As the energy transition accelerates, and global instability continues, the continent is in a strong position to develop its natural gas reserves for the benefit of its people, and to deliver a sustainable energy transition for the continent.
Several critical global developments have highlighted the potential of Africa’s emerging gas industry. Macro events, rising energy prices, and the move to renewables have led many countries, industries, and energy businesses to re-evaluate this resource.
In Africa, natural gas resources remain under-developed. However, the continent is at a crucial inflection point. If it is to seize the significant opportunity in front of it, it must do so now.
The International Energy Agency (“IEA”) Africa Energy Outlook 2022 states that “the continent’s large resource discoveries over the past decade provide an opportunity for natural gas to play an expanded role in Africa’s energy system”.
More than 5 000 billion cubic meters (“bcm”) of natural gas resources have been discovered to date in Africa, which the IEA estimates could provide an additional 90bcm of gas a year by 2030. But for this to happen, the continent must get moving on approval of gas developments – which have extremely long lead times.
“New long-lead-time gas projects risk failing to recover their upfront costs if the world is successful in bringing down gas demand, in line with reaching net zero emissions by mid‐century,” says the IEA.
In Africa, countries like Ivory Coast and Tanzania already employ indigenous gas for power generation. But the continent has vast reserves that hold enormous potential. Recent geopolitical events have only heightened interest in Africa’s gas reserves.
Chariot Limited, an Africa-focused transitional energy company, which is developing a portfolio of gas assets in Morocco, notably the significant Anchois discovery, has already seen evidence of this. Anchois has an estimated total resource base of 1.4 Tcf and Chariot Technical Director Duncan Wallace says he has witnessed high levels of interest in the project from a wide range of industry audiences, including potential investment partners.
Global macro events have also made the energy situation more urgent, he says. Morocco, where Anchois is located, currently sources gas via imports from Spain using the GMA pipeline. Global commodity price increases have emphasised the need for energy security, ideally through local gas at more stable prices.
“In this climate, we’ve seen increased interest in our Morocco gas project, which is moving closer to a final investment decision,” says Wallace. “We are in ongoing negotiations for commercial agreements to sell gas to the national utility, we’ve concluded front-end engineering and design, we're talking to construction suppliers, and the environmental and social impact assessment is nearing conclusion.”
Wallace says what helps projects progress, is a commitment to prioritising African gas, for African clients – in this case, initially to Morocco’s interstate power company, but growing over the medium-term to supplying other domestic markets.
“We're also looking at prioritising gas to industry,” he says. “Not only is it an attractive business, but it's the right thing to do, in terms of developing Morocco’s economy.”
Another factor seeing gas gaining favour is that, as a resource, it is fundamentally different to oil and coal. It burns less carbon, and is more flexible.
Gas can also support the transition to renewable energy. With renewable supply being inherently unstable, gas can provide vital firming capacity to meet varying demand. Gas can help ensure that coal use is minimised as renewables are ramped up, but that power supply can be balanced and remain uninterrupted.
Wallace says using gas to balance power needs in a changing energy mix can help to unlock renewable investment, as it mitigates many of its risks.
“In this sense, gas is also an enabler of renewables investment – while being cheaper, and cleaner than oil,” he says.
Natural gas produces significantly lower carbon emissions than oil or coal. A recent McKinsey report noted that a 2008 switch from coal- to gas-fired power in the US had abated more carbon emissions than all of the renewable power capacity ever installed in the country.
At the same time, most traditional oil and gas companies are also embracing renewables, as they become more diversified energy businesses. As well as its gas portfolio, Chariot has a Transitional Power business, which is developing a range of renewable-energy projects across Africa, and a Green Hydrogen business, which is progressing a 10GW green hydrogen project in Mauritania alongside partner Total Eren.
“Many of the leaders in new energy sectors are traditional oil and gas companies,” says Wallace. “They have precisely the expertise and access to capital needed to deal with a resource like green hydrogen, for instance.”
Developing green hydrogen requires large, capital-intensive projects, and joint-venture partnerships. It also faces similar transportation challenges to oil and gas. This makes it a natural fit for the super majors – as well as more nimble, smaller energy groups – to lead project identification and early development.
Financial institutions are also helping to drive the energy transition. As it becomes more challenging to raise finance for oil projects, more majors and smaller oil businesses are changing focus to renewables and gas projects.
This has meant that, far from being the last holdouts of a legacy technology, traditional oil businesses are often among the leading players in the energy space. Given their access to capital, expertise and infrastructure, they’re often best positioned to drive energy innovation – especially at scale.
In this context, there is currently an amazing opportunity for African countries to capitalise on their gas resources – to attract investors, and ensure clean, secure energy supply domestically, and for their neighbours. There will be a significant chance to seize this opportunity when Africa Oil Week is held in Cape Town in October.
Gas has gained importance, politically, strategically and environmentally. To facilitate its development, many high-level partnerships are taking shape. There are new trans-Mediterranean pipeline projects under discussion, as well as intra-Africa initiatives.
It is clearly time for big thinking in Africa, as the continent looks to develop its resources on a massive scale, to meet the energy needs of its people, and to become a significant player on global energy markets.
