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Africa: The Future of Gas?

04.06.2018 / Energyboardroom

“Africa is going to be an important part of the global gas industry of the future,” says David Carroll, president of the International Gas Union (IGU), the association which advocates for natural gas as an integral part of a sustainable global energy system and promotes the political, technical and economic progress of the gas industry. Carroll’s assertion is backed up by statistics: Africa holds 7.6 percent of the world’s proven gas reserves and accounts for 13.1 percent of global liquefied natural gas (LNG) exports as well as 6.2 percent of gas pipeline exports according to a November 2017 PwC report.

“With economies growing, populations moving to cities and energy demands rising, natural gas is going to be a major growth story”

David Carroll, IGU

Carroll is keen to talk up the benefits of greater utilization of gas, especially in developing countries such as those in Africa, where, “with economies growing, populations moving to cities and energy demands rising, natural gas is going to be a major growth story.” Additionally, he feels that gas is a more multifaceted energy source than the alternatives, pointing to the fact that “gas has multiple roles as a fuel. It generates power, but it is also a feedstock for chemicals and a direct feeding source for homes and businesses.” Moreover, “gas is cleaner than coal, diesel and oil and is therefore an ideal component to complement the increasing growth of renewables,” he notes. Carroll concludes, “we believe that natural gas is not just a transition fuel, but a critical element of today’s and tomorrow’s energy mix.”

PwC’s oil and gas industry lead for South Africa, Chris Bredenhann, describes how the major energy companies are positioning themselves to capitalize on the gas opportunities in Africa. He posits that, “Statoil, ENI and ExxonMobil are all looking at gas plays up the East Coast of Africa in line with the global trend of majors focusing more on gas as part of a longer-term transition to a lower carbon environment. BP and Shell are the notable players already acting to rebalance their portfolio more into gas, for instance, BP with their operations in Egypt and their purchase of LNG in Mozambique, and Shell through their 2016 acquisition of BG Group.”

However, the IGU’s Carroll cautions, “I firmly believe that Africa offers a great opportunity in terms of gas; though to be considered a true success story, countries must be more than just exporters, but users throughout their economies. This will lead to an improved quality of life and economic enhancement.” Speaking about South Africa in particular, PwC’s Bredenhann feels that “there is certainly demand for natural gas here, based on a couple of different factors: gas-to-power initiatives, substitution of coal-fired power and other sources, the anticipated price trajectory for electricity, and the expected economic growth South Africa will see in the future.”

“There is a chicken-and-egg situation where suppliers say they will invest in gas if there is a demand, and the market says they will buy it if supply can be guaranteed”

Chris Bredenhann, PwC

Despite this foundation, Bredenhann warns that “there is a chicken-and-egg situation where suppliers say they will invest in gas if there is a demand, and the market says they will buy it if supply can be guaranteed.” Bredenhann therefore calls for greater interventionism from the state on this issue, declaring that “this is where the government needs to play a stronger role in terms of providing the enabling environment as the gas market will probably need to be kickstarted with LNG imports until gas is found in South Africa.”

Writer: Patrick Burton

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