10
Apr
Natural Gas in East Africa & Potential Benefits
Some of the largest offshore natural gas fields in the world reside in East Africa, yet these fields have historically had limited success. Challenges facing the region include civil conflicts, questionable recovery of gas, and a lack of distribution infrastructure in some locations. Going forward, there is hope in East Africa for developing natural gas fields to provide energy for electricity and transportation, thus fueling economic and industrial growth. Natural gas would provide a reliable and affordable fuel source for many who have had to rely on highly variable energy sources like hydroelectricity and expensive diesel generators.
Bringing affordable natural gas to market in East Africa will benefit numerous countries across Africa, going from Ethiopia down to South Africa. Benefits of accessible natural gas include providing fuel for cooking, electricity, and fueling public transportation. According to a study by Columbia University, one possible scenario of developing natural gas fields would provide energy to 263 major urban areas within eight different countries: Mozambique, Malawi, Tanzania, Kenya, Uganda, Rwanda, Burundi and Ethiopia. Access to affordable energy would reach 185 million people in urban areas, as well as reaching 600 million people in East and Southern Africa. However, similar to previous infrastructure developments in Asia, a distribution system cannot be built without supply, yet supply will not be developed without a distribution system. This “chicken or egg” dilemma could cause delays in the future.
(click to enlarge)
Current Natural Gas Production in Africa
As the population of Africa increases, economic and industrial growth increases, and the demand for energy subsequently increases. However, where will this energy come from? Currently, natural gas reserves are being explored in Nigeria, Algeria, Libya and Egypt. According to the EIA in 2011, total natural gas production in Africa was approximately 1,690 Bcf, compared to 22,902 Bcf of gas production in the US and 21,436 Bcf of gas production in Russia. Additionally, Mozambique and Tanzania have been identified as having significant levels of recoverable gas, and Statoil has expressed interest in Tanzania. More specifically, Mozambique’s current production occurs onshore in the regions of Pande and Temane, and Tanzania’s current production occurs in Songo Songo Island and Mnazi Bay.
Future Exploration in Mozambique and Tanzania
Several major oil and gas companies are analyzing opportunities for future production in Northern Mozambique and Southern Tanzania, including future development of liquefied natural gas (LNG) export facilities. Currently, Anadarko (NYSE:APC) and Eni (NYSE:E) have led exploration activities in Mozambique, operating in Area 1 and Area 4. Anadarko also operates alongside Mitsui E&P, Mozambique’s Empresa Nacional de Hidrocarbonetos (ENH), BPCL Ventures, Videocon, and PTT Exploration and Production. Eni then operates alongside China National Petroleum Corporation (CNPC), GalpEnergia, Kogas, and ENH.
(click to enlarge)
Thus far in Tanzania, the BG Group and Statoil have had the most success in offshore fields, each finding more than 10 Tcf of recoverable gas resources. Other leading exploration companies in offshore Tanzania include Ophir Energy and Exxon Mobil (NYSE:XOM).
(click to enlarge)
Risk Considerations
The biggest risk facing natural gas operators in Mozambique and Tanzania is the market for global LNG to 2020 and beyond, due to the large capital investment and time needed to build an LNG facility. Energy consulting firm Wood Mackenzie has expressed worry about oversupply in the LNG market by 2020, with supply surpassing demand by around 100 million metric tonne per annum (MMtpa). Contrarily, Chevron predicts global LNG demand will exceed supply by around 120 MMtpa by 2025. Uncertainty regarding the supply/demand balance stems from shale gas supply in North America and China, LNG capacity worldwide, LNG demand in Asia, fuel price differentials, and innovations in technologies and infrastructure.
According to the EIA, “Amid uncertainties surrounding global LNG demand, Mozambique and Tanzania are looking at different ways to monetize their natural gas alongside LNG development.” For instance, Eni has considered selling natural gas as either compressed natural gas (CNG) for transportation or natural gas for power generation in Africa, alongside LNG projects. Mozambique has also hinted at the possible of a gas-to-liquids (GTL) plant, possibly backed by Sasol, one the world’s largest GTL operators. Lastly, South Africa is seeking to decrease its dependence on coal, and increase it use of natural gas from locations such as Mozambique. Going forward, East Africa has several options for selling its natural gas including by pipeline, CNG, or LNG.
Source: http://seekingalpha.com/article/3056056-natural-gas-new-pirate-treasure-in-east-africa