Reports from the Regional Coordinators

Repor Coor ts fro m the Regio dinator s nal

In this issue we bring you a report from IGU’s Regional Coordinator for Africa and the Middle East.

Africa and the Middle East

By Khaled Abu Bakr Africa’s population is growing rapidly. Its economies have the potential to do the same, and their demand for energy is set to grow very fast. Africa is also an important supplier of energy and has seen major recent gas discoveries. At the same time, it still faces significant challenges in terms of access to electricity and clean cooking for all.

Despite its large and growing population, Africa accounts for a very small share of global energy sector investment. In 2018, around $100 billion was invested in the energy sector in Africa, or about 5.5% of the global total. Of this, $70 billion was invested in fossil fuels and $13 billion in renewables. Another $13 billion was spent on electricity networks.

In the last decade, there have been several major natural gas discoveries in the African continent, most notably in Mozambique and Tanzania but also in Egypt, Mauritania, Senegal and South Africa. These finds accounted for over 40% of global gas discoveries between 2011 and 2018. The possible

Mozambique is ramping up gas production and the Eni-operated Coral Sul FLNG project is due to start up in 2022. Eni’s partners are ExxonMobil, CNPC, Empresa Nacional de Hidrocarbonetos, KOGAS and Galp Energia. The hull was launched in January at the Samsung Heavy Industries yard in Gohyeon Geoje, Korea.

benefits are many: natural gas can provide the continent with an additional source of electricity for baseload and flexibility needs, it can supply feedstock for industrial growth and bring new export opportunities and revenues; and, when combined with the continent’s huge renewable energy potential, gas can offer a new pathway towards the provision of modern energy services for all. The prospects for gas, however, hinge upon well-articulated strategies to bring the discoveries into production and build infrastructure to deliver gas to consumers at competitive prices.

The position of natural gas in Africa’s energy mix today varies widely across the continent. In North Africa, gas is a mainstream fuel that meets around half of the region’s energy needs. In 2017, with strong growth in Algeria and Egypt, gas consumption in North Africa overtook oil use for the first time in history. However, the picture is very different in much of subSaharan Africa, where gas has been a niche fuel. The share of gas in subSaharan Africa’s energy mix is around 5% – the lowest regional share in the world. There are a number of reasons for the low penetration of gas in subSaharan Africa. In many cases, there is a considerable distance between production and consumption centres, necessitating large-scale, capitalintensive infrastructure.

As a conclusion, Africa’s resource wealth represents both an opportunity

Gas production from Israel’s Leviathan field began in December 2019. It is operated by Noble Energy with Delek Drilling and Ratio Oil Exploration as partners.

and a risk. Faced with multiple social and economic challenges and a major infrastructure deficit, resource-rich African countries are unlikely to forego the chance to develop valuable domestic resources. But extracting value from Africa’s resource wealth requires the establishment of sound, stable and transparent regulatory and fiscal regimes, and the right institutions and practices to implement them.

Egypt as a regional gas hub

Discoveries of major natural gas reserves in the East Mediterranean Sea around Egypt, Cyprus, Israel and Greece are shaking up energy politics in Europe, where Russia has long been a major supplier. These major gas discoveries in the region are now changing the rules of the game. Egypt has all the necessary infrastructure and facilities to transport natural gas from gas fields discovered in the Eastern Mediterranean region to European markets thanks to its extensive network of pipelines and LNG plants in Damietta and Idku on the Mediterranean coast.

Israel is also adding further weight to Egypt’s potential as Europe’s new gas hub. The discovery and development of gas fields off the coast of Israel in the last 20 years has resulted in an abundance of gas, which the country is trying to use to its geopolitical advantage. Partners in Israel’s Leviathan and Tamar offshore gas fields had agreed to sell $15 billion-worth of gas to a

customer in Egypt – Dolphinus Holdings – but in October 2019 the deal was amended to boost supply by 34% to about 85 bcm, or an estimated $20 billion.

Egypt has also signed an agreement with Cyprus to connect the Aphrodite gas field to its liquefaction plants for re-export. This agreement is considered a general framework to establish a direct sub-sea gas line between the countries. The EgyptianCypriot agreement is not only for the implementation of a sub-sea pipeline but will also contribute positively to the supply of gas to the European Union. As of January 2020, gas started to flow from Israel to Jordan and Egypt, and more LNG from Egypt to Europe.

Middle East

The Middle East has the largest discovered natural gas reserves in the world, but the region has not managed to fully exploit this valuable resource and market it internationally. With the

c Countries in North Africa and the Middle East are deploying more renewable power capacities. The Egyptian BenBan Solar Park is considered one of the biggest solar parks in the world producing 1650 MW.

exception of Qatar, exports via pipeline and LNG are minimal, and the rapid growth in indigenous gas demand means that any increase in production is easily absorbed within the region. The Middle East has 75.5 tcm of gas reserves or around 38% of the world’s total.

Despite sanctions on Iran, the country has been the main driver of regional gas growth. Between 2010 and 2018, Iran added 95 bcm to its annual production, which comprised nearly half of the region’s total increase during this period. In addition, Qatar and Saudi Arabia are expected to grow their collective gas production from 200 bcm in 2010 to 349 bcm in 2030, with 60% of this coming from Qatar. While the combined increase in gas production from these two countries is far below the forecast Iranian growth, it is still a significant contribution to the overall tally for the Middle East. Gas output in the UAE and Oman is forecast to remain relatively stable at around 65 bcm and 35 bcm per year, respectively, until 2025. However, from the mid-2020s both countries face decreasing gas production as new discoveries and developments are unable to offset the decline in output of the countries’ mature fields.

Qatar has the potential to increase production further and regain the crown as the largest LNG exporter in the world. The emirate, with a population of less than 3 million people, has the world’s third largest proved gas reserves, with an estimated 24.7 tcm, and produced 175.5 bcm in 2018. As a result, even with a forecast increase in demand of around 3% per year during the next few years, the country has sufficient resources to meet its own demand and continue being one of the main suppliers of LNG in the world.

Despite the region’s vast efforts to deploy more renewable power capacity, led by Saudi Arabia, it is unlikely that this will have a major effect on gas demand between now and 2030. Given the region’s continued high consumption of liquid fuels, any additions in solar, wind or even nuclear power capacity should be directed towards reducing liquid fuel rather than gas consumption.

Khaled Abu Bakr is the Executive Chairman of TAQA Arabia, Chairman of the Egyptian Gas Association and the IGU Regional Coordinator for Africa and the Middle East.