GAS AND POWER: Are Africa's LNG exporters missing an opportunity?

• Published date: 01 December 2016
• Date: 01 December 2016
• DOI: http://doi.org/10.1111/oet.12443

GAS AND POWER

Are Africa’s LNG exporters missing an opportunity?

African gas producers continue to propose new

schemes for liqueed natural gas (LNG) exports in an

already crowded business when they could be missing

marketing opportunities much nearer home. e rise in

domestic consumption across the continent is a largely

unreported story: and there is more growth to come,

particularly fromthe substitution of other fuelsin power

generation.

Too much LNG?

Africa already has ve LNG-exporting countries, while

threemoreplantodoso.eexistingLNGexporters

are Algeria, Angola,Eg ypt,Equatorial Guinea, and Nige-

ria, with total exports of about 4.8bn cfd. One of them,

Equatorial Guinea, plans to increase its existing exports

of 0.5 bn cfd by nearly 0.3 bn cfd. Egypt has suspended

its LNG exports owing to gas shortages at home, but

has longer term plans for a large scale LNG export

scheme from a number of new eld developments o-

shore, combining output fromgaselds o Eg ypt, Israel,

and Cyprus.

ese last two developments, along with proposed

new LNG schemes in Cameroon, Mozambique, and Tan-

zania, are being proposed for what is already a crowded

global LNG market. e period from 2015 to 2020 could

see the addition of nearly 20 bn cfd of LNG to a world

market that is growing at a much slower pace [1], with

new export schemes already announced for Australia,

the US, Russia [2], Malaysia, Papua New Guinea, and

Indonesia, along with several more schemes that have

been proposed for Iran, Brazil, Canada, Colombia, and

variousothercountriesaswell[1].

A number of these schemes are likely to be postponed

or canceled altogether, but even so there looks to be

aglutofLNGfortherestofthepresentdecadeand

even beyond. Meanwhile, the rate of demand growth is

slowing down across much of the world,including in the

key Asian market, which accounts for 20% of global gas

demand and 70% of world LNG demand. e next ve

to ten years should see growing competition for gas from

coal [3], nuclear power and renewables: all of which is

bad news for Africa’s new LNG exporters.

eir initial response has been to make themselves

more competitive in future by looking for cost savings

in their proposed new schemes. ese include reducing

the size of the proposed developments andusing oating

LNG terminals (FLNG) rather than the large, expensive

export facilities on land. Cameroon is to use a converted

LNG tanker, and FLNG schemes are proposed for E qua-

torial Guinea and Mozambique. However, competitors

elsewhere in the world are planning cost reductions of

their own, particularly in the US and Australia. Buyers

meanwhile are demanding lower prices from their LNG

suppliers [1], which is a further problem for Africa’s new

exporters.

Monetizing African gas

Cameroon is in a slightly better position than Africa’s

other new suppliers. Not only has it found a cut-price

solution in the form of its converted LNG carrier, it has

also secured a buyer for all of its 160 mn cfd exports in

the shape of Russia’s Gazprom. Mozambique is making

some progress with its LNG plans, with a nal invest-

ment decision on its C oral FLNG project due by the end

of 2016. e scheme’s operator, ENI, has even increased

the planned capacity by a third to 440mn cfd, and has

also signed-up a singleprospective buyer,BP, forthe gas.

ENI’sproject,however,isnottheonlyonethathas

been proposed for Mozambique’s gas. With estimated

proven reserves of 100 tcf, the third-largest in Africa

(see Table F), Mozambique has the potential for a num-

berofotherLNGexportschemes.ENIhasproposedtwo

further LNG trains on top of its FLNG project, capable

of exporting an additional 1.6 bn cfd. US independent

Anadarko has announced pl ans for a separate 1.3 bn cfd

LNG scheme. With more gas likely to be found in the

prolic Rovuma Basin o Mozambique,other LNG pro-

posals could follow, although probably notfor a number

of years. An important consideration will be the high

costs involved in producing gas from Rovuma. e sit-

uationisnotexactlybeinghelpedbyproblemswitha

government scheme to provide infrastructure such as

onshore facilities to service e xploration and produc tion

oshore. ere have been di culties over the nancing

oftheseprojectscausedbythehighlevelsofindebted-

ness of the government.

Africa’s other new LNG schemes are faring rather

less well than the Cameroon and Mozambique FLNG

projects. In May 2016, Schlumberger was reported to

have broken o talks with British independent Ophir

Energyconcerningtheacquisitionofa40%stakebythe

US company in Ophir’s proposed Fortune LNG scheme

in Equatorial Guinea, which will at the very least delay

the project.

Tanzania’s plans for LNG terminals are al so in trouble.

Tanzania’s proven gas reserves are at present small (see

Table F), but theselook set to grow strongly with further

exploration oshore, whic h contains the northern part of

the Rovuma Basin. Gas-in-place is estimated to amount

to 40 tcf. In 2014, plans wereannounced for LNG exports

of 2.6 bn cfdwith the rst deliveries taking place in 2018.

Since then, enthusiasm for LNG has cooled given both

© 2016 John Wiley& Sons Ltd