To improve investment in Africa for production, transmission, and distribution, African governments would need to consider separation or ‘unbundling’ of production, transmission and distribution and privatisation of the utilities sectors.
NAIROBI, Kenya: Building from a panel discussion on the State of African Energy, Oil and Gas and Hydrogen – market focused webinar recently hosted by the African Energy Chamber, the issue of Africa’s ability to supply gas to Europe to subsidize current demand accelerated by the Russia’s war in Ukraine featured prominently and left some audience with alot of questions.
Africa’s Energy Executive Abdur Rasheed Tunde Omidiya, who is the Managing Director at QSol Consulting DMCC and Head of Nigeria for the African Energy Chamber, in an exclusive interview with Smart Africa Media Founder and Managing Editor Elvis Mboya, explains why the current crisis in Europe could be a blessing in disguise for Africa’s gas producing countries and further shares practical solutions to resolve Africa’s own energy poverty.
Is Africa having the capacity to get sufficient gas to Europe to subsidise the demand as a result of Russia’s war in Ukraine?
African countries do have the capacity to get sufficient gas to Europe. We have some of the world’s most extensive gas reserves with about 148.6 trillion cubic meters of proven gas reserves. Currently, Russia supplies between 150-190 billion cubic metres per year to Europe. Algeria is currently Europe’s third-largest gas supplier with an already placed infrastructure and network for delivering gas to Europe. With further capacity development plans for the already inplace pipelines and new Intra African pipelines being developed to further increase the capacity of exports, Africa has the capacity to become Europe’s largest supplier.
In reality, what would it take to run production to supply gas to Europe within a few weeks/months to meet the existing and soon to be dire demand?
It is critical to remember that North Africa already had a developed gas export market with Europe, pre-Ukrainian crisis. Before 2020, Algeria was already exporting up to 481 million cubic metres annually. The expected expansion of the Algerian Medgaz pipeline capacity is to boost shipments to Europe. The Trans-Saharan Gas Pipeline which goes from Nigeria, through Niger to Algeria once complete, will transport up to 30 billion cubic meters of gas per year to Algeria, connecting to the existing network to Europe. The rate of infrastructure development is currently the bottleneck in supplying gas to Europe. Without the necessary pipelines, storage facilities, and processing plants, African countries are unable to meet local and international demand for the gas resources available.
Then, what’s preventing Africa’s gas producing countries from investing in solid infrastructure to meet local and international demands for their resources?
One of the main issues is a lack of financing. Many African nations are considered to be high-risk investments, so they have difficulty accessing capital from international lenders. There have also been limitations in financing with the current ban on fossil fuel financing (gas included) by international financial institutions and governments across Europe and North America. Additionally, many African countries currently lack the technical expertise needed to develop and operate gas infrastructure. As a result, they must rely on foreign companies, which can be expensive.
The Trans-Saharan gas pipeline initiated by Nigeria and Algeria, is one of those infrastructures established to tap into the opportunity of diversifying the EU’s gas supply. In your opinion, has it delivered on this mandate and what else can be done to maximise its capacity?
The Trans-Saharan Gas Pipeline would enable Europe to tap directly into the three country’s significant natural gas reserves (Nigeria, Niger, and Algeria). The pipeline has been discussed for several years but the security situation in the Sahel region and tensions between the governments of Algiers and Niamey did not allow the project to go ahead. As a result, it wasn’t until 2021 that Algeria and Niger reopened their border. Since then, the pipeline construction has been revived. Once development is complete, it is expected to have a capacity 30 billion cubic meters of natural gas per year. Increasing the infrastructure development within the countries involved and surrounding areas would make it easier and cheaper to transport gas through the pipeline and maximise the capacity.
Vicious cycles of corruption, high taxation and political instability continue to dampen the investment environment in many gas producing countries scaring away potential investors. What deeper role can public/private partnership [PPPs] play to mitigate these challenges?
Through PPPs, the private sector can bring both capital and expertise to projects, while the public sector can provide land and regulatory certainty. In addition, PPPs can help to attract foreign investment and technical know-how. For example, in Mozambique, a consortium of international oil companies is developing a major liquefied natural gas (LNG) project through a PPP with the government. The project is expected to bring much-needed investment and jobs to the country.
Closer back home, how best can Africa, with its vast natural resources, including oil and gas provide the majority of her population with access to energy/electricity?
Investing in oil and gas production, transmission, and distribution infrastructure is essential to ensuring that these resources are properly utilized and energy access is increased. To improve investment in Africa for production, transmission, and distribution, African governments would need to consider separation or ‘unbundling’ of production, transmission and distribution and privatisation of the utilities sectors. This would promote competition and efficiency by allowing different firms to specialise in different parts of the value chain therefore allowing increased energy access, higher reliability and lower costs for consumers
Many governments in Africa blame Russia’s war in Ukraine for the current oil and gas shortage in their countries, and even high prices of commodities. What’s the level of truth in this theory?
The conflict is only one of many factors that have resulted in the current shortages. Other factors include Africa’s own lack of infrastructure and investment, much of the continent lacks refining capability, forcing countries to pay high prices to import gasoline and other petroleum products from Asia and Europe. While the Russia-Ukraine conflict may have played a role in the current situation, it is only one piece of a larger puzzle.
