The Nigeria LNG Limited (NLNG) has indicated that there is real demand for clean energy such as gas in Africa to trigger a massive take-off for industrialisation, with a growing young population, abundant natural resources, and emerging internal markets. This, the company noted, can only be achieved if the right investments in the gas industry were made, which it added could gulp as much as $20 billion in case of Nigeria alone, reports MoneyReport Intelligence.
The Managing Director and Chief Executive Officer, of Nigeria LNG Limited (NLNG), Dr. Philip Mshelbila, has argued, that the potential for growth in Africa relies heavily on energy to provide the necessary amenities in line with the UN Sustainable Development Goals (SDGs), adding that natural gas helps industrialization in several ways as it is found throughout the world either by itself or in association with crude oil.
According to Mshelbila, gas remained a viable revenue generation strategy, experiencing a surge in demand due to its role as a clean energy option and transition fuel, both in Africa and globally. He added that global demand is projected to increase to 5.1 trillion cubic meters by 2035. He also noted that Africa would require substantial investments to increase gas production and ensure the supply of significant volumes of natural gas to the world market in the future. He emphasised that Africa, especially Nigeria, must take essential steps to attract the necessary investment for enhancing the gas industry from exploration to production.
“Despite the gas potential in Nigeria, our country struggles with inadequate infrastructure to efficiently harness and distribute our gas resources. This infrastructure gap has not only hampered domestic energy growth and power generation but also the country’s ability to meet its export commitments, posing a tremendous risk to our viability as a reliable and competitive gas supplier,” he said. He noted that dearth of investors significantly impact the availability of capital necessary to enhance gas infrastructure within the country.
He remarked that the Federal Government in August 2022 estimated that a yearly investment of $20 billion is required to bridge the gas infrastructure gap in Nigeria in the next 10 years. While expressing optimism on the future of gas, Mshelbila called for deliberate efforts in moving the needle on the Decade of Gas programme by the Federal Government, noting that the Petroleum Industry Act (PIA) has the potential to reshape both the industry landscape and address deficiencies in the country’s gas infrastructure.
“Facilitating an enabling environment that is light on regulatory volatility and heavy on efficiency of process and operations will encourage foreign investment, which is the means to bridging the infrastructure gap in a competitive and sustainable manner,” he concluded. According to him, a plunge in crude oil prices due to the COVID-19 pandemic and a global supply glut of oil occurred in 2020. The energy industry once again, turned to the gas industry to salvage revenues and catalyze industrial development and with its multiplier effect. Nigeria has the largest gas reserves in Africa but her resources remain highly underutilized. Thus, the opportunity for gas to catalyze industrial and economic development is one the country can no longer ignore.
The development of the gas industry is driven by end-user demand and the largest consumer markets. As of 2019, Asia – primarily driven by China – is the world’s largest natural gas consumer. Europe and North America also influence prices with their large gas consumer bases and temperate weather needs. At the World Economic Forum (WEF) in 2020, the importance of natural gas to African countries’ economic development loomed large. The discussion was against the backdrop of plans to block funding for gas energy projects in Africa by the industrialized societies which are actively considering a blanket ban on fossil fuels that would preclude any new projects involving natural gas.
The argument against funding natural gas projects in Africa is that burning natural gas emits carbon dioxide (CO2), a long-lived greenhouse gas.
Facilities that produce, transport and consume natural gas sometimes leak methane, a short-lived but even more potent greenhouse gas. So blocking money for new gas pipelines, gas-fired power plants, or gas-consuming industries in Africa might seem like good environmental policy, especially as they seek to accelerate the global transition to a cleaner energy future in the wake of COVID-19. But it was discovered that any effort to prohibit funding gas development projects in Africa will end up as a barren exercise.
The reason is that prohibition on funding for gas-fuelled power in Africa will not work for climate mitigation as it will hurt the continent’s development. Gas has a pivotal role to play in Africa’s transition to clean energy; so, a ban now could slow the adoption of renewables and reinforce a global energy double standard.
