Natural Gas is Key to Africa’s Industrialization Process

Source: 9/6/2023, Location: Africa

Natural gas only contributes 5% to Africa’s energy mix but almost half the continent’s 55 countries have proven reserves and it could provide the baseload power needed to boost Africa’s capacity to process its raw materials locally.

Africa’s vast natural gas reserves are key to bringing energy to Africa’s poorest countries, to a solid industrialisation process throughout the region and to significant poverty reduction.

The region is home to 33 of the world’s 46 least-developed countries (LDCs) with an average income per head of less than $1,018 a year. The continent’s poorest countries must expand at 6-7% a year if poverty is to be reduced in a big way and if the life chances of hundreds of millions of people are to be improved. To achieve this goal, these countries require abundant and cheap energy. Luckily, for many African states, the answer lies on their own doorstep — natural gas. Gas has remained a niche fuel in sub-Saharan Africa — contributing only 5% of the total energy mix against a global average of 20-25% — but its potential is enormous.

A new vision for Africa is required — a criss-crossing network of natural gas pipelines that brings energy to all corners of the region. The continent’s contribution to global greenhouse gas emissions is tiny and will only become slightly bigger if the region’s natural gas reserves are exploited. There is also a massive opportunity to wean poor Africans away from the use of biomass fuel and to help protect the region’s forests through the rollout of small, liquified petroleum gas (LPG) stoves. Climate change is an issue in Africa but poverty reduction is a bigger one. Poverty is the biggest killer in Africa today.

It’s very hard for Europeans and North Americans to imagine what it’s like to live on under $1,018 a year, to not have readily available electricity, to not have a refrigerator or a washing machine, to not have a car, to not have a lawnmower, to not be able to fly from one country to another cheaply, to not have electricity in the school or the workplace and to have to use firewood or charcoal for cooking purposes. Fossil fuels have been at the heart of the Industrial Revolution that has brought prosperity and better living standards to the developed world. People in the First World must be very careful if they decide to deny Africans the same chance to prosper.

Africa has the lowest energy use per capita in the world — the average electricity use of a sub-Saharan African resident is lower than that of a household fridge in the United States. Average consumption per person in sub-Saharan Africa, excluding South Africa, is a mere 185 kilowatt-hours (kWh) a year, compared with about 6,500kWh in Europe and 12,700kWh in the US. Every year San Antonio, Texas, with a population of 1.5m people, uses as much electricity as the whole of Nigeria, with 203m people. Golden, Colorado, a small town with only 19,000 people, uses as much electricity as Chad, a country with 16m people.

The UN’s Sustainable Development Goal Seven aims to “ensure access to affordable, reliable, sustainable and modern energy for all” by the year 2030. That’s a tall order. In 2019, 917m people in Africa (around 80% of the region’s population) relied on wood, charcoal, kerosene, animal and crop waste or other solid fuels to cook their food and heat their homes. The International Energy Agency (IEA)reports that almost 490,000 people die prematurely every year in sub-Saharan Africa from household air pollution-related causes —stemming from the lack of access to clean cooking facilities. Gas is a much cleaner form of cooking than biomass and its use should be encouraged. Biomass burning-power plants emit 300-400% more CO2 than natural gas per unit energy produced. Natural gas emits almost 50% less carbon dioxide than coal.

Africa has one-fifth of the world’s population but contributes only 3% to global greenhouse gas emissions. Incredibly, some 48 sub-Saharan African countries, excluding South Africa, have an estimated share of global emissions of only 0.55%. The fact is that many African states are already at net zero. If the continent were to use an additional 90bn cu m of natural gas per year — or 50% more than today — the resulting emissions would only raise Africa’s cumulative contribution to global carbon emissions to 3.5% (tengigatonnes) by the year 2050, according to the IEA. It really is a tiny increase compared to the chance of reducing poverty levels for hundreds of millions of poor people. If Africa is to provide universal electricity access by 2030 it would have to almost double its total generation capacity from around 260gw today to 510gw.

Almost half the continent’s 55 countries have proven natural gas reserves. Across the region, natural gas reserves amount to around 17.5trn cubic metres (cu m), making up around 9% of the world’s total gas reserves. They are considerable in northern Africa (accounting for 45% of African reserves) and western Africa (32%), in particular. Commercial quantities of natural gas have been found in many African countries.

Previously, only four countries from the region have been major natural gas production hubs: Nigeria (with total gas reserves of 5.8trn cu m), Algeria (4.5trn cu m), Egypt (2.2trn cu m) and Libya (1.5trn cu m). These four accounted for 78% of African gas reserves in 2021, according to the United States Energy Information Administration.

