations are also handled by the SIR and commercialised by the Petroleum Product Management Company of Côte d’Ivoire (Société de Gestion des Stocks Pétroliers de Côte d’Ivoire, Gestoci). Gestoci, a storage company operating under the umbrella of Petroci, is responsible for stocking petroleum products. Its main storage facility is the Vridi oil terminal at the Port of Abidjan, and there are another two warehouses in the cities of Yamoussoukro and Bouaké, although the latter has been out of service since 2015.

The SIR has a refining capacity of 75,000 bpd, or 3.8m tonnes a year, with its main output including diesel, kerosene, butane gas and fuel oil. For a number of years, the SIR has been facing headwinds from the drop in oil prices, high operational costs, aging machinery and increased competition from refineries in Asia, resulting in liquidity shortages and thus an exponential increase in debt. In January 2018 the government stated that it will seek funds through syndicated loans with commercial and development banks to restructure part of the refinery’s debt, which amounts to CFA368bn (€552m). In addition to servicing its debt, the SIR has been undergoing a restructuring since 2016 to improve its financial position and become more competitive.

In October 2016 the government announced that it was to begin negotiations for the establishment of two new companies in the fields of mass storage of petroleum products and transport through pipeline. The former aims at increasing Côte d’Ivoire’s current refined products storage capacity by 608,000 cu metres, from 440,000 cu metres currently, through the creation of an additional facility in Ferkessé dougou and San Pedro, as well as an increase capacity within Abidjan. The latter will see the creation of a company to manage and develop Petroci’s current pipeline, which extends from Abidjan to Bouaké, passing by Yamoussoukro. Negotiations for both projects are still ongoing with a consortium of companies, which include Total, Vivo Energy, Puma Energy, Sahara, Oil Libya, Bolloré, Pétro Ivoire, a representative from Mali, among others.

Operational Fields

Independent oil producer Canadian Natural Resources (CNR) operates the country’s two biggest oilfields, Baobab, located roughly 25 km off the coast of Côte d’Ivoire in block CI-40, and Espoir, which is situated 60 km from the economic capital of Abidjan in block CI-26. Baobab came on-line in 2005. CNR holds the largest proportion of interest in the oil field with 57.61%, which is in block CI-40, while Sweden-based Svenska Petroleum Exploration owns 27.39%, and the remaining 15% of the oilfield is held by Petroci.

Production at the Espoir field commenced in 2002, and it is expected to have a lifespan of approximately 20 years. CNR is the majority shareholder in the field, owning 58.7%, followed by Tullow Oil at 21.3% and Petroci on 20%. Estimates have put the field’s recoverable oil reserves at some 93m barrels and its gas reserves at 180bn cu feet.

Petroci has a 68.1% stake in the smaller Lion field, located 13 km from the coast and 100 km southwest of Abidjan in block CI-11. In 2013 Petroci gained a majority stake in the field after it purchased 48% stake from Nigeria-based Afren. Meanwhile, the International Finance Corporation and SK energy hold 18.9% and 13%, respectively.

Gas Production

Côte d’Ivoire’s gas reserves are estimated to total 1trn cu feet, according to the EIA. Government data shows natural gas production averaged 216m cu feet per day in 2017. The majority of the gas comes from the Mahdi and Foxtrot fields in block CI-27, operated by Foxtrot International. Oslo-listed gas and oil investment company RAK Petroleum holds a 33.33% stake in the company. The block had an average daily output of 170m cu feet as of August 2016, according to international media reports. Foxtrot international completed a four-year development programme costing $850m in the third quarter of 2016, bringing two new gas fields, Marlin and Manta, on-line. Foxtrot International holds a 24% interest in the block, while Petroci has a 40% stake, and Seci and Enerci own 24% and 12%, respectively. Smaller amounts of gas are also produced in the Espoir, Baobab and Panther fields.

DEVELOPING BIOMASS: The government sees biomass as a vital component of its renewable energy plans, with independent biomass energy producers expected to sell their electricity output to the national grid. Thanks to plentiful cocoa, oil palm, cotton, coffee and sugar plantations, the country has significant feedstock at its disposal. According to the MPEDER, the country’s annual biomass production could be as high as 15m tonnes.

A large-scale biomass power plant is currently under construction in Aboisso, 116 km east of Abidjan. The Biovea facility, which was initiated by Biokala, a subsidiary of local agro-industrial group Société Immobilière et Financière de la Côte Africaine (SIFCA), will be built in two phases, with each to have a production capacity of 23 MW. The first phase is expected to be operational in 2020. The project, which costs CFA105bn (€157.5m), is a partnership between SIFCA, French electricity company EDF and French firm Bouygues, and it is set to become Africa’s largest biomass power plant.

Also under development at present is an 8.5-MW biogas project in the Akouédo landfill in Abidjan, which will use urban waste as feedstock once it becomes operational in 2019.

