![[Column] NJ Ayuk: More progress needed in African gas exploration and development](Images/Key Persons/NJ Ayuk-Africa Energy Chamber.jpg)
[Column] NJ Ayuk: More progress needed in African gas exploration and development
Nigeria is Africa’s largest producer of natural gas and also has the continent’s largest proven reserves. Even so, gas is a relatively minor element in its energy mix, accounting for only around 10.3% of total supply as of 2020, according to data from the International Energy Agency.
But Nigeria’s government is determined to change this. In August 2020, Minister of State for Petroleum Resources Timipre Sylva declared that the country was entering into a “Year of Gas” that would pave the way for expanding the development and utilization of domestic gas resources.
Then, in March 2021, Nigerian President Muhammadu Buhari announced that his administration had widened the scope of the program. Buhari stated that the country was embarking upon a “Decade of Gas,” explaining that the government wanted natural gas to become Nigeria’s main source of energy by 2030. He also said that the federal government would back these efforts with policies that supported the building of gas pipelines and gas-fired power stations, enabled the exploration of new gas reserves, reduced the flaring of associated gas, and promoted domestic consumption of compressed natural gas (CNG) and liquid petroleum gas (LPG).
These are all wonderful ideas, and the African Energy Chamber (AEC) has expressed support for Nigeria’s ambitious plans.
And now that three years have passed since Nigeria stated its intentions, it’s worth asking how much progress it’s actually made so far.
Unfortunately, the answer is: not as much as anticipated. As the AEC notes in its recently released report, “The State of African Energy Q2 2023 Outlook,” Abuja has thus far only implemented 5% of its gas agenda, far below the 85% target set for this part of the decade.
The Good News
Nigeria’s failure to meet expectations is important. This is not just because Nigeria is, as noted above, the continent’s largest gas producer. It’s also important because it’s part of a wider pattern.
That is, it’s emblematic of the fact that Africa’s gas industry is not reaching its full potential.
The news is not all bad. African gas production is set to rise this year, moving up by about 1% on the 2022 level to reach 25.5 billion cubic feet (bcf) per day. It’s also set to continue climbing in the long term, reaching 27.4 bcf per day in 2025, 32.8 bcf per day in 2030, and 41.6 bcf per day in 2035.
Meanwhile, African gas consumption is also slated to rise. Even as total production moves upward, commercial flows from the continent are likely to rise to about 27-28 bcf per day within the next few years and then remain at that level until the late 2030s.
Moreover, the volume of African gas available for development has been increasing. Prior to the COP27 summit, held in Egypt’s Sharm el-Sheikh resort in November 2022, the continent’s recoverable resources were estimated at 13.34 trillion cubic meters, or 471.1 trillion cubic feet (tcf). Since then, the figure has gone up to 14.67 tcm (518 tcf).
The Catch
But there’s a catch – two catches, actually.
First, the recoverable resource figure isn’t rising because new reserves are being discovered. Instead, it’s rising because reserve estimates for certain brownfield projects have been revised upward — and for the record, the largest share of these revisions were made in just one country, Algeria.
Second, efforts to bring new gas reserves on line are moving forward very slowly. There are large-scale greenfield projects in the pipeline in multiple countries, including Tanzania, Mozambique, South Africa, Mauritania, and Senegal. However, many of these trillions of cubic meters of gas in new reserves are likely to remain undeveloped until the very late 2020s or beyond, as their operators have not even reached the stage of making final investment decisions (FIDs) and signing front-end engineering and design (FEED) contracts.
Both of these factors are sure to pose a challenge, given that Africa’s existing gas fields will inevitably see output levels sink over the long term. As detailed in “The State of African Energy Q2 2023 Outlook,” the continent’s brownfield projects are set to boost production by about 2% year on year in 2024. After that, however, currently producing fields will experience a steady decline of about 5% year on year until 2035.
The upshot of this decline is that the sites in question will see their share of total African gas output drop from more than 80% in the 2023-2025 period to just over 40% in the 2031-2035 period. This would not be a concern if the continent could count on bringing a sufficient number of gas fields on stream to compensate for the decline. At this point, however, it cannot do so, as the greenfield projects that have reached the FID stage are not projected to yield enough to cover the entire gap.
Working Toward the Best Outcome
And unless the gap can be covered, the African gas sector will struggle to realize its potential to the fullest.
In the face of the coming production declines at brownfield sites, Africa must step up exploration and development work of greenfield sites. If it does not do so, it will struggle to overcome the kinds of challenges that are already dogging Nigeria’s “Decade of Gas” program.
It will, for example, be forced to put plans for building new gas-fired power plants on hold. This will leave many of the Africans who have access to the electricity grid dependent on solutions that are more carbon-intensive, such as continuing to supply existing power stations with petroleum-based fuels or coal.
Moreover, it will be forced to slow-walk or suspend initiatives designed to promote the use of other cleaner-burning fuels such as CNG and LPG (cooking gas) for individual and household use due to lack of supply. As a result, many of the Africans who lack access to the electricity grid will remain reliant on the burning of wood, dung, charcoal, and other biofuels, all of which contribute to poor health outcomes.
In other words, failure to push Africa’s gas sector forward is likely to complicate efforts to eliminate the energy poverty that still afflicts hundreds of millions of Africans, even as it complicates the process of expanding the use of lower-carbon fuels.
So even if there are some bright spots, such as the projected increase in gas output this year, Africa is still facing serious challenges. In the long term, its best chance of meeting and overcoming challenges will be to press forward with gas exploration and development. The AEC hopes to see more signs of progress soon.
NJ Ayuk, is the Executive Chairman, African Energy Chamber
