ShareLatest progress of the LNG industry in Africa
Africa is expected to increase its share of LNG production by 2050. Emerging infrastructures and gas-specific regulations suggest that the region will become a major LNG hub.
According to the International Energy Agency (IEA), sub-Saharan Africa is among the fastest-growing regions in the world and is set to become the most populous region by 2023. [1] Understandably, the continent is witnessing a high demand for energy. Africa’s natural gas consumption is expected to grow by an average of 3.3% per year, reaching about 195 billion cubic meters (bcm) in 2025 and up to 380 bcm in 2050. [2]
Africa Oil & Power (AOP), an investment platform for the African energy sector, has recently published a report outlining the investment and development opportunities within Africa’s liquefied natural gas (LNG) landscape. The authors of the report believe that the continent could use its gas reserves to fuel socio-economic growth, along with a transition to cleaner energy sources and regional industrial development, namely through the use of LNG. [2]
Emerging LNG infrastructures in Africa [2]
Equatorial Guinea is focusing on the development of a “Gas Mega Hub”, an offshore gas industry to spur regional LNG trade and expand the market. Equatorial Guinea has also created the LNG2Africa initiative, which prioritises intra-African trade by supplying natural gas to the wider region.
In the first quarter of 2021, Ghana will become the first country in sub-Saharan Africa to import LNG, through its Tema LNG Terminal. LNG imports should be key to boosting the country’s gas-fired power generation sector. [3] Indeed, LNG-to-power has emerged as a powerful driver of sustainability. In Ghana, the development of Ghana’s 1000 Power Station enables the use of natural gas for power generation. The proposed project for a 1,300 MW gas-fired power plant includes a combined cycle gas turbine power plant, LNG import infrastructure in the form of a floating storage and regasification unit (FSRU), and a gas pipeline connecting the FSRU to the plant.
Gas-specific regulations for the African LNG industry [2]
According to the authors of the AOP report, the African LNG industry faces challenges such as securing requisite financing and the lack of a stable regulatory framework for LNG development.
Investor-friendly regulations and productive policies are essential for alleviating regulatory challenges and creating an enabling environment for LNG development. Besides, energy legislation in many African countries still caters to oil development rather than natural gas. LNG projects are more likely to take off if gas-specific regulations are implemented to clarify the process.
For example, Angola, the second largest oil producer in sub-Saharan Africa, has implemented the Natural Gas Law (Presidential Decree no. 7/18 of May 18, 2018) to regulate natural gas exploration, production, monetisation and marketing. The authors of the AOP report believe that this law has significantly boosted investor interest by providing clear and attractive fiscal and exploration conditions for LNG development.
Africa’s share in the global LNG trade forecast [4]
According to the Gas Exporting Countries Forum (GECF) Global Gas Outlook 2050, in 2019, natural gas exports from Africa were around 95 bcm, of which 62 bcm (45 mt LNG) was exported as LNG from Nigeria, Algeria, Angola, Egypt, Cameroon and Equatorial Guinea. Overall, the continent supplied 13% of global LNG exports.
Africa currently has about 71.1 million tons per annum (mtpa) of LNG liquefaction capacity. Projects to expand Africa’s LNG production are underway in the countries mentioned above. For instance, Nigeria signed a corporate loan to finance the construction of its seventh LNG train in 2020. [2] The NLNG Train-7 project will increase LNG production capacity by 35% from the current 22 mtpa to approximately 30 mtpa, which should make Nigeria one of the largest LNG exporting countries in the world. With over 90 mtpa LNG liquefaction projects, Mozambique should emerge as Africa’s number one producer by the mid-2030s.
Despite delays caused by COVID-19 and the current market oversupply, several African LNG projects have been able to progress. Overall, it is estimated that Africa’s total liquefaction capacity will reach around 218.5 mtpa by 2050, more than tripling the region’s existing export capacity. Consequently, the region will become a major LNG hub in the long-term.
Sources
[1] IEA (2019), Africa Energy Outlook 2019, IEA, Paris https://www.iea.org/reports/africa-energy-outlook-2019
[2] Africa LNG Special Report 2021. https://www.africaoilandpower.com/africa-energy-series/
[4] Gas Exporting Countries Forum. GECF Global Gas Outlook 2050. February 2021. https://www.gecf.org/insights/global-gas-outlook?d=2021&p=1