A new report released by the International Gas Union (IGU) highlights the key principles that Africa needs to adopt to supercharge the development of gas markets.
Future-Proof through Project Design
The IGU recommends that African countries prioritize environmental sustainability and energy decarbonization in project planning and deployment to ensure gas projects will remain relevant for decades to come as carbon emissions reduction becomes more of a priority for global governments. With the energy transition taking center stage, there is a need for Africa to ensure gas projects align with the just energy transition agenda; guarantee environmental sustainability; and are compatible with the goals of the Paris Agreement.
Africa is, however, progressing in this regard, with countries focusing on emissions reductions through various measures such as policy enactments aimed at reducing and curbing gas flaring. Africa is also prioritizing sustainability by developing gas in the form of liquefied natural gas (LNG), with a lion’s share of the continent’s new discoveries including Greater Tortue Ahmeyim (GTA), BirAllah, Coral Sul, Brulpadda and Luiperd, Mozambique LNG, Venus and Graff being monetized as LNG.
Africa is competing with international markets to attract the investments required to fast-track gas exploration, production as well as mid- and downstream activities. By looking inward, promoting and leveraging domestic financial mechanisms, the continent has an opportunity to maximize the growth of the industry, according to IGU. Private sector funders and institutions such as the Afreximbank, Africa Finance Corporation, African Energy Investment Corporation and the proposed African Energy Transition Bank have and will continue to be critical in enabling Africa to fund domestic gas projects.
Good Business Climate
Fiscal terms, political atmosphere, energy policies and contractual terms need to be attractive to global investors and energy companies. The IGU report states that African governments need to maximize the creation of enabling environments for global gas companies and investors in order to be globally competitive and attract the capital, technologies and skills needed to enhance industry growth. In this regard, countries such as Angola, Mauritania, Senegal, Algeria, Tanzania and Namibia have been successful with an increasing number of energy companies, investors and foreign direct investment flowing to boost energy exploration and infrastructure development.
The development of sub-regional and regional gas and energy networks can support economies of scale and infrastructure investments, according to the IGU. Africa is progressing well in this area with large-scale projects such as the Nigeria-Morocco Gas Pipeline, Trans-Saharan Gas Pipeline, East African Crude Oil Pipeline and the Central African Pipeline System either underway and in in the planning stage. Equatorial Guinea through its Gas Mega Hub and Senegal and Mauritania through the development of the massive GTA gas development have indicated the importance of regional cooperation in driving industry growth.
Gradual Scaling and Increased Focus on Gas-to-Power
With massive reserves remaining untapped across the continent’s marginal fields, an opportunity has risen for African countries to enhance partnerships with local and international independents to tap these resources for local electricity generation. In this regard, countries such as Nigeria, Angola, Congo-Brazzaville, South Sudan and Gabon have the potential to accelerate electrification on the back of small-scale gas-to-power projects and marginal field development.
Cluster and Ecosystem Investing
The IGU recommends that in order to amplify the development of gas markets, Africa needs to include tangible industrialization plans such as the development of manufacturing clusters close to gas fields. This will help ensure the provision of cheap energy to power industries.
With African countries seeking to meet growing energy demand and ensure energy affordability, thereby reducing reliance on high-cost energy imports, the continent’s gas sector is set to record an impressive growth both in the short and long-term.