DAKAR: Africa must build oil and gas pipelines, liquefied natural gas (LNG) terminals, distribution centers and gas-fired power plants over the next 20 years to unlock its energy market of more than 600 million people, officials, executives and analysts say .
But the rapid shift in the rest of the world to renewable energy means that countries in the region that have vast untapped hydrocarbon reserves and rely on exporting those resources for revenue and attract investment funds will face increasing challenges. greater.
Some projects are underway and more are needed, according to six officials, investors and experts, but the challenges, including financing, security and coordination, are daunting.
“We have heard that by 2030 developed nations will no longer need our oil and gas,” Gabriel Mbaga Obiang Lima, Equatorial Guinea’s hydrocarbons minister, said at a recent oil conference in Senegal’s capital Dakar.
“The question is, what are we going to do if we can no longer sell to Europe, America or Asia?”
At least eight memorandums of understanding (MOUs) have been signed in recent weeks for major oil and gas infrastructure networks that would traverse the continent, targeting export, national and regional markets.
Obiang Lima said that by 2030, the main market for African fossil fuel producers will be Africa itself, and without it they are likely to be left with stranded assets.
He was presenting the Central African Pipeline System (CAPS), a new 6,500km oil and gas network with hubs, terminals and storage facilities expected to stretch from Chad to Angola and inland to Rwanda.
“The goal of the project is to create areas where we can transport, store, distribute and create oil hubs. The best example of this is Rotterdam,” he said.
Other projects include a trans-Saharan gas project involving Nigeria, Algeria and Niger, which have revived decades-old talks. The 4,000 km, $13 billion pipeline could send up to 30 billion cubic meters a year of gas to Europe.
Senegal and Mauritania signed four memorandums of understanding with Nigeria and Morocco on Oct. 15 for the estimated $25 billion Nigeria-Morocco gas pipeline project, while construction of the 2,000 km Niger-Benin oil pipeline is underway.
Africa holds about 13% of the world’s natural gas and 7% of its oil, but has the lowest energy use per capita in the world.
Although renewables could play a major role in Africa’s energy supply in years to come, governments say they need fossil fuels for baseload power generation that will power industries. Africa is home to 60% of the world’s best solar resources, but only 1% of installed solar capacity.
Power demand is expected to grow rapidly over the next two decades, 30% higher than today, compared with a 10% rise globally, consulting firm McKinsey said in a June report.
While projects like the trans-Saharan and Niger-Benin pipelines are export-focused, potentially spurred by moves in Europe to decouple from Russian energy, Obiang Lima and others said it was an opportunity to develop regional markets.
Apart from the 678km West African Gas Pipeline completed in 2008, linking Nigeria, Benin, Togo and Ghana, there are few regional oil and gas projects to get products where they are needed.
Senegal, which joins the continent’s oil and gas producing club next year, and others have unveiled gas development plans that include terminals, pipelines for national and regional markets, and conversion of coal-to-gas power plants.
But most African countries, including major oil producers like Nigeria, still rely on imported refined products because local and regional oil and gas infrastructure is poor.
How countries finance these vast projects remains unanswered. US climate envoy John Kerry has warned against long-term investment in oil and gas infrastructure in Africa, urging countries to turn to renewable energy.
Mickael Vogel, head of research at pan-African energy investment research firm Hawilti, said the focus should be on developing domestic gas markets and infrastructure before anchoring it to a larger regional grid if needed.
Citing the example of independent oil and gas producer Perenco in Cameroon, Vogel said companies should start with gas-to-power generation, then liquefied petroleum gas, and expand to small-scale LNG for export and finally gas to industries. .
“Once you have that in place, you can further develop the gas market, then the national infrastructure can anchor regionalization. I think you should start with the national component,” Vogel said.
Obtaining financing to develop Africa’s vast oil and gas projects will remain a challenge in the absence of strong domestic markets, the International Energy Agency (IEA) said in its June report.
“Africa’s gas project track record in this regard is not encouraging,” the IEA said, citing delays in the TotalEnergies project in Mozambique and the Senegal-Mauritania gas project.
“These issues weigh on the prospects for investment decisions for other African LNG projects in the pipeline.”
But Omar Farouk, secretary general of the African Organization of Petroleum Producers, told an oil conference earlier this month that he was confident energy projects on the continent would get financing.
“The funding requirements for the oil and gas industry in Africa far exceed the capacity of any single country in Africa. However, when we pool our resources we can raise funding to sustain the industry on the continent.”
He said his organization, which supports the CAPS pipeline, has teamed up with the Africa Import Export Bank to finance a power bank, which will have about “$6bn in its kit” to finance projects.
Finding gas and laying pipelines across the continent can be easy, said an oil executive who focuses on Africa. He added that keeping assets safe could be the biggest challenge, even in places like Nigeria, where militant violence and oil theft are common.
Another challenge would be for countries to put aside historical differences to unlock a broader market and offer the necessary regulatory stability for investments of up to 30 years, said another regional oil and gas expert who requested anonymity.
Previous plans for large regional projects, such as large-scale refineries, have been stymied by rivalries, leading countries to build small refineries that ultimately failed, the expert added.