Africa’s push for oil and gas [Gas in Transition]

Africa went to COP28, the UN climate conference held early December in Dubai, with clear goals. It was organised with the African Group of Negotiators (AGN) chaired by Zambia speaking on behalf of the continent. The key issues for Africa were: a just energy transition, climate change finance and funding for adaptation. 

African countries demand the right to develop their oil and gas resources, particularly gas as a transition fuel, to enable them to industrialise before reinvesting any gains in low-carbon energy projects. Many Africans consider energy access as more important than climate change concerns.

Judging from the outcome, Africa came out of COP28 quite successful. Climate finance received strong support, with the ‘loss & damage fund’ becoming operational, albeit with funding levels still unclear. But equally importantly the need for a ‘just transition’ received strong recognition. The right of countries to “transition in a just, orderly and equitable manner” was recognized in the final COP28 report, but also “that strategies related to just transition and economic diversification should be implemented taking into account different national circumstances and contexts.”

In addition, recognition that “transitional fuels can play a role in facilitating the energy transition while ensuring energy security,” is quite important to Africa’s demand that while pursuing energy transition, it should also be able to develop its oil and gas resource potential, in a way which does not undermine its economic development. 

Africa’s energy transition requires pragmatic solutions. In particular for African countries that so far have received negligible support in terms of climate change adaptation and renewable energy investment, natural gas is a critical energy source that offers a low-emissions route to equitable energy access and bolsters energy security.

The African Group of Negotiator's chair on climate change, Collins Nzovu, at COP28.

Natural gas potential

Africa is already facing an energy crisis and severe energy poverty, with about 600mn people lacking access to energy, made more challenging by its rapidly expanding population, expected to increase to 2.5bn by 2050 from 1.4bn now. Sub-Saharan Africa has the lowest energy use per capita in the world, at about 3% of the European average. It contributes only about 3% to global greenhouse gas emissions.

This massive population growth will require massive job creation and economic expansion, expected to be provided by industrialisation and the manufacturing sector. In addition, as a result of this population growth, the demand for energy in Africa is growing faster than the available supply. The extra supply needed must be both reliable and affordable.

With its inability to make significant investments in renewable energy systems without extensive external funding, the International Energy Agency (IEA) concluded in its Africa Energy Outlook 2022 that the continent’s industrialisation relies, at least in part, on expanding use of its oil and gas resources, and in particular natural gas, during energy transition. 

In 2022, ten African countries issued the Kigali Communique to draw attention to the continent’s requirements for a just, fair and equitable energy transition. They specifically identified the “deployment of gas as a transition fuel and the long-term displacement of gas by renewable energy and green hydrogen for industrial development, if financially and technically sustainable,” as key to these requirements. Energy is key to the industrialisation and energy poverty reduction in Africa.

The IEA estimates that more than 5,000bn m³ of natural gas resources has been discovered to date in Africa that has not yet been approved for development. About 84% of this was discovered in Mozambique, Senegal, Tanzania, Mauritania, South Africa, Ethiopia and Morocco. In addition, major untapped reserves have been discovered in Angola, Cameroon, Ghana, Equatorial Guinea, the Republic of the Congo, Kenya and Uganda.

It is estimated that even if all these gas resources are utilised, they would bring Africa’s share of global emissions to just 3.5% – considered to be negligible in global terms.

The IEA declared Africa the ”new frontier” in global oil and gas, stating that these resources “may well be vital for the fertiliser, steel and cement industries and water desalination.”

This is a view shared by the World Bank in its Analysis of issues shaping Africa’s economic future, published in Africa’s Pulse in 2023. It states “the extractive sector is a critical part of Sub-Saharan Africa’s economy, in terms of both revenue and exports. Minerals, oil, and gas account for a third or more of exports from most countries in Sub-Saharan Africa.” 

It goes on to say “natural gas can play an important role for Africa as a transition fuel as countries build up their renewable energy capacity. Africa is home to…40% of the world’s natural gas discoveries between 2010 and 2020.” 

There is also growing support from the African Union and the African Development Bank (AFDB) to invest in gas for the domestic market, to promote industrialisation, job creation and economic development at home. AFDB president Akinwumi Adesina said “Africa must have natural gas to complement its renewable energy.” He repeated this at the Africa Climate Summit 2023, where he said “We must make sure we achieve universal energy access, optimising and maximising the potential that Africa has, including natural gas, which is a great part of the energy mix.”

Currently, the biggest gas producing, consuming and exporting countries are Algeria, Egypt, Nigeria and Libya. They account for over 80% of Africa’s gas production and consumption. 

Natural gas contributes only about 5% to Sub-Saharan Africa’s energy mix, but almost half of Africa’s 55 countries have proven reserves, estimated in 2021 to total about 18,000bn m³. Developing these could provide the baseload power needed to boost Africa’s energy and facilitate the uptake of renewables.

