The growing importance of gas in the Africa energy mix
The 3rd Africa Gas Forum took place on Monday, 19th February 2018 at the Sandton Convention Centre in Johannesburg, South Africa and is aligned as an official side event of the annual African Energy Indaba (AEI).
Africa’s oil and gas potential will grow significantly over the next two decades, driven by population growth, urbanization and the emergence of a wealthier middle class on the continent. Africa is endowed with natural resources that are changing the global energy landscape with six of the top 10 global discoveries in the oil and gas sector in 2013 being made in Africa.
In the past, economic and political uncertainty coupled with fluctuating energy prices and weak infrastructure hampering growth, but in recent years the commodities boom and increased investment in energy infrastructure have seen a resurgence of growth.
There is no doubt that Africa remains open for exploration by oil and gas companies. Although finding oil and gas in Africa can still be low cost, it needs financial investment and long-term commitment. African governments that can manage the business and regulatory processes have a better chance of attracting this investment.
The potential is evident, but today’s leading oil and gas executives in Africa must stay on top of emerging challenges and opportunities to remain competitive in the surging industry.
The Africa Gas Forum has been created to ensure a balance between country specific opportunities as well as common issues that affect the whole region such as exploration activity, licensing rounds, development plans and the move to gas, new tax regimes, regional infrastructure projects, pipelines, LNG terminals, security, local content initiatives, investment requirements and other key upcoming projects.
Latest market trends
With African economic growth in 2018 making a recovery after a difficult year, developments in gas has seen West Africa’s gas sector become extremely active in 2018 from Senegal to Angola. While large gas discoveries in Mozambique, Kenya and Tanzania, has ignited a gas surge on the east coast, developing these discoveries and their concomitant infrastructure requires foreign and, or private investment that will be expensive and require a long-term commitment. The emergence of Shale Gas, and with the commissioning of the Strategic Environmental Assessment of Shale Gas by the South African Government, leads the way for Shale Gas exploration on the continent.
At the end of 2016, Africa is reported to have had proven natural gas reserves of 503.3 Tcf (trillion cubic feet), indicating an increase of around 1% in total gas reserves on the continent. Though, ninety percent of African gas production continues to come from Algeria, Nigeria, Egypt and Libya.
The development of gas pipelines, floating liquefied natural gas (FLNG) platforms and major gas field projects, have seen the governments in the Gulf of Guinea and across West Africa amplify their efforts to secure gas supply, in order to enhance domestic power generation, and expand their revenues away from crude oil. However, in order to encourage gas infrastructure investment across the region, it has become necessary as well to deregulate the gas market.
Natural gas is considered the most environmentally friendly fossil fuel, and is broadly regarded as a bridging fuel to a low-carbon future. The natural gas supply chain involves field treatment, and the moving of natural gas liquids depends on many factors including the composition of the produced hydrocarbon stream, proximity to end users, market conditions, and available infrastructure.
Natural gas is an adaptable fuel and supplies 22% of the energy used worldwide. It makes up nearly a quarter of electricity generation, plays a crucial role as a feedstock for industry, has fewer emissions of most types of air pollutants and carbon dioxide, and still produces an equal amount of energy.
The International Energy Agency (IEA) asserts that in meeting the world future energy demands, the lead is taken by natural gas whereby the demand for gas will grow faster than oil and coal at 1.6% per year over the next 5 years. This growth will be stimulated by low prices, ample supply, and its role in reducing air pollution and other emissions.
With the global natural gas market growing, driven by the availability of shale gas and the increase in the liquefied natural gas (LNG) trade the stage is set for gas to become the world’s primary energy source towards 2050, and the last of the fossil fuels to experience peak demand. Gas can play a central role in supporting energy security alongside variable renewables during the transition. However new markets need connecting with hundreds of thousands of kilometres of pipelines. LNG provides a viable route to monetize large gas reserves in remote locations such as Sub-Saharan Africa which have no significant markets nearby, and only limited connectivity to existing demand centres (DNV-GL, 2017).
The world could foresee in the near future a shift toward gas-based economies with companies exploring cost-effective solutions to create value from flared gas, and assessing the various technologies to transport gas from remote offshore fields. This increased growth in natural gas use will result in more investment in both the short and long term across the supply chain of natural gas.
Currently it is the only fossil fuel that will preserve its share in the energy mix of the coming decades by improving its carbon footprint by curtailing methane emissions and improving the economics of large-scale carbon capture and storage (CCS) for gas-fuelled power generation. This can only be achieved if supported by policies to reduce air pollution and greenhouse gas emissions.
Independent power producers (IPPs) are constantly surveying the African market for entry opportunities. Many of them offer gas-fired power solutions, and this parallels with the expected overall growth agenda for a lower carbon future as gas is expected to be used as a bridging fuel as the world moves to more renewable alternatives. The hope is that additional gas usage could result in reduced flaring on the continent with additional facilities providing alternative uses for the gas.
According to DNV-GL (2017), digitalisation and automation in the industry is set to make a significant contribution to cut costs and enhance safety. Technology and innovation obviously present a great growth opportunity for industry players in Africa, and the Africa Gas Forum was set to unpack this low carbon option addressing the challenges that face the African market with dynamic information sharing and interesting solution-driven debates.