By NJ Ayuk, Executive Chairman, African Energy Chamber (www.EnergyChamber.org)
Although Africa’s natural gas production is expected to remain relatively flat over the next two years — increasing only slightly, from 268 billion cubic meters (bcm) today to 272 bcm in 2025 — there’s room for optimism about the continent’s potential, according to the African Energy Chamber’s (AEC) “The State of African Energy Q1 2023 Report.”
For Africa to move forward and grow its natural gas output, a two-pronged approach is required: Gas producers must continue to pump from existing fields while countries with new discoveries must get these undeveloped projects to the final investment decision (FID) stage as quickly as possible.
A Worrying Decline in Production
Here’s the reason for the urgency: Many of Africa’s existing gas production fields, particularly those in the north and west, are maturing or in decline, meaning they are quickly reaching the end of their productive lives. For example, Nigeria, Angola, and Equatorial Guinea currently account for 85% of the total gas output from the West Africa region, and volume is expected to remain the same until 2025. After that, levels will gradually decline: to 75% by 2030, 70% by 2035, and 60% by 2040. Although these fields are considered crucial for sustained production, the need for new projects to come online is critical to prevent a stall in output.
Fortunately, many major new gas finds have been announced in recent years, including finds in Senegal, Mauritania, Angola, Ghana, South Africa, Namibia, and the Ivory Coast. In Namibia alone, Shell’s Graff discovery holds approximately 2 billion barrels of oil equivalent (BOE). These new gas discoveries will, however, remain dormant potential unless African governments and gas producers come together quickly to forge realistic actionable plans to capitalize on these vast new resources. Otherwise, new hopes will simply fade into the past as yet more symbols of lost opportunity.
Some Good News
These fields along with newly discovered pre-final investment decision (FID) projects have the potential to supercharge output and allow Africa to realize its enormous natural gas potential. As the AEC report notes, any new production growth expected over the next decade will come from both pre-FID potential — such as emerging upstream economies like Mozambique, Tanzania, Mauritania, Senegal, South Africa, and Ethiopia — as well as from mature producers like Nigeria, Libya, and Algeria.
At a very conservative forecast, production from these pre-FID projects is expected to double year-on-year from 2025 to 2029, with a continued gradual increase until around the late 2030s. Currently, just over 10% of Africa’s gas production comes from these pre-FID volumes and will increase to over half of the total output. Therefore, these volumes play a critical role in the continent’s natural gas export aspirations, and in becoming a true player in international markets.
There is also great excitement building around the growth of Africa’s liquefied natural gas (LNG) export business. As “The State of African Energy Q1 2023 Report” asserts:
“Africa LNG export infrastructure also is shaping in a similar way to the natural gas forecast. Between the bigger producers like Algeria, Nigeria and Egypt, Algeria and Egypt are expected to maintain their existing LNG infrastructure capacity of about 29 million tonnes per annum (MMtpa) and 12.7 MMtpa, respectively. Nigeria’s plans involve increasing its LNG infrastructure capacity from the existing 22 MMtpa to 30 MMtpa via the Nigeria LNG (NLNG) Train 7 development and further marginally to just over 31 MMtpa via UTM Offshore’s FLNG project.”
Some further good news is Mozambique’s aspirations to increase its LNG export capacity from its current 3.4 MMtpa to about 43.5 MMtpa by the end of the next decade — by far the largest increase the contentment is likely to see if all the obstacles can be overcome. Lastly, the BP-Kosmos-owned LNG project in the waters off Senegal and Mauritania is also expected to see an increase in the cumulative capacity output of both countries from the current 2.5 MMtpa to 22.5 MMpta overall capacity by the end of the next decade.
As I have written before, for these projects to get off the ground and go online, African governments must do all they can to eliminate any restrictive red tape to ensure speedy turnarounds between hydrocarbon discoveries and FID. Otherwise, their countries will miss out on the major benefits their vast natural gas resources offer.
Natural Gas Will Benefit Africa, its People, and the Planet
Natural will be a key investment topic at the African Energy Week in Cape Town, South Africa from October 16th to 20th. Despite living on a continent with an abundance of untapped natural gas resources, energy poverty is a daily reality for over 600 million Africans. By harnessing our vast hydrocarbon resources, it’s possible to transform the quality of these people’s lives, industrialize their economies, build gas-to-power plants, create jobs, and provide energy for clean cooking.
Fortunately, we are seeing a movement in the right direction. Around a dozen African countries are now generating their own electricity with gas they either produce themselves or import.
In addition to having the potential to resolve energy poverty in Africa, natural gas is indispensable in many industries. Natural gas, for example, plays a key role in the production of fertilizers used internationally to grow the food that sustains the entire global population.
Since the Russia-Ukraine conflict started in early 2022, both food and fertilizer prices shot up significantly as Russia started shutting down its gas supplies, thereby limiting fertilizer production and creating a low-supply, high-demand market globally, which left many farmers unable to afford the fertilizers necessary to grow crops. According to the UN, more than 60 countries are now struggling to import food, many of which are African states. Not only can Africa itself benefit by developing its natural gas resources, but it also appears to have an obligation to do so to secure domestic and global food supplies.
Natural gas can also be used as a feedstock for liquid transport fuels, paraffin, base oils, and naphtha, which can generate additional revenues to help build infrastructure, set up new businesses, and bring down unemployment levels. Exporting natural gas as feedstock also has many other great advantages.
Gas feedstock can be used in residential and commercial heating, and used as fuel in manufacturing, food processing, and chemical production. Natural gas feedstock can also be used in combined heat and power (CHP) systems, which simultaneously produce electricity and utilize the wasted heat in other industrial processes, thereby increasing overall efficiency. Natural gas also can be used to produce hydrogen, which is needed in various industries including refineries, ammonia production, and the emerging hydrogen economy. African leaders have a responsibility to explore the uses of natural gas and capitalize on export deals with major players in these industries.
Developing Africa’s natural gas resources will create a plethora of new fiscal opportunities. It will also empower the continent’s residents to make a good living, which in turn, will stimulate and diversify economies through sustained long-term growth.
It is very clear to me that Africa’s natural gas production is on the verge of cosmic growth, but I must reiterate what I have many times before: Africa’s new natural gas discoveries will remain just that — discoveries — until leaders start taking a proactive approach to quickly developing and capitalizing on them. At the moment, however, nations are still not fully reaping the enormous benefits of their dormant resources.
I urge all African leaders to do the right thing for themselves and their people. Utilize the unique and lucrative opportunities natural gas offers, monetize your gas, grow your economies, and allow your people access to energy and a decent standard of living.
For more information about the African Energy Chamber's new report, visit https://EnergyChamber.org.
Distributed by APO Group on behalf of African Energy Chamber.
