As the move to renewables accelerates, the continent is in a strong position to develop its gas reserves. (Benson Ibeabuchi/Bloomberg via Getty Images)
Several critical global developments have highlighted the potential of Africa’s emerging gas industry. Macro events, rising energy prices and the move to renewables have led many countries, industries and energy businesses to re-evaluate this resource.
In Africa, natural gas resources remain under-developed, largely because not many countries have the infrastructure in place to add it to their energy mix. However, the continent is at a crucial inflection point. If it is to seize the significant opportunity in front of it, it must do so now.
The International Energy Agency Africa Energy Outlook 2022 states that “the continent’s large resource discoveries over the past decade provide an opportunity for natural gas to play an expanded role in Africa’s energy system”.
More than 5 000 billion cubic metres of natural gas resources have been discovered to date in Africa, which the agency estimates could provide an additional 90 billion cubic metres of gas a year by 2030. But for this to happen, the continent must get moving on approval of gas developments, which have extremely long lead times.
The report goes on to reveal that “new long lead-time gas projects risk failing to recover their upfront costs if the world is successful in bringing down gas demand, in line with reaching net zero emissions by mid‐century”.
Thus, if global efforts to reduce demand for gas come to fruition by 2050, Africa might not reap the economic benefits of the continent’s natural-gas reserves, emphasising the need for more immediate action.
Countries such as Côte d’Ivoire and Tanzania already employ indigenous gas for power generation. But the continent has vast reserves that hold enormous potential. Recent geopolitical events have only heightened interest in Africa’s gas resources.
Evidence of this is the significant Anchois discovery in Morocco, which Chariot is developing. This project is receiving interest from a wide range of industry audiences, including potential investment partners.
Global macro events have also made the energy situation more urgent. Morocco, where Anchois is located, sources gas via imports from Spain using the GME pipeline. Global commodity price increases have emphasised the need for energy security, ideally through local gas at more stable prices.
In this climate, there’s increased interest in this Morocco gas project, which is moving closer to a final investment decision. There are ongoing negotiations for commercial agreements to sell gas to the national utility; front-end engineering and design has been completed and the environmental and social impact assessment is nearing conclusion.
What helps projects progress, is a commitment to prioritising African gas, for African clients, in this case, initially to Morocco’s interstate power company, but growing over the medium term to supplying other domestic markets. Not only is this project an attractive business, but it’s the right thing to do, in terms of developing Morocco’s economy.
Another factor seeing gas gaining favour is that, as a resource, it is fundamentally different to oil and coal. While it’s not a renewable resource, it burns less carbon and is more flexible.
It can also support the transition to renewable energy. With renewable supply being inherently unstable, gas can provide vital firming capacity to meet varying demand. Gas can help ensure that coal use is minimised as renewables are ramped up but also that power supply can be balanced and remain uninterrupted.
Using gas to balance power needs in a changing energy mix can help to unlock renewable investment, as it mitigates many of its risks. In this sense, gas is also an enabler of renewables investment, while being cheaper and cleaner than oil.
Natural gas produces significantly lower carbon emissions than oil or coal. A recent McKinsey report noted that a 2008 switch from coal- to gas-fired power in the US had abated more carbon emissions than all the renewable power capacity ever installed in the country.
At the same time, most traditional oil and gas companies are also embracing renewables, as they become more diversified energy businesses. Many of the leaders in new energy sectors are traditional oil and gas companies. They have precisely the expertise and access to capital needed to deal with a resource like green hydrogen, for instance.
Developing green hydrogen requires large, capital-intensive projects and joint-venture partnerships. It also faces similar transportation challenges to oil and gas. This makes it a natural fit for the super majors — as well as more nimble, smaller energy groups — to lead project identification and early development.
Financial institutions are helping to drive the energy transition. As it becomes more challenging to raise finance for oil projects, more majors and smaller oil businesses are changing focus to renewables and gas projects.
This has meant that, far from being the last holdouts of a legacy technology, traditional oil businesses are often among the leading players in the energy space. Given their access to capital, expertise and infrastructure, they’re often best positioned to drive energy innovation — especially at scale.
Gas has gained importance, politically, strategically and environmentally. To facilitate its development, many high-level partnerships are taking shape. There are new trans-Mediterranean pipeline projects under discussion, as well as intra-Africa initiatives, such as the Nigeria-Morocco gas pipeline.
In this context, there is an amazing opportunity for African countries to capitalise on their gas resources, to attract investors and ensure clean, secure energy supply domestically and for their neighbours.
There will be a significant chance to seize this opportunity when Africa Oil Week is held in Cape Town in October.
It is time for big thinking in Africa, as the continent looks to develop its resources on a massive scale, to meet the energy needs of its people, and to become a significant player in global energy markets.
Duncan Wallace is Chariot Limited’s Technical Director.