However, seven African countries — Mozambique, Senegal, Tanzania, Mauritania, South Africa, Ethiopia and Morocco — with no history of fossil gas exploitation have now opened up their doors to gas projects. Some 84% of new reserves in the pre-production stage are found in these states — total new reserves amount to 5.1trn cu m. Mozambique has re-production reserves of 2.3trn cu m, Senegal 779bn cu m, Mauritania 575bn cu m, Tanzania 512bn cu m, South Africa 96bn cu m, Ethiopia 42bn cu m and Morocco 39bn cu m.

Furthermore, major untapped reserves have been discovered in Angola, Cameroon, Ghana, Equatorial Guinea, the Republic of the Congo, Kenya and Uganda. A number of these states — including Mozambique, Tanzania, Mauritania and Senegal — are actively marketing natural gas to capitalise on recent discoveries. In fact, the IEA has declared Africa the ‘new frontier’ in global oil and gas.

The big four gas-producing countries will continue to dominate gas production in the near term but experts estimate that Mozambique and the other new entrants will contribute more than 50% of the region’s gas production by 2038.

Natural gas can be used for electricity generation, industry and domestic use. Crucially, harnessing Africa’s gas could provide the baseload power needed to boost Africa’s capacity to process its raw materials locally. It could provide enough energy for industrial processes, including steel and cement production and paper and pulp manufacturing. It could be also used to make fertiliser to raise agricultural yields. Renewables, including solar and wind, cannot yet provide enough energy for these purposes.

The huge reserves of gas can play a significant role in the continent’s energy transition, as natural gas has a much lower carbon footprint than oil and coal. Critically, natural gas development and renewable power are not mutually exclusive. If Africa were to triple its use of natural gas, the United Nations Economic Commission for Africa (Uneca) estimates that the region would be able to increase its use of renewable energy eight-fold. Reliable forms of energy such as gas can be used to stabilise a grid powered by intermittent sources such as wind and solar. It can play a key role in a ‘just’ energy transition.

However, expanding gas supply across Africa would require a whole web of new gas pipelines and that does not come cheap. A lot of the gas from the new projects already under way in Africa is destined for international markets, including the European Union — which have been seeking new sources of energy since the Ukraine crisis — but it is vital that the region’s gas reserves are deployed for domestic use, as well. Nigeria, for example, sits on the continent’s largest known natural gas reserves but only 55% of the population had access to secure electricity in 2020.

Multilateral financial institutions (MFIs) — many of which are headquartered in the developed world — are now shying away from investing in natural gas projects in Africa because of pressure from a vociferous green lobby. In 2021, 20 countries — including almost all the world’s big, rich democracies — pledged to stop almost all financing of new fossil fuel projects internationally by the end of 2022. Furthermore, under the Glasgow Financial Alliance for Net Zero (GFANZ), 450 financial firms across 45 countries,responsible for over $130trn in assets, committed to accelerate the global decarbonisation process. The problem is that most Western governments and financial institutions do not distinguish between coal, oil and gas, and the pressure to stop funding all hydrocarbons has negatively impacted gas projects in Africa in a big way.

Some of the continent’s biggest financiers — including the African Development Bank (AfDB) — are finding it increasingly difficult to support gas project developments that require loan syndication and foreign partners. The World Bank is pulling back, too. Local bankscannot finance major gas projects on their own, as they are limited by their capital base. In particular, the fossil fuels divestment campaign is having a big impact on the amount of development and concessional finance available. This kind of finance used to support a number of gas projects for their poverty-reducing and economic development value.

For example, without the guarantees of development finance institutions (DFIs), most of Africa’s recent gas-to-power plants would have never been built in the first place. The withdrawal of development finance from downstream gas and gas-to-power projects is a serious cause for concern for Africa’s electrification effort and moving the needle on energy access.

Furthermore, there is a glaring double standard — many European countries have increased their use of hydrocarbons (coal as well as gas) since Russia’s invasion of Ukraine. They are constructing new fossil fuel pipelines at home. The EU recently classified natural gas a ‘green’ fuel, which will allow Europe’s projects to be backed by investors committed to environmental, social and governance(ESG) principles. European countries are now looking towards African states for new sources of gas. However, they are not prepared to back new gas projects in Africa that would supply the fuel to the region itself. That smacks of hypocrisy of the worst kind. How can you deny the poorest people in the world the sort of energy that you want to use yourselves?

Lumping all hydrocarbons together is a blunt policy mechanism that is not good from an emissions perspective either. In poorer places, like sub-Saharan Africa, the available alternative to gas is not renewable electricity but rather coal, diesel and, most of all, polluting biomass. In sub-Saharan Africa, demand for biomass fuels is expected to surge by 40% by the year 2040 if ‘business as usual’ continues. The burning of biomass is a major contributor to global carbon emissions and charcoal has been a top driver of tropical forest loss during the past two decades, with the greatest footprint in Africa. The continent’s carbon sinks need protecting and the irony is that the greater use of gas would achieve that.