At the WEF, it was stated that banning funding for gas development in Africa will not be effective in fighting climate change. The continent is starting from such a low energy use and emissions base that there are few gains from squeezing out gas. Simply put, if all of Sub-Saharan Africa tripled its electricity consumption overnight using only natural gas, the additional CO2 would be equivalent to just 1% of global emissions.
Many others reasons, including the fact that Africa’s energy needs are enormous and urgent, climate resilience requires more energy, not less were adduced as part of the reasons for the shift.
Buoyed by this position, last year, the representatives of the private and development sectors attending an online conference organized by the African Development Bank (AfDB) expressed consensus that exploiting Africa’s natural gas resources offered benefits for both African and Asian countries. This consensus is against the backdrop of the Russia-Ukraine conflict and its impacts on food and fuel prices worldwide. Africa’s industrialization is partially dependent on the expansion of natural gas usage because the continent possesses 13% of natural gas and 7% of world oil reserves with more than 5,000 billion cubic meters (bcm) of natural gas resources available.
A select number of African countries presently have still untapped gas reserves totaling trillions of cubic feet of natural gas. Nigeria leads the way, with the West African oil giant presently sitting on 206.53 trillion cubic feet of natural gas. Energy experts say that natural gas reserves in Africa will last around another 55.7 years before being depleted, considering that the present level of production is maintained.
In 2020, the continent generated 231 billion cubic meters of natural gas. This represented a growth of more than 70 per cent in the output level in comparison to 2000. Currently, Algeria is the main natural gas producer in Africa, followed by Egypt and Nigeria. Naturally, these countries are also the continent’s leading gas exporters. Also as of 2020, Africa’s natural gas exports amounted to over 95 billion standard cubic meters, with Algeria, Egypt, and Nigeria as major exporters, as previously mentioned. Most of the African gas exports arrive in Europe, which absorbed 60 % of the gas exported from Africa in 2019, via pipelines or as LNG.
Algeria’s gas exports, for instance, were destined almost entirely for Italy and Spain. The geographical proximity to Europe makes the Northern African country a strategic supplier, although stagnating production levels and lack of infrastructure may impose challenges for increasing the trade level.
According to available data, the total natural gas production of Africa increased by 3.43% in 2022 when compared to 2021. Through to 2030, annual gas production is forecast to decrease by a CAGR of 4.2%. According to the Gas Exporting Countries Forum, the demand for energy in Africa is expected to increase by 82% by 2050 and natural gas will account for 30% of their energy mix. In Africa, Nigeria currently accounts for 33 per cent of the total gas reserves in the continent. The gas reserves in Nigeria could last for about 94 years.
This is important because, it would continue to guarantee energy security for Nigeria’s massive population estimated to be about 200 million.
Nigeria had 5.91 trillion cubic metrics of proved natural gas reserves in 2022. The amount increased slightly compared to the previous year, continuing the upward trend observed over the period under review. Nigeria holds the largest natural gas reserves on the continent and exports increased significantly in the past 23 years. As of 2022, some 32.2 billion standard cubic meters of natural gas was exported by the West-African country.
The Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) Gbenga Komolafe said, “With a reserve base of 36.97 billion barrels of oil and 208.83 trillion cubic feet of gas which represents 33 per cent of Africa’s total gas reserves of 620TCF, Nigeria can be described as a gas rich nation ranking number one in Africa in reserves with a life index of 94 years.
“This clearly presents Nigeria in a dominant position in the entire African gas market. Nigeria has the potential to ensure sustained supply of natural gas across the sub-Saharan region of Africa, if the necessary financing and infrastructure are in place.” Komolafe noted that over the last two centuries, the world had witnessed the evolution of various energy sources, from the traditional biomass to coal, oil and gas, hydropower, wind, solar, blue hydrogen and other renewable. “However, today, oil and gas has remained the most dominant source in the energy mix,” he stated. He said the global call for de-carbonisation and increased focus on cleaner energies had provided the avenue for Africa to diversify its portfolio, while leveraging its abundant oil and gas resources for energy security and economic development.
