AFRICA’S GAS SECTOR IS
AFRICA’S GAS SECTOR IS BENEFITING FROM A GLOBAL SHIFT TOWARDS GREATER FLEXIBILITY African gas has enormous potential, writes NJ Ayuk, Executive Chairman, African Energy Chamber. A host of new projects are coming on stream - and new countries are laying the groundwork for future production. Africa may not possess the vast conventional gas resources of the Middle East or Russia and it may not be able to match the combined conventional and unconventional resources of North America. But it does have a sizeable amount of gas – at least 620-trillion cubic feet (tcf) or 17.56-trillion cubic meters (tcm) ‒ in proven reserves. That’s more than enough to make Africa a key player in the global gas industry. In fact, it puts Africa in a position to influence the course of the industry, especially in light of long-term trends, including the shift to more flexible contract and delivery terms, along with more recent developments such as the Russia-Ukraine conflict. The African Energy Chamber (AEC) has outlined our expectations for Africa’s gas sector in the “The State of African Energy Q1 2023 Report”, a new publication available for download on our website. The report covers our outlook on both upstream and downstream trends. Here, I’d like to offer some extra insight into our take on downstream developments – that is, on African liquefied natural gas (LNG) projects, including the countries currently dominating the industry and those preparing to make their presence known. AFRICAN GAS TAKES THE STAGE First, some background on Africa’s significant gas reserves. Prior to last year, those reserves had already drawn a significant amount of attention from international oil companies (IOCs) and other entities involved in the global gas trade. Indeed, they hadn’t just attracted attention; they had also attracted many billions of dollars in investment commitments from firms seeking access to large undeveloped gas deposits. IOCs were especially keen to enter offshore frontier provinces such as the Ruvuma basin, located off the coast of Mozambique, and the Senegal- Mauritania section of the MSGBC basin, located off the continent’s western coast. These companies were interested in Africa not just because they wanted to add new assets to their portfolios. They also wanted to maximise their ability to serve customers seeking gas on flexible terms. This was in line with the long-term shift towards greater flexibility in the gas sector, which is shedding its previous reliance on overland pipeline deliveries and long-term, large-scale contracts with pricing formulae linked to crude oil. That is, IOCs wanted African gas precisely because they saw it as an additional means of supporting alternative supply arrangements involving spot market purchases and tanker shipments of LNG. But they shifted from wanting African gas to needing it in late February 2022, when conflict broke out between Russia and Ukraine. I continue to see this as a major topic requested by many to be on the agenda at African Energy Week taking place in Cape Town on 16-20 October. AFRICAN GAS ENTERS THE SPOTLIGHT This event – the Russian invasion of Ukraine – turned out to be a tipping point for Africa’s gas sector. The conflict sent global energy markets into a frenzy. This was partly because it led the US, the UK and the European Union to introduce embargoes on Russian crude oil supplies and partly because it sparked concerns about possible interruptions in Russian gas deliveries to Europe via pipeline. These concerns appeared to be valid, as Russian gas shipments to Europe became irregular last year despite the lack of a formal embargo such as the one imposed on oil. The conflict also led the EU to step up its long-standing campaign to reduce dependence on Russian gas. Russia has long been the largest outside supplier of gas to the European market and up until the end of 2021, it was the source of at least a third of all volumes consumed within the EU. Uncertainty over these supplies heightened European interest in alternative supply sources and a significant portion of that interest settled on Africa. As a result, some IOCs and EU member states began pursuing deals with North African states that were already in a position to export gas to Southern Europe via pipelines. The Italian energy major Eni, for example, signed a deal with Libya’s National Oil Corp (NOC) in January 2023 with the 40
AFRICAN GAS Credit: Emmaus Studio on Unsplash 41