Africa is home to 18% of humanity but receives less than 5% of global energy investment. And much of this investment goes on producing oil and gas for export. There must be much more investment in the region for the domestic use of gas. Gas projects couldplay an absolutely vital role in bringing energy to Africa but obviously the projects require financing. DFIs must think again about their decision to limit investment in new projects in Africa. The financing of a network of gas pipelines throughout Africa would be one of the quickest and surest ways of industrialising the region in a big way and of alleviating poverty on a large scale. Renewables just cannot do that how ever much wishful thinking takes place.

In fact, development institutions should go one step further and consider subsiding a massive roll out of small LPG stoves to millions of poor households in the region. It could be one of the biggest moves in contributing to Africa’s decarbonisation effort by arresting the pace of deforestation in the region. LPG is recovered from ‘wet’ natural gas (gas with condensable heavy petroleum compounds) by absorption and reaches the domestic consumer in cylinders under relatively low pressures. The widespread adoption of LPG stoves would reduce the amount of pollutants in the air from biomass fuels. Poor households that currently depend on woodfuel for cooking require a cleaner cooking alternative — LPG is one of the solutions.

LPG stoves are also suitable for domestic use in rural settings — a key consideration in Africa where energy poverty is greatest in the countryside. For instance, in 2016, electricity access in urban and rural areas in Nigeria was 86% and 34%, respectively, according to the World Bank.

Africa only needs to look to Asia for examples. In 2006, Indonesia implemented a ‘mega-programme’ to induce a large-scale transition from kerosene to LPG stoves in order to reduce government spending on kerosene subsidies. The initiative invested in LPG infrastructure, domestic cylinder production and consumer awareness. By 2012, 93% of the target had been reached and LPG consumption had grown by almost 350%.

In India, LPG access expanded through the early-2000s but it was still not reaching most poor families. To boost access among the poor, the Indian government introduced the Pradhan Mantri Ujjwala Yojana (PMUY) Scheme. Under it, the country’s oil marketing companies provide subsidies to reduce the cost of both LPG connections and cylinder refills to women in households classified as below the poverty line. In 2016, the cost of a connection was about Rupees 3,200 ($48) and included the first full cylinder (plus deposit), deposit for a regulator, an LPG stove and administrative fees.

Furthermore, African governments must consider increasing domestic gas allocations from liquified natural gas (LNG) export projects. These are an effective way to ensure that even if developers prioritise lucrative exports over local sales, they must reserve part of their production for the domestic market. Upcoming LNG terminals in sub-Saharan Africa — for example, in Mozambique — now make it compulsory to allocate a specific amount of gas to the domestic market. The availability of domestic gas from export facilities can encourage gas-based industrialisation (for example, in Senegal) or additional gas-to-power capacity (Mozambique, Mauritania and Senegal). In August 2022, for instance, Senegal’s Petrosen Trading & Services signed an MoU with Turkey’s Çalik Enerji andJapan’s Mitsubishi for the pre-feasibility study of a gas-based ammonia and urea manufacturing unit.

It is a huge mistake to lump all hydrocarbons together and for Western environmentalists to argue that no new new fossil fuel projects should happen in Africa whatsoever. Deforestation is one of the biggest issues in Africa today. Poor Africans must be weaned off the use of wood-based fuels. The widespread adoption of small LPG stoves would be one of the surest ways of reducing deforestation. Natural gas could also form the basis for a solid, large-scale industrialisation process in Africa — something that is essential if the region is to achieve the sort of economic growth needed to lift hundreds of millions of people out of poverty.

Nigeria >>  11/30/2023 - San Leon, the independent oil and gas production, development and exploration company focused on Nigeria, notes the announcement made on 30 November 2...
Sudan >>  11/28/2023 - Zenith Energy Ltd., the listed international energy production and development company, is pleased to announce that it has signed a Memorandum of Unde...

Uganda >>  11/27/2023 - Details of what will be the world’s longest heated crude oil pipeline, carrying oil from Uganda to the Indian Ocean coast of Tanzania, have been revea...
Uganda >>  11/16/2023 - Following the publication of the report by the NGO Greenfaith on the consideration of cultural heritage within the EACOP project in Uganda and Tanzani...

Australia >>  11/15/2023 - Santos notes the decision of the Federal Court of Australia today ruling pipelay activities can commence on an 86km section of pipeline for the Baross...
Mexico >>  11/15/2023 - The Government of the State of Chihuahua and Mexico Pacific announced today they have entered into a strategic collaboration agreement, attracting key...

Gulf Oil and Gas
Copyright © 2023 ICT All rights reserved. - Terms of Service - Privacy Policy.