On funding of development of gas resources in Africa, the European Commission (EC) and AfDB recently formalised a new Financial Framework Partnership Agreement, aimed at expanding investments in infrastructure projects in Africa in strategic transport corridors, in energy and digital connectivity. This, it is gathered, follows the success of African countries at COP28, where their key demands, for a just energy transition, climate change finance and funding for adaptation, received strong support. This initiative was led by the African Group of Negotiators (AGN), which demanded the right for Africa to develop its oil and gas resources, particularly gas as a transition fuel, to enable the countries in the continent to industrialize and then reinvest gains in low-carbon energy projects. Africa’s population now exceeds 1.4billion people, and it is projected to reach 2.5billion by 2050. The continent has abundant natural resources, including minerals, oil and gas, that have become increasingly attractive to the rest of the world. But despite this, Africa is facing an energy crisis and severe energy poverty, with about 600million people, about 40% or more of the population, lacking access to energy.
The agreement with the EC, and another one between USAID and AfDB, extended last year to 2030, could help combat energy poverty in Africa. But their main thrust is to support clean energy projects.
Still on the funding of gas projects in Africa, the Secretary General of the African Petroleum Producers Organization (APPO), Dr. Farouk Omar Ibrahim, has at various occasions outlined current regional initiatives to address natural gas funding and investment challenges.
“Africa should be able to raise the funds necessary for the operations of its energy industry,” Ibrahim said who also explained that the African Energy Bank designed to address the issue of funding of African energy resources will take off this June, while the host country will be decided by the end of March 31,2024.But, what will African Energy Bank do for Africa? As the African Export-Import Bank (AfreximBank) points out, the new institution will accelerate Africa’s economic development, whilst ensuring this progress is compatible with, and complementary to, the Sustainable Development Goals (SDG) as well as the continent’s long-term social and environmental objectives as set out in African Union’s Agenda 2063: The Africa We Want.
Afreximbank says the African Energy Transition Bank addresses an urgent and existential need on the continent. Africa stands to experience profound effects from climate change, while the considerable poverty across the continent further disincentivises a focus on environmental care and sustainability for many populations. Moreover, Africa’s oil and gas industry faces growing pressures as international investment in hydrocarbons diminishes. While Africa’s transition towards alternative energy sources presents great opportunities for the continent, this transition must be carefully managed to minimise the short-term adverse impacts of the transition while maximizing its longer-term benefits. The new bank’s responsibilities would include the management and encouragement of such a productive transition.
Former chairman of the African Union, President Macky Sall of Senegal, once said, African states are open to embracing renewable energy sources: The problem comes “when we are bullied into giving up our fossil fuels, and the opportunities they represent, on others’ timetables. Our countries cannot achieve an energy transition and abandon the polluting patterns of the industrialized countries without a viable, fair and equitable alternative. Our countries, which are already shouldering the crushing weight of unequal trade, cannot bear the burden of an unfair energy transition,” Sall noted.We believe that President Sall is right, and so is South African President, Cyril Ramaphosa, who said, “We must contend not only with these primary dangers (of climate change), but also with potential economic and social damage should the global community fail to deal with the crisis in a way that works for developing as well as developed markets.
”Developing African energy banks is a way to protect African countries from those social and economic dangers. China might be a credible partner to Africa in building these unique financial infrastructure but as APPO Secretary General has emphasized, Africans do not want to depend on external sources for the funding of its oil and gas resources.
Meanwhile , President Bola Tinubu of Nigeria on March 6, executed Policy Directives to improve the investment climate and position Nigeria as the preferred investment destination for the oil & gas sector in Africa.Recognizing the urgency to accelerate investments, the President has directed as follows: introduction of fiscal incentives for non-associated gas, midstream and deepwater developments; streamlining of contracting process to compress the contracting cycle to six months and the application of the local content requirements without hindering investments or the cost competitiveness.
