Sub-Saharan Africa’s Natural Gas Jurisdictions to Watch

In a hurry? Here’s a ‘compressed’ rundown of three countries with exciting natural gas developments that have caught our eye recently.

A quick caveat that this list does not include Mozambique, which AOW has covered extensively in previous articles and webinars. Just click to find them!
  1. South Africa

Just a few years ago, you would not often have heard South Africa and natural gas mentioned in the same breath, and yet, 2020 has once again proven to be full of surprises! Just a month ago, Total announced its second major gas condensate discovery offshore South Africa in two years in the Luiperd Well. The volume of gas found in this well is reportedly much larger than last February’s Brulpadda gas discovery, which at the time was heralded as potentially transformational for the country.

Total have now abandoned plans for a second exploration well in the area and will work on commercialising these two existing discoveries. The conditions in the area offshore Mossel Bay, where the two discoveries are located, are difficult owing to sea depth and climate, but Total and its partners Qatar Petroleum, CNR International and South African consortium Main Street, remain confident of success.

After years of energy insecurity and crippling load shedding, the South African government is prioritising energy, particularly gas, as a significant future growth area. Addressing the AOW Virtual conference on October 8th, Minister of Mineral Resources and Energy Gwede Mantashe said, “We are re-positioning South Africa to be a serious player in the global gas market. We will promote the development of a domestic and regional gas market. We continue to advance our gas to power projects with the Coega Special Economic Zone, identified as the first LNG import terminal. This lays a foundation for gas to power plants and converting existing power plants from diesel to gas”.  

South Africa is one of few countries in Sub-Saharan Africa with attractive fiscal and pricing qualities for gas. Plus, the Petroleum Resources Development Bill, a draft of which will be available by the end of the year, will provide further clarity and lay the groundwork for accelerating activity in the upstream sector.
  1. Nigeria

“Nigeria has the greatest gas opportunity in terms of scale and access for investors and should ultimately be leading the way” commented Wood Mackenzie’s Greg Roddick in a recent AOWebinar. With 2020 designated as the “Year of Gas” by Minister of State for Petroleum Resources Timipre Sylva, it’s no surprise that a host of positive gas stories have emerged from Nigeria in recent months.

Arguably the most significant is the Train 7 Project. Spearheaded by Nigeria LNG (NLNG), it includes the construction of one complete LNG train and one additional liquefaction unit, plus a host of associated utilities and infrastructure. The project is alone expected to boost Nigeria’s LNG output by more than 30%.
NLNG CEO Tony Attah has recently gone on record saying that at least 55% of work on Train 7 will be domiciled and domesticated in Nigeria. An estimated 12,000 direct jobs will be created by the project, a welcome figure for Nigeria, whose economy has suffered significantly due to the sudden and prolonged drop in the oil price caused by the COVID-19 pandemic.

It’s important, however, not to ignore the elephant in the room, which in this case is the long-awaited Petroleum Industry Bill (PIB).  After numerous delays, this continues to inch its way through the Senate and looks likely to be approved in mid-December at the earliest, or possibly early 2021.

When passed, the PIB will offer more clarity on fiscal terms in the Nigerian gas sector and likely establish a higher gas base price of $3.2 per MMbtu. Plus, many of the incentives included in the 1992 Associated Gas Framework Agreement, which allow producers to offset their gas costs against oil production, will likely remain. Speaking at a recent conference, Nigerian Vice-President Yemi Osinbajo said “In order to grow our reserves, we have proposed fiscal incentives that will attract investments in all our basins in the PIB…In addition, the fiscal provisions for gas business will be some of the most attractive in Africa.” The PIB is certainly promising, but will it come soon enough to allow the country to fully capitalize on its 200+ tcf of gas?
  1. Tanzania

Like its neighbour, Mozambique, Tanzania is developing large natural gas projects in the south of the country. Currently a small gas producer, Tanzania has potentially transformational gas reserves of 56.5 tcf, though a portion of these remain unproven.

Equinor and Shell are the biggest players currently operating in the country. After entering in 2011, Equinor has drilled a total of fifteen exploration wells, resulting in nine discoveries of an estimated 20tcf. Shell holds two offshore deep-water blocks in partnership with Ophir Energy and Pavilion Energy. These hold around 16 tcf of gas.

After stalling again earlier this year, talks with a consortium led by Equinor, along with Shell, Exxon Mobil, Ophir Energy and Pavilion Energy, are set to resume shortly. The subject of discussion is the construction of an LNG export terminal near huge deep-water natural gas discoveries. This project could potentially open Tanzania up as a major gas exporter. Low gas prices and harsh fiscal terms, including state royalties, had threatened to derail the project, but both Equinor and Shell recently reaffirmed their commitment to the country.  

For more insights on African gas investment, join us at Africa Oil Week 2021 (1-5 November, Cape Town). Registration is now open.

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