According to Rystad Energy research, Africa is expected to peak gas production at 470 billion cubic meters (Bcm) by the end of the 2030s, equivalent to about 75% of the amount of gas produced by Russia in 2022. In early March, the European Union announced its intention to reduce its dependence on Russian gas by two thirds by the end of this year alone and is currently heading towards a supply shortage which will affect the whole world.
Even with the number of gas projects under development or currently delayed, Africa still has significant production potential. The continent is expected to increase its gas production from around 260 bcm in 2022 to 335 bcm by the end of this decade. If oil and gas operators decide to increase the stake on their gas projects on the continent, Africa’s near to medium term natural gas production could exceed the above conservative forecasts.
Russia has historically been Europe’s main natural gas supplier, averaging around 62% of global gas imports to the continent over the past decade. Africa has also been a consistent exporter of gas to Europe during this period, with an average of 18% of European gas imports coming from Africa.
However, projects in Africa are historically considered higher risk and may be delayed or not permitted due to high development costs, difficulty accessing finance, issues with tax regimes and other unreal risks. . Recent signals from oil and gas majors such as BP, Eni, Equinor, Shell, ExxonMobil and Equinor, however, point to a shift in strategy towards new investments in Africa, with several projects that were previously on ice – including liquefied natural gas (LNG) projects – as they consider restarting or accelerating previously suspended projects in response to growing global demand.
“The geopolitical situation in Europe is changing the global risk landscape. While LNG flows from the United States are significant, demand is much higher. Asian and European importers will need to consider African priorities when developing projects, as many African producers focus on supplying power locally as well as to intra-African markets while supplying global markets. The existing pipeline infrastructure between North Africa and Europe and historic LNG supply relationships make Africa a strong alternative for European markets, following the ban on Russian imports,” says Siva Prasad , principal analyst at Rystad Energy.
African nations that have historically been gas suppliers to Europe are well placed to increase their exports. Africa’s advantage is that it already has existing pipelines connected to the wider European gas network. Current pipeline exports from Africa to Europe run through Algeria to Spain and from Libya to Italy. Discussions on long-distance gas pipelines linking gas fields in southern Nigeria to Algeria via the onshore Trans-Saharan Gas Pipeline (TSGP) and offshore Nigeria Morocco Gas Pipeline (NMGP) have resumed in recent months. While the TSGP aims to use existing gas pipelines from Algeria to access European markets, the NMGP aims to extend the West African Gas Pipeline (WAGP) to Europe via West African coastal countries and the Morocco. Further afield, African LNG exports come mainly from Nigeria and Algeria, with smaller volumes from Egypt, Angola and a fraction from Equatorial Guinea. In addition, large-scale discoveries off Mozambique, Tanzania, Senegal, Mauritania and South Africa have the potential to generate additional natural gas exports once developed.
Europe is now considering how to help gas-rich African countries increase their production and exports in the years to come. The decision by the European Union earlier this year that all investments in natural gas are equivalent to investments in “green” energy indicates that African gas is considered sustainable. The supply crisis driven by security interests may push Europe to fund projects that will also contribute to energy accessibility at home. For example, Europe could be a major backer of the proposed $13 billion TSGP project.
Exit of BP in Russia: a boost for uncontracted gas in Senegal-Mauritania
BP chief executive Bernard Looney said the decision to leave Russia was not only the right thing to do, but was also in the company’s long-term interests. The British giant recently recorded pre-tax charges of $24 billion and $1.5 billion in its first quarter 2022 financial results due to its decision to withdraw from Russia. The company is now looking to African projects to seize the opportunity to target European markets with gas supplies.
BP has several large gas projects in Senegal and Mauritania – the Greater Tortue Ahmeyim (GTA), Yakaar-Terenga and BirAllah LNG projects. Floating GTA Phase 1 (FLNG) LNG volumes of 2.5 million tonnes per annum (tps) have already been sold, and part of the gas from Yakaar will be used as feedstock for the gas-power plant of the Senegal. Meanwhile, gas from GTA LNG Phase 2, remaining gas from Yakaar – Teranga and BirAllah are still not under contract and these volumes could benefit from what is expected to be a tight supply LNG market in the coming years. GTA FLNG Phase 2 has a planned capacity of 2.5 million tpy, while the Yakaar – Teranga and BirAllah LNG facilities could have a capacity of 10 million tpy. However, initial engineering and design (FEED) on Yakaar–Teranga, which was launched in November 2021, will determine the final capability of the project, and BP is also currently carrying out studies to see whether to accelerate the development of the Bir Project Allah targeting sales in Europe. Like BP, other major companies could also look to their African gas portfolios to address the likely gas supply shortfall.
Eni plans to increase the volume of African gas in Italy
Italian major Eni has said it can alleviate Europe’s dependence on Russian gas to some extent by supplying its African projects, including in Algeria, Egypt, Nigeria, Angola and Congo-Brazzaville. Over the past month, Italy, in association with Eni, has signed agreements to boost gas imports from the North African countries of Algeria and Egypt, and more recently two more gas supply agreements with two sub-Saharan African countries, Congo-Brazzaville and Angola. Other African countries where Eni has significant upstream portfolios on which Italian authorities could potentially sign gas-related deals include Mozambique, Nigeria, Ghana, Ivory Coast and Libya. Nigeria is currently in the process of increasing the capacity of the Nigeria LNG project from 22 million to 30 million tpa through its Train 7 program and debottlenecking, and Eni is a stakeholder in many upstream fields that supply gas from supply to the LNG plant as well as to the processing plant.
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Equinor, Shell and ExxonMobil leave Russia: refocusing on LNG assets in Mozambique and Tanzania
Equinor, ExxonMobil and Shell, like BP, have large LNG portfolios in Africa that have yet to be developed, and they can turn to these massive gas resources to counter the potential gas supply shortfall in the future. ExxonMobil has a 25% stake in Zone 4 in Mozambique, with significant potential to add further expansion trains. Mozambique stood to benefit from the EU’s decision to classify gas investments as green, even after an Islamist insurgency in the gas-rich province of Cabo Delgado crippled planned investments. The current scenario of a potential gas supply shortage could see the country accelerate the development of its gas resources. The withdrawal of the American major from Russia could lead it to finally sanction its Rovuma LNG project in Mozambique.
Announced exits from Russia by Anglo-Dutch major Shell and Norwegian giant Equinor could see the pair refocus on developing Tanzanian LNG, which has long stalled. Increased demand for natural gas driven by the ongoing war in Ukraine and withdrawals of Russian supplies could also lead to renewed interest in exploration and development in Nigeria to fuel these LNG exports on an extended period. Many other projects on the continent could also be accelerated to increase gas exports.
By Rystad Energy
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