Making the case for African gas

Hawilti Ltd, in partnership with the International Gas Union (IGU), launched the Gas for Africa Report on February 14, at the EGYPS 2023 conference in Cairo. The report assesses the key drivers, potential barriers and solutions to developing natural gas value chains in Africa that can tackle energy poverty and enable a just energy transition. In doing so, it demonstrates that gas can play a major role in delivering a secure and sustainable energy future for the continent – economically, socially and environmentally.

Despite having almost 9% of the world’s proven natural gas reserves – some 18 tcm – Africa remains the most energy-poor continent. Its industries continue to rely on expensive, inefficient and polluting sources of energy, and hundreds of millions of households lack modern energy access, the report states. The development of Africa’s gas reserves has remained reserved mostly for the export market, rather than meeting the continent’s own growing domestic energy needs. So, while Africa’s gas has been fuelling economies and supporting decarbonisation and jobs abroad, most of the continent lacks the infrastructure to benefit from the resource itself.

The report analyses the current reality of energy access in Africa and finds that in light of its rapid population growth and the post COVID-19 economic downturn, progress in expanding energy access is slowing. Today, nearly 600mn Africans do not have access to electricity, and almost 1bn lack access to clean cooking. Energy poverty is preventing Africa’s industrial and commercial development, making it impossible to establish competitive and modern economies. By adopting gas locally, the report finds that Africa can promote industrialisation to create jobs and expand supply chains with the production of fertilisers and petrochemicals, and develop energy-intensive industries such as cement, steel and desalination. Gas can also provide baseload electricity in countries with no alternatives, ultimately supporting the integration of renewable energies. It can also provide households and industries with cleaner and more affordable energy and decarbonise the power mix in the short term by phasing out coal and diesel. Gas systems can later be decarbonised with the use of renewable gas, hydrogen and carbon capture technologies.

The report covers case studies where natural gas development has had clear benefits, both economic and environmental.

In Tanzania the development of the Songo Songo gas field has “resulted in one of the most successful domestic gas monetisation ventures across Africa,” the report notes. Brought into production in 2004, Songo Songo serves the 190-MW Ubungo power plant, and its gas is also used for distribution to the Tanzania Portland Cement Company and for the country’s village electrification programme. It is responsible for 45% of Tanzania’s overall electricity supply.

By adopting gas, Tanzania has significantly reduced its emissions, with the World Bank estimating that the country reduces CO2 emissions from power generation and local industry by more than 2.5 MT in 2004-10. The gas replaced diesel and heavy fuel oil as a reliable baseload power source.

As a result of gas development, Tanzanian electricity costs have also dropped significantly. The cost of power generation fuelled by Songo Songo’s gas dropped to $0.13 per kWh by 2010, compared with $0.64 previously, according to the World Bank.

African countries can also reap rewards from more gas export projects. In Nigeria, the NLNG liquefaction hub generated $9bn in taxes and $18bn in dividends to the government between 2019 and 2019. Besides exports, NLNG also supplies LNG to the domestic market, having signed 10-year contracts for the sale of 1.1 MTPA of LNG to three local companies in June 2021. The project also produces high-quality NGLs for the domestic market including LPG, which replaces dirtier fuels for cooking in Nigerian households.

The report also looks at how Africa has much more LNG export potential than the projects currently being proposed. There is a window of opportunity for Africa to position itself as a strategic and reliable global gas supply hub – but it must act fast. To realise this potential, it must demonstrate a pragmatic approach, a sense of urgency and a focus on competitiveness to attract the necessary billions of dollars of investment.

Africa must also overcome barriers to gas development. Firstly there is financing, which has been stifled by growing national debts and global asset managers’ divestment from hydrocarbons. Investments in gas must be future-proofed to demonstrate the fuel’s sustainability and climate value to global investors.

The second barrier is the lack of infrastructure for processing, storing, and distributing natural gas. The report explores how Africa can increase gas penetration by developing industrial clusters, reforming electricity markets, promoting regionalisation and encouraging the adoption of small-scale technologies.

Lastly, policymakers must create a better enabling environment and decrease the risks associated with investing in Africa. Policy certainty and physical security must be prioritised to provide a positive environment for growing gas value chains on the continent.