Global Markets: Gas demand awakens new fields

In a recent report released by the International Energy Agency (IEA), Gas 2017: Analysis and Forecast to 2022, gas is identified as having a strong foothold in Africa, particularly in Egypt, Algeria, Libya and Nigeria where an estimated 90% of gas production originates.

At the end of 2016, Africa had proven natural gas reserves of 503.3 trillion cubic feet (TCF),indicating an increase of around 1% in total gas reserves on the continent.

However, according to the IEA,consumption in Africa is expected to rise 3.1% per year, reaching more than 150 billion cubic metres.

This article originally appeared in Issue 2 2018 of our print magazine. The digital version of the full magazine can be read online or downloaded free of charge.

In addition to the high consumption demand in the western region, gas discoveries are stimulating sector growth and infrastructure development in the eastern and southern regions – notably Mozambique, Kenya and Tanzania.

In Ethiopia, government has recently announced that plans are underfoot for local natural gas exploration in conjunction with a new set of policies and regulations and the possibility of extending pipeline infrastructure with neighbouring Djibouti. However, due to the high associated costs and pending regulations, the time lag to reach commercialisation is often a tedious and arduous exercise.

Large resource centres

A report compiled by the World Bank, Harnessing African Natural Gas, has identified total discovered natural gas resources in sub-Saharan Africa at 359TCF. Proven gas reserves in this region are estimated at 136TCF, a figure that grows to 169TCF if probable reserves are also considered. The Bank highlights that West Africa continues to lead the LNG story – Nigeria accounts for 81% of proved reserves, and the three LNG exporting countries – Nigeria, Angola, and Equatorial Guinea – account for 92%.

The balance of around 190TCF for SSA has been attributed to contingent resources, which means that an estimated 50% of total resources is not currently being commercialised.

The report highlights that the large undeveloped fields in Mozambique and Tanzania account for 62% of the total contingent resources.

Mozambique

According to the Bank’s report, licence holders are currently forging ahead with plans to develop four LNG trains in Mozambique, which form part of the long-term plan calling for up to 10 trains. In March 2018, Anadarko Petroleum Corporation announced that it has received official approval from the government of Mozambique for the Golfinho/Atum field development plan.

The development plan outlines the integrated onshore project from the reservoir to the LNG market and is a culmination of the substantial progress made to date on the technical and commercial aspects of the Anadarkooperated Mozambique LNG development.

The LNG project will be Mozambique’s first onshore LNG development, initially consisting of two LNG trains with total nameplate capacity of 12.88 metric tonnes per annum to support the development of the Golfinho/Atum fields located entirely within Offshore Area

Tanzania

To the north of Mozambique, Tanzania is looking at developing two LNG trains, entailing a commitment of 14TCF of gas with an additional two built into the longterm strategy. The Bank’s study highlighted that, in parallel, “Tanzania is aggressively pursuing a domestic gas-to-power agenda that could result in over 8TCF of gas being committed to the domestic market.” The use of domestically produced natural gas in Tanzania between 2015 and 2017 has resulted in Sh8 trillion ($4 billion) in economic savings. This is according to researcher Aristides Katto from the Tanzania Petroleum Development Corporation (TPDC).

As stated by Katto, the use of locallyproduced natural gas has not only saved funds, it has also increased the country’s energy sources, and stimulated economic activities. Tanzania saved $6.7 billion in 2015 alone, after turning away from heavy fuel oil and diesel to natural gas to generate electricity.

According to TPDC records, demand for natural gas has doubled from a total of 145 million standard cubic feet (scf) per day in 2016 to 300 million scf in 2017. TPDC acting managing director, Kapuulya Musomba, advised that the company is currently undertaking a study to map out gas demands across the country, adding that: “At the moment, gas supply is ahead of demand. But, we are working to meet the needs as per the industrialisation plan.” So far, at least 42 industries have been connected to the natural gas supply system – although only 37 are fully using this energy source.

Angola and Equatorial Guinea

On the west coast, Angola and Equatorial Guinea have been highlighted to have gas resources of 18TCF and 13TCF, respectively. Although both countries are LNG producers, they have very low “domestic thermal energy demand, and the prospects for expanding domestic gas-to-power are highly constrained. In the case of Angola, 400MW of gas-fired power plants are under development, but further growth in domestic demand will be slow because hydropower projects under implementation will be able to accommodate electricity demand growth.

In the case of Equatorial Guinea, the domestic electricity market is simply too small to sustain a gas-to-power programme,” the Bank noted in the study.

In the pipeline Despite the high need for a sustainable baseload, there has been a recent pushback around the tabled expansion plans of the West African Gas Pipeline (WAGP), linking Nigeria to Ghana through Benin and Togo. The plan to stretch the pipeline about 5,000km from Nigeria to Morocco, with a possible extension to Europe – a blueprint in place since 2016 – has caused a stir among 30 global organisations who have signed a petition against the developments.

The petitioners argue that the project would “increase the extraction and consumption of fossil resource, the main cause of global warming,” adding that the project will lead to a financial sinkhole. “It is likely that the forecasted cost of $20 billion will likely be doubled and will lead to an exponential increase in the debt burden of our countries,” the petition read. “It is a top-down project that does not consider the needs of the populations and the environment. They are not consulted and will not be the first beneficiaries of this pipeline. While Nigeria is Africa’s largest exporter of gas and oil, less than half of the population has access to electricity. In Benin, Togo, an area already served by the WAGP, barely a third of the population have access to electricity,” the petition added.

Honing in on this large power generation deficit in SSA – leaving an estimated 600 million without access to power – it is increasingly important for a region to diversify its energy mix whilst being innovative in terms of mobilising power resources from the generation source to the demand location. With many grey areas and red tape in terms of regulations fast-tracking developments in the gas sector, and in other power generation sectors, is essential to boost both direct and indirect investment into the gas market.

This article originally appeared in Issue 2 2018 of our print magazine. The digital version of the full magazine can be read online or downloaded free of charge.