Harare – In the wake of the COVID-19 pandemic, Africa’s liquefied natural gas (LNG) industry has been able to emerge as a global leader as demand is projected to rise.
“Driven by new, commercial-sized discoveries and progressive policies, African natural gas consumption and production is set to become one the fastest-growing sectors globally by 2040. While a large share of these resources is yet to be developed, the continent holds a promising future,” says a report by Africa Oil and Power (AOP).
According to the Gas Exporting Countries Forum (GECF) Global Gas Outlook 2050, Africa is expected to increase its share of global marketed gas production from current figures of six percent to 11 percent by 2050.
Despite project delays initiated by COVID-19, and a temporary market oversupply that has limited capital expenditure leading to new project sanctions, several African LNG projects have progressed significantly.
“African gas markets have not been protected from COVID-19, but are less exposed than oil markets as COVID-19 primarily curtailed the transportation sector, in which gas is less used. However, the gas market was already experiencing a market glut due in part to export growth of key producers that accelerated global LNG exports and contributed to market saturation. Despite a gradual increase in demand as the global economy recovers, the 2021 gas outlook is expected to remain loose until prices tighten,” notes the African Energy Chamber (AEC) Energy Outlook 2021.
The AEC notes that LNG demand growth will outpace liquefaction capacity due to more delays in project sanctioning, thereby restoring the supply/demand equilibrium within the sector.
Delays in final investment decisions and project developments, including for Mozambique’s Coral South Floating LNG Facility and ExxonMobil’s Rovuma LNG Project, are not expected to have a significant bearing on the global LNG market in the medium-term.
Experts emphasizes that some projects have found success in maintaining production and development timelines.
Notably, Total’s Mozambique LNG project, the country’s first such onshore development with a target operational date of 2024, remains on track and has secured the largest project financing in Africa to date.
Additionally, in May 2020, Nigeria LNG Ltd signed a US$3 billion loan to finance construction of a seventh LNG train. The project remains on track and is expected to boost Nigeria’s LNG output by about 30 percent.
“On the supply side, Africa is expected to become the fastest-growing region in gas production, averaging 5.6 percent growth per year … accounting for 20 percent of the global gas production increase during the same period. According to the IEA, the bulk of this growth comes from LNG export- driven production developments in Mozambique and Nigeria, as well as the joint Grand Tortue Ahmeyim development offshore Mauritania and Senegal. Despite the current market oversupply, projected rises in demand are expected to regain balance in emerging projects, with African gas producers leading the way,” said AOP.