africa Banking capital markets development Economy Energy Finance Gas Mozambique

Low-cost natural gas to fuel Africa’s economic revolution

Approximate reading time: 4 minutes

Gas remains a largely untapped energy resource in Sub-Saharan Africa with resource estimates suggesting offshore discoveries in the Rovuma Bason may turn Mozambique into one of the world’s largest natural gas exporters by 2023.

With growing interest in sustainability and low-carbon energy, access to abundant, low-price gas resources may help position the region for a new wave of commercial and industrial development.

Beyond Mozambique gas resources have been identified in Namibia, Angola, Malawi, Ghana, Tanzania and Nigeria, each of which has the potential to contribute significantly to Africa’s energy security goals, as well as help drive the industrial ambitions across the region.

In fact, the US Agency for International Development’s (USAID) Power Africa initiative, which was initiated in 2016, launched the Gas Roadmap for sub-Saharan Africa this June at the World Gas Conference in Washington, DC. This roadmap aims to add about 16,000MW of gas-fired power in nine countries by 2030. The roadmap is built on the fact that based on known reserves, there is potential for approximately 400GW of gas-generated power in sub-Saharan Africa.

With demand from commercial and industrial organizations for higher levels of access and reliability, this initiative can help drive investments from US companies upwards of $175 billion in gas power projects in Kenya, Tanzania, Côte d’Ivoire, Ghana, Nigeria, Senegal, Angola, Mozambique and South Africa.

Gas production

Webb Meko, Business Development Director at Black & Veatch points out that these discoveries, while significant, need to be preceded by meaningful engagements between members of the Southern African Power Pool (SAPP). “The region has a once-in-a-generation opportunity to capitalize on advances in gas production, generation technology and the public’s demand for low-carbon energy. It is critical to take a holistic approach to developing a framework that plans out how this great resource can be used to meet the social and economic goals of the region.”

There are a number gas-to-power projects in Southern Africa. Namibia’s Kudu Gas Power Project, which was developed with Eskom with Zambia’s Copperbelt Energy Corporation as the intended off-takers, was initially expected to produce 850MW of power. However, challenges finalizing power off-take agreements in a region with large capacity shortfalls slowed development and forced a reduction in the overall scale of the project to 515.3MW.

Meko argues that a clear framework would help mitigate delays in the future and would provide each country with a plan to guide towards reaching their individual targets and supporting the targets of the region.

“The same way that South Africa is looking at an integrated energy infrastructure approach to meet the needs of its own country, a similar approach but expanded to include the whole region could be used to optimise how we maximise the use of our gas,” he asserts, adding that an integrated approach has the benefit of having the infrastructure costs shared amongst the various SAPP members.

Gas strategy framework

South Africa is in the process of developing its own gas strategy framework, the Gas Utilisation Master Plan (GUMP), which is currently in the process of being finalised. Meko explains that the GUMP will provide a framework that outlines infrastructure needs across the country as well as for each segment of the entire gas value chain, from electricity generation to industrial and commercial applications.

“The key is to plan gas transmission and distribution infrastructure in conjunction with generation capacity so that as resources become available it is only a matter of integrating it with the existing assets and demand centers,” he states.

South Africa’s Integrated Resource Plan has positioned gas as an important part of the country’s proposed future energy mix, however, Meko believes that this needs to seamlessly integrate with the Integrated Resource Plan and the GUMP, to create “one, total energy plan for the country”.

“This approach can be expanded to the rest of the SAPP, as it creates a mutually beneficial energy sector that is more equitable for member states. However, there needs to be political buy in from everyone. This will help build a much larger financing pool that can be accessed for project development, which will result in significant employment opportunities and skills development across the region,” Meko concludes.

Source: ESI Africa

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