Winter is coming: Europe scrambling for Africa’s natural gas

By Seth Onyango, bird story agency

Europe’s rush to replenish its gas stocks has unlocked a massive new market for Africa’s natural gas, with forecasts now showing the continent is on course to export 50% of its total gas output to Europe and Asia between now and 2025.

Europe’s looming energy crisis amid fears of a cold winter could offer financing solutions for Africa’s green energy future: selling its gas to tap its renewables.

Experts argue that natural gas, the “cleanest” fossil fuel, could prove a game changer in Africa’s push for a just energy transition in the wake of new lucrative markets.

According to McKinsey and Company, Africa’s gas suppliers should not sleep through the opportunity, urging them to plough the proceeds from gas sales into renewable-energy projects.

“Investment in lower-carbon-energy infrastructure projects, especially gas pipelines, processing infrastructure, and liquified petroleum gas (LPG), could enable African countries to promote intraregional trade and boost global exports of African energy products, while also helping to strengthen regional energy access,” it states.

“Despite having the largest proven gas reserves on the continent, Nigeria could find itself in a situation in which gas demand outstrips gas supply by 2030 by at least three billion cubic feet per day. This presents a potential opportunity for investment in gas infrastructure such as gas pipelines, gas processing facilities, and coastal liquified natural gas (LNG) regasification to connect currently stranded gas reserves onshore and offshore with domestic industrial, commercial, and power demand centres.”

With reduced flows of Russian gas to Europe, and the lingering threat of a full supply disruption in the dead of winter, the EU is scrambling for any gas it can find.

To Africa’s top producers, this is a windfall that could be converted into a wider strategy for a clean energy revolution.

According to the African Energy Chamber’s (AEC) latest projections, gaps in the European gas market that weren’t there in the past now urgently need to be filled.

“The existence of those gaps means that there’s more room for African gas now than there used to be, particularly LNG, which is easy to store and transport … 50% of the 2022-25 cumulative gas flows from Africa’s top 10 producers are expected to be exported as LNG,” states the AEC.

“And, the interest in African LNG is not likely to be a momentary blip. Going forward, new technologies and shifting geopolitical conditions should make it easier for African producers to maintain market share in Europe.”

The AEC further notes that European buyers aren’t just treating African gas as a quick fix. Italy expects Algeria to keep supplying extra volumes beyond 2022, and it’s also talking to Angola, Egypt, and the Republic of Congo about more extensive deals. Germany is looking to cement ties with Senegal in light of that country’s future gas production, which is on track to start next year. The EU has signed a trilateral memorandum of understanding (MoU) with Israel and Egypt in the hope of boosting future gas imports from the eastern Mediterranean region.

According to AEC, the EU has also sent Matthew Baldwin, the European Commission’s deputy director-general for energy, to Nigeria to discuss the possibility of increased gas supplies. Baldwin, who leads the EU’s Energy Platform Task Force – set up in May 2022 to help cut Europe’s dependence on Russian oil and gas – waxed enthusiastic about Nigeria’s contribution to the EU’s gas supply in an exclusive interview with Premium Times.

He noted that the West African country already accounted for 14% of the EU’s LNG imports and suggested that the figure might rise to 30% or more in the long term, describing Nigeria as a supplier that European gas buyers could count on.

As new markets open, Africa’s emerging gas producers are expected to take advantage of new LNG technologies such as the modular Fast LNG solutions offered by New Fortress Energy, a US-based company, to meet European demand for gas.

With these technologies, AEC argues, they won’t have to wait as long or spend as much money to begin producing the LNG that European consumers are clamouring to buy. They can start in two years or less, rather than waiting five years or more, as is common with more conventional onshore projects.

Meanwhile, the EU has now classified natural gas projects as “green energy” investments, potentially allowing the block to invest in the sector and at the same time contribute to what African nations are increasingly calling a “just transition” in the energy sector as the continent taps into gas and uses the proceeds to build on its huge green energy opportunities.

According to the Brookings Institute, the result of the January decision is that Europe is likely to be a key financer. However, there may be a number of international players eyeing Africa’s gas and renewables opportunities. And Russia’s invasion of Ukraine is focusing attention with startling speed.

With BP divesting its stake in Russian state oil company Rosneft, it may also look for new business opportunities in Africa. Of interest is Africa’s more than 630 trillion cubic feet of proven natural gas reserves that the EU would seek to integrate into its energy mix.

African states have warned that an excessively fast move to renewable energy would be disruptive to their development prospects and have called for a just transition.

With a looming crisis, Europe now also finds itself willing to look anew at financing some of Africa’s potential carbon developments.

/bird story agency