A new liquefied natural gas project off Africa's west coast may only be 80 per cent complete, but already the prospect of a new energy supplier has drawn visits from the leaders of Poland and Germany.
Key points:
- Europe is turning to resource-rich African countries as it looks to lessen its dependence on Russian gas
- African leaders across the continent are looking to cash in on the bonanza as prices spike
- The deals raise questions about the energy needs in these countries and the move away from fossil fuels
The initial field — near Senegal and Mauritania's coastlines — is expected to contain about 425 billion cubic meters of gas, five times more than what gas-dependent Germany used in all of 2019. However, production isn't expected to start until the end of next year.
That won't help solve Europe's energy crisis triggered by Russia's war in Ukraine.
Still, Gordon Birrell — an executive for project co-developer BP — says the development "could not be more timely" as Europe seeks to reduce its reliance on Russian natural gas to power factories, generate electricity and heat homes.
"Current world events are demonstrating the vital role that [liquid gas] can play in underpinning the energy security of nations and regions," he told an energy industry meeting in West Africa last month.
While Africa's natural gas reserves are vast and North African countries such as Algeria have pipelines already linked to Europe, a lack of infrastructure and security challenges have long stymied producers in other parts of the continent from scaling-up exports.
Already-established African producers are cutting deals or reducing energy use so they have more to export to boost their finances, but some leaders warn that hundreds of millions of Africans lack electricity and supplies are needed at home.
Nigeria has Africa's largest natural gas reserves, according to Horatius Egua, a spokesman for the country's petroleum minister, although it accounts for only 14 per cent of the European Union's imports of liquefied natural gas, or LNG, that comes by ship.
Projects face the risk of energy thefts and high costs.Other promising countries such as Mozambique have discovered large gas reserves only to see projects delayed by violence from Islamic militants.
Europe's scramble for Africa's gas
Europe has been scrambling to secure alternative sources as Moscow has reduced natural gas flows to EU countries, triggering soaring energy prices and growing expectations of a recession.
The 27-nation EU — whose energy ministers are meeting this week to discuss a gas price cap — is bracing for the possibility of a complete Russian cut-off, but has still managed to fill gas reserves to 90 per cent.
European leaders have flocked to countries such as Norway, Qatar, Azerbaijan and, especially, those in North Africa, where Algeria has a pipeline running to Italy and another to Spain.
Italy signed a $US4 billion (more than $6 billion) gas deal with Algeria in July, a month after Egypt reached an agreement with the European Union and Israel to boost sales of LNG. Angola also has signed a gas deal with Italy.
While an earlier agreement allowed Italy's biggest energy company to start production at two Algerian gas fields this week, it was wasn't clear when flows would start from the July deal because it lacked specifics, analysts said.
African leaders such as Senegalese president Macky Sall want their countries to cash in on these projects, even as they're being dissuaded from pursuing fossil fuels.
They don't want to export it all either — an estimated 600 million Africans lack access to electricity.
"It is legitimate, fair and equitable that Africa — the continent that pollutes the least and lags furthest behind in the industrialisation process — should exploit its available resources to provide basic energy, improve the competitiveness of its economy and achieve universal access to electricity," Mr Sall told the UN General Assembly last month.
Algeria is a major supplier — it and Egypt accounted for 60 per cent of the natural gas production in Africa in 2020 — but it can't offset Russian gas to Europe at this stage, said Mahfoud Kaoubi, a professor of economics and specialist in energy issues at the University of Algiers.
"Russia has an annual production of 270 billion cubic metres, it's huge," Professor Kaoubi said.
"Algeria is 120 billion cubic meters, of which 70.50 per cent is intended for consumption [by] the internal market."
The impact on domestic demand
This year, Algeria is forecast to have piped exports of 31.8 billion cubic meters, according to Tom Purdie, a Europe, Middle East and Africa gas analyst with S&P Global Commodity Insights.
"The key concern here surrounds the level of production step-up that can be achieved, and the impact domestic demand could have", given how much gas Algeria uses at home, Mr Purdie said.
Cash-strapped Egypt also is looking to export more natural gas to Europe, even regulating air conditioning in shopping malls and lights on streets to save energy and sell it instead.
Prime Minister Mostafa Madbouly says Egypt hopes to bring in an additional $US450 million a month in foreign currency by rerouting 15 per cent of its domestic gas usage for export, state media reported.
More than 60 per cent of Egypt's natural gas consumption still is used by power stations to keep the country running. Most of its LNG goes to Asian markets.
A new, three-party deal will see Israel send more gas to Europe via Egypt, which has facilities to liquefy it for export by sea. The EU says it will help the two countries increase gas production and exploration.
In Nigeria, ambitious plans have yet to yield results, despite years of planning. The country exported less than 1 per cent of its vast natural gas reserves last year.
A proposed 4,400-kilometre-long pipeline that would take Nigerian gas to Algeria through Niger has been stalled since 2009, mainly because of its estimated cost of $US13 billion.
Many fear that, even if completed, the Trans-Sahara Gas Pipeline would face security risks like Nigeria's oil pipelines, which have come under frequent attacks from militants and vandals.
The same challenges would hinder increased gas exports to Europe, said Olufola Wusu, a Lagos-based oil and gas expert.
"If you look at the realities on ground — issues that have to do with crude oil theft — and others begin to question our ability to supply gas to Europe," he said.
Mr Wusu urged pursuing LNG, calling it the "most profitable" gas strategy so far.
Even that isn't without issues: In July, the head of Nigeria LNG Limited, the country's largest natural gas firm, said its plant was producing at just 68 per cent of capacity, mainly because its operations and earnings have been stifled by oil theft.
Islamic militants in the south
In the south, Mozambique is slated to become a major exporter of LNG after significant deposits were found along its Indian Ocean coast in 2010.
France's TotalEnergies invested $US20 billion and started work to extract gas that would be liquefied at a plant it was building in Palma, in the northern Cabo Delgado province.
However, Islamic extremist violence forced TotalEnergies to indefinitely scupper the project last year.
Mozambican officials have pledged to secure the Palma area to allow work to resume.
Italian firm Eni, meanwhile, pressed ahead with its plan to pump and liquefy some of its gas deposits discovered in Mozambique in 2011 and 2014.
Eni established a platform in the Indian Ocean, 80 kilometres offshore, away from the violence in Cabo Delgado.
It's the first floating LNG facility in the deep waters off Africa, Eni says, with gas liquefaction capacity of 3.4 million tonnes per year.
The platform liquefied its first gas on October 2, according to Africa Energy, and the first shipment is expected to depart for Europe in mid-October.
AP