In addition, Ivorian authorities have launched tenders for two other biomass projects, one using waste from cotton and the other from cocoa. Both will be established under build-own-operate (BOO) contracts, and as of late 2017 the authorities were evaluating shortlisted candidates for both projects. The 25-MW cotton biomass power plant is set to be built in the town of Boundiali at a cost of CFA29bn (€43.5m). The government also set the maximum tariff for the electricity to be sold to the national grid at CFA65 (€0.10) per KWh. Meanwhile, the 20-MW cocoa biomass plant is set to cost CFA21bn (€31.5m) and will be established in the city of Gagnoa. Electricity output from this plant will sell at a maximum price of CFA60 (€0.09) per KWh.

Although it has not been made clear how the feedstock, which is spread across various production areas, will be collected and transported to the biomass power plants, some of the existing logistics networks for the cocoa and cotton industries will likely be useful for the collection of the vegetable waste. According to Mahamane Sow, CEO of EDF Côte d’Ivoire, in addition to negotiations regarding the feed-in tariff, the structuring of the sector demonstrates a notable challenge for the development of additional biomass energy projects. “Biomass projects can only be feasible if operators are able to secure access to organic raw material at affordable prices throughout the year,” he told OBG.

“At the moment, the government is leaving the firms and contractors involved in the tender process to come up with their own solutions for how the fuel should be collected,” Koménan Koffi, energy specialist at USAID in Côte d’Ivoire, told OBG. “After it begins, the government might step in and regulate the system, but at the moment, it is leaving interested parties to figure out how to do it”.

Solar Energy

The solar potential in the country is around 2-6 KWh per square metre per day, while the annual potential for photovoltaic power is estimated at 10,325 TWh, according to the Africa-EU Renewable Energy Cooperation Programme. The country’s northern regions in particular show the highest potential for solar power, and two solar projects are currently being implemented to harness it.

The biggest one, located in the Poro region and set to be operational in 2018, involves the construction of a 50-MW solar generation plant. A smaller 25-MW solar unit is being established in Benguébougou, in the Korhogo department. The project, developed by Moroccan contractor Nova Power is estimated to cost $40m and come on-line in 2018 (see analysis).

In addition, other projects are under way to boost the usage of solar energy on a smaller scale. EDF has partnered with US-based firm Off Grid Electric to sell independent solar kits under the Zla brand. The initiative, launched in late 2016, provides off-grid electricity to customers across the country, selling basic products costing around €7 per month. The authorities are also implementing projects to install solar-powered street lighting in urban areas.

Pricing

Electricity pricing for BOO projects is set to form a critical aspect of renewable energy development in Côte d’Ivoire, as the authorities try to balance the sector’s financial situation with the need to attract new IPPs into the country. “For the upcoming projects, the MPEDER has said that certain prices that the government will pay for energy should not be exceeded,” Koffi told OBG. “So between CFA60 (€0.09) per KWh and CFA70 (€0.11) per KWh will likely be the maximum that new renewable projects in biomass and solar will be able to sell their electricity for,” he said.

“The cost per kilowatt hour of solar energy in Côte d’Ivoire remains high in comparison to other sources,” Dalil Paraiso, country general manager at Schneider Electric, told OBG. “This is predominantly due to the lack of specific policies to help stimulate sector growth, such as preferential Customs duties or fiscal incentives. Solar power will only take hold once the government takes the initiative to support its development,” he added.

Hydropower

In 2016 a total of six small and medium-sized dams with a combined installed capacity of 604 MW were operational in the country, according to the Africa-EU Renewable Energy Cooperation Programme. The biggest of these facilities was the Taabo hydroelectric plant on the Bandama River in central Côte d’Ivoire. The dam has a generation capacity of 210 MW.

The same waterway hosts the smaller Kossou dam, located 30 km to the north of Yamoussoukro, with a capacity to generate 174 MW of electricity. To the west of the country, in the district of Bas-Sassandra, the 165-MW Buyo dam was built in 1980. Smaller hydroelectric power-generation units are also operational at Ayamé 1 (20 MW) and Ayamé 2 (30 MW), as well as at Faye (5 MW).

Efforts to boost the country’s hydroelectric capacity advanced further with the inauguration of the Soubré Dam in October 2017. The project, which was built on the Naoua Falls area of the Sassandra River at a total cost of $572m, has a generation capacity of 275 MW. The authorities are also in the process of negotiating the construction of new hydropower plants that could add more than 400 MW over the coming years (see analysis).

Transmission & Distribution

Years of underinvestment and the civil conflict of the early 2000s had a notable impact on Côte d’Ivoire’s electricity transmission and distribution network, making the system unprepared to handle the planned increases in generation capacity. With energy losses reaching 22%, according to the Africa-EU Renewable Energy Cooperation Programme, network rehabilitation has become a major sector priority.

“A lot of tenders are coming out for rehabilitation of infrastructure,” Pierre Anoman Ayerebi, deputy director of the tender department at Bouygues Energies et Services Côte d’Ivoire, told OBG. “Part of this is to address increasing capacity as demand grows. But work is also focusing on modernisation, because a lot of this infrastructure was outdated,” he added. Under the direction of the government’s current energy strategies, as much as CFA1.553trn (€2.3bn) has been set aside for the rehabilitation of transmission and distribution infrastructure.