Export as LNG can also help secure revenues that can be used to address economic challenges that held development back in the past.

The United Nations Economic Commission for Africa (UNECA) estimates that if Africa were “to triple its use of natural gas, it would be able to increase its use of renewable energy eight-fold.”

A major challenge, though, constraining the wider use of natural gas are energy access problems and lack of adequate infrastructure, especially in sub-Saharan Africa, as well as lack of inter-connectivity between countries. 

Developing Africa’s gas

Developing this gas would require new infrastructure, including pipelines. But with international financial institutions pulling away from funding fossil fuel projects, this is becoming a challenge. 

Most current funding, including from international oil and gas companies, goes into projects that produce oil and gas for export. One effective way to ensure gas is made available locally is that developers of such projects should be required by host governments to reserve part of their production for the domestic market.

That, for example, is the case with upcoming LNG projects in Mozambique, Senegal and Mauritania, where it is compulsory to allocate specific amounts of gas to the domestic market to supply gas-to-power and industrialisation projects.

Another is through support of local independents. This is already happening. African governments are encouraging this by providing them with favourable tax terms and conducive regulatory environments.

And a third is an overhaul of energy and hydrocarbon laws to provide more attractive incentives and reduce the level of administrative bureaucracy. Ultimately, it is in the hands of African policymakers to make funding of gas projects attractive.

It is hoped that the outcome of COP28 will now make it easier for multilateral financial institutions to support the development of such projects in Africa.

As the African Energy Chamber (AEC) pointed out last year, on the road to COP28, “natural gas is key to Africa’s industrialisation process and to ending the region’s massive energy poverty.” In sub-Saharan Africa, “the available alternative to gas is not renewable electricity but rather coal, diesel and, most of all, polluting biomass.” 

AEC advocates that “by directing substantial investments towards oil and gas, the continent will be able to bolster industrialisation, alleviate energy poverty and… strengthen its capacity to deal with climate change.” What is needed is investments in all forms of energy.

Change is afoot. The G7 Leaders’ Hiroshima Communique last year agreed that “…publicly-supported investment in the gas sector can be appropriate as a temporary response, subject to clearly defined national circumstances.”

Africa is ready to take advantage. The Gas Exporting Countries Forum (GECF) forecasts in a report released last year that annual gas production in Africa will increase from 250bn m3 in 2022, to 585bn m3 in 2050. As a result, its global gas market share is projected to rise from 6% in 2021 to over 11% by 2050.

Quite importantly, and crucial to Africa’s drive to alleviate energy poverty, GECF forecasts that primary energy demand will rise by 82% by 2050, with gas accounting for 23% of Africa’s energy mix (see figure 1).

Figure 1: Primary energy mix in Africa (mn tonnes oil equivalent) and fuel shares

Source: GECF Secretariat

Use of natural gas has been increasing steadily in Africa’s energy mix. GECF expects this growth to continue as industrialization and availability of reliable electricity continue their upward trajectory.

In addition, GECF estimates that electricity generation in Africa will need to increase from 890 TWh in 2021 to 3,025 TWh in 2050, with natural gas’ share at 42% (see figure 2), to ensure universal access to electricity and bolster the manufacturing sector. 

Figure 2: Africa power generation by fuel (TWh)

Source: GECF Secretariat

This would enable a massive increase in the uptake of intermittent renewables, that by 2050 could be providing 50% of Africa’s power generation. The combination of natural gas with renewables could then displace reliance on coal and oil for power generation.

Based on the report findings, Mohamed Hamel, secretary general of GECF, said natural gas development is key to Africa’s economic growth. “The narrative that Africa should not develop its natural resources, particularly natural gas…is misguided.” He added “a prosperous Africa will be more capable to protect its environment. The right of Africa to develop its vast natural resources can be preserved, and its access to finance and technology, facilitated.”

As Wood Mackenzie pointed out, “there is a golden opportunity for resource-rich African countries to tap into the world’s need for energy security and tackle energy poverty at home.”

There are increasing signs that this is happening. As EAC said at the start of the year, “Africa’s natural gas sector is building momentum in 2024” led by international energy companies (IECs). An example is the TotalEnergies-led group that is likely to resume its Mozambique LNG project in early 2024. The project, valued over $20bn, halted in 2021 due to insurgent attacks. LNG exports are likely to start in 2028.

IECs still recognise Africa as the next oil and gas frontier. From Algeria to Egypt, Libya, Nigeria, Angola, Mozambique, South Africa, Namibia, Congo, Mauritania and Senegal, to name but a few, increased investment by IECs in Africa’s rich gas reserves and in LNG for exports is facilitating the realisation of forward-looking forecasts. Interest in oil and natural gas exploration and development in Africa remains strong. Africa needs to develop its oil and gas resources along with clean energy to alleviate poverty and accelerate the energy transition.