Sub-Saharan gas prospects rise as EU turns its back on Russian energy [Gas in Transition]

The EU and its member states have been concerned for some time about the extent to which they depend on Russian natural gas supplies, and these concerns have only intensified in the wake of Russia’s invasion of Ukraine on February 24. The European Commission expressed those concerns on March 8 by putting forward a plan for cutting purchases of Russian gas by two thirds before the end of this year and then halting purchases of Russian fossil fuels altogether by 2030.

This plan is perhaps laudable from a security perspective, but it does raise questions about how exactly the EU can effectively replace Russian gas. After all, Russia covers a very large portion of the European gas market. According to data from the International Energy Agency (IEA), it supplied the EU with about 155bn m3 of gas in 2021, equivalent to 45% of all imports and 40% of total consumption. This made it the continent’s single largest supplier.

As such, there is probably no single gas supplier out there that can effectively replace Russia in Europe. However, there is certainly room for other producers to make inroads into the European market – and this certainly includes existing gas producers and new upstream opportunities in sub-Saharan Africa.

Sub-Saharan Africa: Coming into the limelight?

Derek Boulware, head of sub-Saharan Africa research at Welligence Energy Analytics, tells NGW that he expects African gas to become more attractive in light of events in Eastern Europe.

“Put in simple terms, the events of the last month make sub-Saharan Africa’s upstream more attractive,” he says. “Of course, the same argument applies to other regions, but some of the countries in sub-Saharan Africa had been making good progress in drawing in investment. These countries can continue to pull in the dollars as long as they stay on that path.”

Siva Prasad, senior analyst at Rystad Energy, agrees. “Considering the amount of natural gas potential that sub-Saharan Africa holds and the need for Europe to find an alternate source of natural gas [following] Russia’s invasion of Ukraine, Sub-Saharan Africa definitely stands at a point where previously stalled/delayed projects might come into [the] limelight,” he says.

Prasad lists several specific examples of stalled projects that had attracted new attention, including BirAllah in Mauritania and initiatives in Tanzania and Mozambique on the other side of the continent. “We are already seeing BP, which was one of the first operators to announce its exit from Russia, start studies on its BirAllah gas discovery offshore Mauritania, targeting LNG sales to Europe,” he states. “To be noted, it was previously estimated that BirAllah would see a delayed timeline of development, especially after the [Greater] Tortue Ahmeyim (GTA) scheme [offshore Senegal] was downsized from the initially planned 10mn metric tons/year] capacity to 5mn mt/yr.”

He continues: “Shell and Equinor’s exits from Russia can mean increased focus on the currently less spoken about Tanzania LNG. ExxonMobil’s exit from Russia can mean acceleration of [the] currently phased-out development of [Rovuma] LNG [in Mozambique].”

Additionally, Prasad drew attention to Train 7, an ongoing expansion project undertaken by Nigeria LNG (NLNG), a consortium that has already gained market share in Europe. “Europe has been one of the two main importers of Nigerian LNG, with the other being Asia,” he says. “Nigeria is bumping up its LNG export capacity from 22mn to 30mn mt/yr, and this can mean increased focus on natural gas development in the country to feed the Nigeria LNG plant.”

Providing the right kind of support

The Rystad analyst also describes the EU’s decision to reduce and eventually eliminate Russian imports as something of an opportunity for gas-producing states in sub-Saharan Africa.

If these producers take the proper approach, he said, they stand a chance of gaining a strong foothold in European energy markets. The proper approach, he explains, will involve investment in infrastructure and providing steady legal, fiscal and political support for upstream development. Taking these steps will reassure investors that African gas projects are worth the money and worth the risk, he comments.

“One way for sub-Saharan African gas producers to go about taking advantage of the situation, [in which] some European nations are looking to end/minimise their gas supply trade relations with Russia, would be to showcase [their] large natural gas potential and secure long-term LNG supply contracts – and then focus on accelerating the upstream development and LNG export infrastructure development to fulfil these contracts,” he says. “Many upstream gas developments are delayed in sub-Saharan Africa, and LNG export infrastructure plans are [being] phased out. [Demonstrating the capacity] to develop potential and transform as a long-term supplier should be the focus if sub-Saharan African gas producers want to replace Russia as an LNG/natural gas exporter to Europe.”

Prasad does not name any specific examples of producing states, but it is easy to see how his advice might apply to, say, Nigeria. The West African country is currently implementing its “Decade of Gas” program, which aims to foster the development of 200 trillion ft3 (5.7 trillion m3) in proven natural and associated gas reserves for the purpose of converting the economy to gas to the greatest extent possible. The program focuses on promoting domestic consumption of gas in the household, business, industrial and power-generating sectors. However, it also encourages the development of infrastructure projects such as Train 7, which was designed to facilitate LNG exports.

Time for regional cooperation?

When asked by NGW whether events in Ukraine might inspire African gas producers to join forces to seek market share in Europe, both Prasad and Boulware indicated that they expect states in sub-Saharan Africa to act individually rather than join forces.

Despite the recent signing of a memorandum of understanding (MoU) between Nigeria and Equatorial Guinea that may see gas from the former country’s stranded deepwater fields processed in the latter’s Punta Europa facilities and exported to Europe as LNG, the experts do not expect many similar initiatives to follow. “[Cross-border] agreements can be easy to sign, but hard to turn into tangible progress in terms of investment and ultimately production. The reality can be very slow progress, or none at all,” Boulware explains. “For now, we think the political and legal challenges associated with such agreements will continue to slow progress.”

“The Nigeria-Equatorial Guinea natural gas MoU is aimed at fast tracking monetization of unused natural gas from Nigeria by exporting it to global, mainly European, markets via the Punta Europa plant in Equatorial Guinea,” Prasad adds. “This probably allows deep water Nigerian gas to be monetized by connecting it with the Punta Europa plant at a lesser cost than bringing it back to Nigeria LNG plant for exports. With each of these gas rich countries working on enhancing their own respective export plans, these examples of cross-border cooperation can be a rarity.”