Africa Oil Week takes place from October 9 – 13 at CTICC2 in Cape Town under the theme “Maximising Africa's Natural Resources in the Global Energy Transition”. AOW is the global platform for stimulating deals and transactions across the African Upstream.
In Africa, natural gas resources remain under-developed. However, the continent is at a crucial inflection point. If it is to seize the significant opportunity in front of it, it must do so now.
The International Energy Agency (“IEA”) Africa Energy Outlook 2022 states that “the continent’s large resource discoveries over the past decade provide an opportunity for natural gas to play an expanded role in Africa’s energy system”.
More than 5 000 billion cubic meters (“bcm”) of natural gas resources have been discovered to date in Africa, which the IEA estimates could provide an additional 90bcm of gas a year by 2030. But for this to happen, the continent must get moving on approval of gas developments – which have extremely long lead times.
“New long-lead-time gas projects risk failing to recover their upfront costs if the world is successful in bringing down gas demand, in line with reaching net zero emissions by mid‐century,” says the IEA.
In Africa, countries like Ivory Coast and Tanzania already employ indigenous gas for power generation. But the continent has vast reserves that hold enormous potential. Recent geopolitical events have only heightened interest in Africa’s gas reserves.
Chariot Limited, an Africa-focused transitional energy company, which is developing a portfolio of gas assets in Morocco, notably the significant Anchois discovery, has already seen evidence of this. Anchois has an estimated total resource base of 1.4 Tcf and Chariot Technical Director Duncan Wallace says he has witnessed high levels of interest in the project from a wide range of industry audiences, including potential investment partners.
Global macro events have also made the energy situation more urgent, he says. Morocco, where Anchois is located, currently sources gas via imports from Spain using the GMA pipeline. Global commodity price increases have emphasised the need for energy security, ideally through local gas at more stable prices.
“In this climate, we’ve seen increased interest in our Morocco gas project, which is moving closer to a final investment decision,” says Wallace. “We are in ongoing negotiations for commercial agreements to sell gas to the national utility, we’ve concluded front-end engineering and design, we're talking to construction suppliers, and the environmental and social impact assessment is nearing conclusion.”
Wallace says what helps projects progress, is a commitment to prioritising African gas, for African clients – in this case, initially to Morocco’s interstate power company, but growing over the medium-term to supplying other domestic markets.
“We're also looking at prioritising gas to industry,” he says. “Not only is it an attractive business, but it's the right thing to do, in terms of developing Morocco’s economy.”
Another factor seeing gas gaining favour is that, as a resource, it is fundamentally different to oil and coal. It burns less carbon, and is more flexible.
Gas can also support the transition to renewable energy. With renewable supply being inherently unstable, gas can provide vital firming capacity to meet varying demand. Gas can help ensure that coal use is minimised as renewables are ramped up, but that power supply can be balanced and remain uninterrupted.
Wallace says using gas to balance power needs in a changing energy mix can help to unlock renewable investment, as it mitigates many of its risks.
“In this sense, gas is also an enabler of renewables investment – while being cheaper, and cleaner than oil,” he says.
Natural gas produces significantly lower carbon emissions than oil or coal. A recent McKinsey report noted that a 2008 switch from coal- to gas-fired power in the US had abated more carbon emissions than all of the renewable power capacity ever installed in the country.
At the same time, most traditional oil and gas companies are also embracing renewables, as they become more diversified energy businesses. As well as its gas portfolio, Chariot has a Transitional Power business, which is developing a range of renewable-energy projects across Africa, and a Green Hydrogen business, which is progressing a 10GW green hydrogen project in Mauritania alongside partner Total Eren.
“Many of the leaders in new energy sectors are traditional oil and gas companies,” says Wallace. “They have precisely the expertise and access to capital needed to deal with a resource like green hydrogen, for instance.”
Developing green hydrogen requires large, capital-intensive projects, and joint-venture partnerships. It also faces similar transportation challenges to oil and gas. This makes it a natural fit for the super majors – as well as more nimble, smaller energy groups – to lead project identification and early development.
Financial institutions are also helping to drive the energy transition. As it becomes more challenging to raise finance for oil projects, more majors and smaller oil businesses are changing focus to renewables and gas projects.
This has meant that, far from being the last holdouts of a legacy technology, traditional oil businesses are often among the leading players in the energy space. Given their access to capital, expertise and infrastructure, they’re often best positioned to drive energy innovation – especially at scale.
In this context, there is currently an amazing opportunity for African countries to capitalise on their gas resources – to attract investors, and ensure clean, secure energy supply domestically, and for their neighbours. There will be a significant chance to seize this opportunity when Africa Oil Week is held in Cape Town in October.
Gas has gained importance, politically, strategically and environmentally. To facilitate its development, many high-level partnerships are taking shape. There are new trans-Mediterranean pipeline projects under discussion, as well as intra-Africa initiatives.
It is clearly time for big thinking in Africa, as the continent looks to develop its resources on a massive scale, to meet the energy needs of its people, and to become a significant player on global energy markets.
Africa Oil Week takes place from October 9 – 13 at CTICC2 in Cape Town under the theme “Maximising Africa's Natural Resources in the Global Energy Transition”. AOW is the global platform for stimulating deals and transactions across the African Upstream.
