Natural gas in Africa: frontier of the Golden Age

Expectations and potential

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Forecast African natural gas production and disposition (total production = demand + net exports)

African rotary rig count (annual averages — 2012 through June)

Source: EY calculations from the International Energy Agency (IEA), “Golden Rules for a Golden Age of Gas,” June 2012

African rotary rig counts (annual totals — percent by type)

African rotary rig counts (annual totals — percent by type)

(*2012 through June)
Source: EY analysis of Baker Hughes Inc. data.

African rotary rig counts (annual averages — 2012 through June)

African rotary rig counts (annual averages — 2012 through June)

*2012 through June
Source: EY analysis of Baker Hughes Inc. data.

While short-term risks from the global economy are still quite high, longer-term economic prospects for Africa are seen as very bright.

In its last World Energy Outlook, the IEA assumes that Africa’s GDP will grow at between 3.4% to 4.5% per year until 2035 5.

Net exports of natural gas from Africa are expected to more than double, reaching more than 230 bcm by 2035.

In its most recent report, the IEA forecasts that African natural gas production will expand to almost 400 bcm by 2035, with regional natural gas consumption growing to almost 170 bcm. Gas production in Africa is expected to almost double by 2035, increasing at an average rate of about 2.7% per year.

Gas consumption is expected to grow at about 2% per year. Net exports of natural gas from Africa are expected to more than double, reaching more than 230 bcm by 2035 6.

Forecast African natural gas production and disposition (total production = demand + net exports)

Sub-regional expectations and prospects

The expectations and prospects for natural gas are quite different in each of the three sub-regions in Africa.

North Africa

Two of the three leaders of Africa’s “Old Guard” — Libya and Egypt — will struggle, at least in the short-term, to restore political stability and to achieve public acceptance of the new political order.

While any expansion of Egypt’s natural gas sector is likely to be domestically focused, in contrast, Algeria’s expansion will be export-focused, specifically targeting new reserves and infrastructure, specifically in the southwest and northern parts of the country, including offshore.

West Africa

The underlying theme of West Africa’s future gas development is the monetization of the underutilized resource base through dramatically reduced flaring and the capture of associated gas for export, and more importantly, for domestic use.

Throughout the sub-region, two critical components of the gas development theme are downstream gas infrastructure development (e.g., “integrated” gas development that could include power generation and/or industrial development) and increasing local content focus — again, using gas development as a broader prime mover.

East Africa

East Africa is the newest frontier — with the recent massive discoveries, it represents the growth engine for Africa’s natural gas sector. While it may not be the next Qatar or Australia, it certainly has the potential to be an LNG heavyweight on par with Nigeria.

East African LNG is expected to be very competitive into Asian gas markets; consultants at Wood Mackenzie estimate that the break — even for East African gas — is around US$7 per million BTUs, in contrast to around US$10 per million BTUs for Australian LNG .

African LNG capacity


 Country Project Start* Capacity
(MT/yr)
Operator
Existing/operating
Algeria Arzew (3 trains) 1964 1.1 Sonatrach
Skikda (4 trains) 1972 7.6 Sonatrach
Bethioua (12 trains) 1978 16.5 Sonatrach
Egypt Damietta (1 train) 2005 5.0 ENI
ELNG (2 trains) 2005 7.2 BG Group
Libya Marsa El Brega (2 trains)
1971 3.2 Sirte Oil
Nigeria NLNG (6 trains) 1999 22.2 NNPC
Equatorial Guinea Punta Eur (1 train) 2007 3.7 Marathon
Angola Angola LNG (1 train) 2012 5.2 Chevron
Planned/possible
Algeria Arzew GL3Z 2013 4.7 Sonatrach
Algeria Skikda LNG 2013 4.5 Sonatrach
Libya Marsa El Brega T3 2016 2.6 Sirte Oil
Nigeria Progress FLNG 2017 1.5 NNPC
Cameroon Kribi LNG 2018 3.5 GDF Suez
Egypt Damietta T2 2018 4.8 ENI
Equatorial Guinea Punta Eur T2 2018 4.4 Marathon
Mozambique Mozambique T1 2018 5.0 Anadarko
Nigeria Brass LNG T1 2018 5.0 NNPC
Tanzania Tanzania LNG T1 2018 6.6 BG Group
Mozambique Mozambique T2 2019 5.0 Anadarko
Nigeria Brass LNG T2 2019 5.0 NNPC
Nigeria NLNG T7 2019 5.0 NNPC
Nigeria NLNG T8 2020 8.5 NNPC
Nigeria OK LNG 2020 12.6 NNPC
Mozambique Mamba 2020 10.0 ENI

*For existing projects, start date is for first train; for planned/possible projects, start dates arenominal and subject to delay/cancellation.
Source: EY compilations from various analyst/investment reports.

5 “World Energy Outlook,” International Energy Agency (IEA), November 2011.
6 “Golden Rules for a Golden Age of Gas,” International Energy Agency (IEA), June 2012.
7“Ophir Energy,” J.P. Morgan Cazenove — Equity Research, 1 May 2012.