Africa is poised to become a leading region for LNG after several years of decline. Currently, eight planned and announced LNG project developments in Sub-Saharan Africa are slated to come online.
They have a total liquefaction capacity of approximately 44 million tonnes per annum (mtpa). This will account for 8% of the potential capacity worldwide by the mid-2020s. New LNG hotspot Mozambique, together with the present regional leaders Nigeria and Algeria, will be among the world’s top 10 largest LNG producers in the next five years.
LNG project costs need to be competitive
The competitiveness of an LNG project is largely based on its feed gas supply. Costs are also important. These include upstream cost, cost of the liquefaction plant and shipping, as well as fiscal and regulatory regimes. The sector has become much more selective in making major investment decisions. While positives signs reflect LNG project development progress in some countries, massive delays are observed in Sub-Saharan Africa’s major planned and announced LNG projects. As a result, not all of these developments can move forward.
FLNG technology may offer a development solution for relatively small and isolated gas fields without local demand. However, it is not a panacea for stranded resources. Cameroon exported its first LNG in 2018 from Perenco’s Sanaga Sud field using the 2.4 mtpa Golar Hilli FLNG vessel. However, the country’s potential second FLNG project operated by New Age (African Global Energy) Ltd., now appears doubtful.
Finance remains a big constraint
Financing these major projects also remains a major constraint for some potential developments. Fortuna FLNG in ultra-deepwater Equatorial Guinea has been stalled. This is because Ophir Energy Plc. failed to secure finances before the licence of Block R (now EG-27) expired on 31 December 2018. Djibouti’s US$4 billion FLNG project operated by China’s POLY-GCL Petroleum Group, also seems to have stalled. It looked to develop capacity of approximately 3 mtpa fed from gas fields in Ethiopia’s Ogaden Basin but has financing difficulties.
The global LNG market is a major growth area for the energy sector. The potential for LNG to develop African gas resources has generated significant industry interest. However, the progression and delivery of the planned and announced LNG projects are not certain. They depend on the field development costs, fiscal terms, political and security risks. Natural gas infrastructure in Sub-Saharan Africa is sparse. The absence of a large regional market will also increase the risks of making major investment decisions on the LNG developments.