Energy

Time to get more energy into Africa.

Africa’s Eastern seaboard – the Indian Ocean – sits in relatively close proximity to energy hungry Asian markets such as India, S-E Asia, and China.  In the last decade or so, substantial discoveries of oil and gas offers potential for significant economic benefits to the Eastern region, and the rest of Africa, too.

The focus seems to be directed at developing a supply chain into overseas markets. Yet Africa itself is also desperately energy hungry, and a more stable, sustainable source of energy could make a transformative difference. The challenge is about whether or not governments with energy reserves are able to develop these resources, and how, or if, the rest of Africa can set up structures for continental distribution and utilisation.

Mozambique is a case in point. The proven reserves at its Rovuma field alone holds enough gas to supply Germany, Britain, France and Italy for at least 15 years. Cabo Delgado also contains massive reserves.  Properly managed, and effectively exploited, these reserves could see Mozambique overtaking Russia to become the world’s 3rd largest exporter of liquefied natural gas (LNG). Indeed, executive Chairman of the African Energy Chamber, N.J.  Ayuk, goes so far as to say that the Mozambique LNG project will likely result in “ the creation of Africa’s largest liquefied natural gas facility — a project so sweeping that it will have implications for both the continent’s and the world’s energy landscape…”

To that end, the African Development bank has approved a $400 million loan to Mozambique in support of the development of its LNG 1 Liquid Natural Gas facility in Cabo Delgado. Companies such as Total, Mitsui and Oil India will input expertise and additional finance. Meanwhile, a consortium that includes Exxon Mobil and other partners, has initiated a $33 billion enlargement of Mozambique’s Rovuma LNG complex. That bodes well for Moz.

Yet there doesn’t seem to be a coherent strategy for Africa to benefit from intracontinental LNG supply. There is ample planning for distribution out of the continent, but hardly any for within. 

Africa accounts for less than 4 percent of the world’s natural gas consumption, despite a critical need for much, much more.  Why so little? The challenge is that it has almost no infrastructure to deliver gas from producing to consuming nations — or even from one end of a producing nation to the other. That is a pity, because if enabled, Africa could massively improve unreliable electrical power grids and alleviate energy constraints that have been an inhibiting factor in African economic growth for decades.

N.J. Ayuk puts it succinctly:  “More than 620 million sub-Saharan Africans — two-thirds of the population — have no electricity at all. The other third are constantly enduring power blackouts due to most grids being antiquated and stretched thin. And the problem is getting worse… rapid population growth means the percentage without electricity will actually increase…”

Initiatives like Rovuma and Cabo Delgado could become part of a solution to the electrical-power shortage that has been restricting Africa for decades. LNG has great potential. The trick is to look at ways of distributing it into Africa, not only outside the continent.

“By doing business with each other, African LNG exporters and importers will both prosper. So will the hundreds of millions of Africans who are without stable electrical systems. And there will still be LNG left over to send to much of the rest of the world.”[Ayuk]

[Nod: NJ Ayuk is the Executive Chairman of the African Energy Chamber. He is the author of upcoming book, “Billions at Play: The Future of African Energy,” discussing the global stampede into LNG and what it means for Africa. Tom Collins is an East Africa analyst reporting extensively for African Business Magazine.]

Author: Kevin Abraham

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