“There are a myriad of new projects aiming to increase energy access across the country,” Hassan Ghandour, CEO of Sogelux, an Ivorian electronic firm, told OBG. “However, the ability of local firms to participate in such programmes is limited, given the speed at which they are tendered and rolled out, and the technical expertise they require,” he added.

The country’s commercial capital Abidjan in particular has shown how rapid growth in demand with insufficient investment into infrastructure having led to gaps in electricity access. “Some neighbourhoods in the city were built for a certain number of people, but have seen their population numbers grow exponentially, leading to increased electricity consumption,” Ayerebi told OBG. Unauthorised development has also made distribution projects harder to implement in certain urban areas by reducing the space available for electricity infrastructure.

“While energy production has recently been able to keep with the pace of growth, the focus in the short term should be on expansion and rehabilitation of the transmission and distribution network,” Bekou Gontran, managing director of Instafric-Elec, told OBG. “As Abidjan’s industrial capacity expands, electrical lines must too, to provide sufficient power to new or expanding installations.”

Electricity Policy

In an effort to bring more competition into the electricity sector and encourage private investment, the sector regulations have been moving towards liberalisation. Private producers have been able to operate in electricity generation since 1985, when the authorities published an electricity bill. However, production, transmission and distribution remained under a state of monopoly, with these activities managed by CIE since 1990.

In 2014 the government adopted a new Electricity Code. Although parts of its implementation still depend on a series of upcoming governmental decrees, the code was set to terminate CIE’s monopoly on transmission, distribution and marketing of electricity. It also created new regulatory provisions for renewable energy producers, and established regulations to penalise electricity theft.

In late 2016 the government made claims that it had broken up the long-standing monopoly of CIE, thus opening the door to new companies involved in the distribution of electricity. Six decrees in total were implemented covering the dissolution of the sector regulator, improved conditions for IPPs to sell energy to the national grid, as well as the establishment of new prices and regulations for the distribution and marketing of energy.

However, the power grid has remained under the management of CIE, which is majority-owned by utilities firm Eranove Group. CIE signed its first concession agreement with Côte d’Ivoire in 1990, which was extended in 2005 for 15 additional years. In this context, information on whether the decrees taken will have much effect on the current state of the industry, before 2020, remains unclear.

CIE also oversees for some of the government-owned dams, and handles all production, transmission, distribution and marketing of electricity, as well as exports into neighbouring countries. IPPs sell the energy produced to the national grid through power purchase agreements with the CIE. However, 2020 will open the door for authorities to either renegotiate a new contract with CIE or a number of different providers, which will now be able to participate in all segments of the market.

Regional Exports

Although a rapidly expanding economy is placing increasing demand on supply the country exports around 15% of its power production to neighbouring countries. Côte d’Ivoire aims to remain a key electricity supplier at a regional level. As a participant in the West African Power Pool (WAPP), an ECOWAS body established to promote integration of the region’s power systems and develop a fully fledged regional electricity market, Côte d’Ivoire has been supplying electricity to neighbouring countries, including Ghana, Mali, Burkina Faso and Benin. Under the WAPP Côte d’Ivoire-Liberia-Sierra Leone-Guinea Interconnection Project, export capacity to those countries will be extended. To reach this goal, a CFA212bn (€318m) project to construct more than 1400-km of high-voltage transmission lines is in progress. Works are also set to include the expansion of existing high-voltage substations in the Ivorian city of Man, as well as in other locations in Liberia, Sierra Leone and Guinea. The first phase of the interconnection project is expected to be commissioned in 2019.

Although Côte d’Ivoire’s geographical position and rising production capacity have secured its role as a key player in the regional energy market, arrears of some of its neighbouring electricity customers have exposed the Ivorian electricity sector to additional financial shortages. In early 2017, for example, Ghanaian media outlets reported that as of December 2016, the country owed Côte d’Ivoire as much as $60m for unpaid electricity imports.

Outlook

Successive years of economic growth have put a strain on the energy sector. One positive outcome of this pressure has been the drive to prioritise attracting investment and upgrading existing networks. At the same time, renewable energy is set to become an important part of the country’s energy mix. In addition to plans to boost the country’s hydropower capacity, upcoming biomass and solar-power projects will be critical to that end.

Moreover, rehabilitation of existing energy distribution infrastructure in conjunction with the country’s geographical position in a region with a growing electricity demand should allow Côte d’Ivoire to increase its energy exports. Ensuring the right conditions to attract new IPPs willing to service neighbouring countries from Côte d’Ivoire will be imperative to strengthen the country’s position as a long-term regional electricity supplier. Nevertheless, development of the sector will require a long-term commitment by private investors. To ensure this happens, the authorities are aiming to improve the investment environment as well as sector-specific investment regulation and simplify contractual procedures for IPPs. The sector will continue to present opportunities for investors over the medium term, both in upstream hydrocarbons productions, as well as in generation and transmission infrastructure.