Nigeria loses gas investments to other African countries

Nigeria remains Africa’s largest gas consumer and producer, but the focus for new gas projects is shifting to the east coast and to the huge offshore discoveries in Mozambique and Tanzania, the World Energy Outlook Special report 2014 just released has stated.

The World Energy Outlook, recognised as the most authoritative source of strategic analysis of global energy markets said that East coast liquefied natural gas export is helped by relative proximity to the importing markets of Asia.

It explained that natural gas resource-holders can power domestic economic development and boost export revenues, but only if the right regulation, prices and infrastructure are in place.

The incentives to use gas within sub-Saharan Africa are expected to grow as power sector reforms and gas infrastructure projects move ahead but, for the moment, as much gas is flared as is consumed within the region.

According to the report, more than 1trillion cubic metres of gas have been wasted through flaring over the years, a volume that – if used to provide power – would be enough to meet current sub-Saharan electricity needs for more than a decade.

It further said that power will shape the future of Africa. According to the report, a severe shortage of essential electricity infrastructure is undermining efforts to achieve more rapid social and economic development.

For the minority that has a grid connection today, supply is often unreliable, necessitating widespread and costly private use of back-up generators running on diesel or gasoline. Electricity tariffs are, in many cases, among the highest in the world and, outside South Africa, losses in poorly maintained transmission and distribution networks are double the world average, the report said.

Building on successful examples of electrification programmes, such as those in Ghana and Rwanda, the total number without access starts to decline in the 2020s and 950million people gain access to electricity by 2040 – a major step forward, but not enough. More than half a billion people, mainly in rural areas, remain without electricity in 2040.

The report also said that Sub-Saharan Africa will start to unlock its vast renewable energy resources, with almost half of the growth in electricity generation to 2040 coming from renewables.

As regards hydropower, the report said that it accounts for one-fifth of today’s power supply, but less than 10 percent of the estimated technical potential has been utilised. The Democratic Republic of Congo, where only 9 percent of the population has access to electricity, is an example of the co-existence of huge hydropower potential with extreme energy poverty. Political instability, limited access to finance, small market size and weak transmission connections with neighbouring countries have all held back exploitation of hydro resources.

These constraints are gradually being lifted, not least because of greater regional co-operation and the emergence of China, alongside the traditional lenders, as a major funder of large infrastructure projects. New hydropower capacity in the Democratic Republic of Congo, Ethiopia, Mozambique and Guinea, among others, plays a major role in bringing down the region’s average costs of power supply, reducing the share of oil-fired power.

According to the report, other renewables, led by solar technologies, make a growing contribution to supply, with a successful auction-based procurement programme in South Africa showing how this can be achieved cost effectively. Also, geothermal becomes the second-largest source of power supply in East Africa, mainly in Kenya and Ethiopia.

The report also projects that two-thirds of the mini-grid and off-grid systems in rural areas in 2040 will be powered by solar photovoltaics, small hydropower or wind. As technology costs come down, the attraction of renewable systems versus diesel generators grows (although they are often used in combination), especially where financing is available to cover the higher upfront expense.