East Africa: Future for African Gas Lies in East Africa

AllAfrica

East Africa Business Week (Kampala)[05/11/12]

With open access and attractive leasing terms, Africa's oil and natural gas resources continue to attract a broad spectrum of investors, according to a new report from Ernst & Young Natural gas in Africa - The frontiers of the Golden Age launched at Africa Oil & Gas Week.

Elias Pungong, Ernst & Young's Oil & Gas Leader for Africa says, "Natural gas development holds tremendous opportunity for Africa. It can be a primary driver of economic growth and broader social development, as well as a major spur for local employment growth and infrastructure development."

The report spotlights Africa's rapidly evolving natural gas sector, and while Algeria, Nigeria, Egypt and Libya are identified as holding significant reserves, the production of gas is considerably lower in these countries.

More recently, the sector's growth has been concentrated in West Africa, with the huge associated gas resources that accompanied the deepwater oil boom, led by Nigeria and Angola.

While the West African gas growth will continue as flaring is reduced and local gas infrastructure is developed, the big future for African gas lies in the East of Africa with the massive offshore gas discoveries in East Africa, particularly in Mozambique and Tanzania.

Pungong added "While the risk rankings overall in Africa are quite high, for many countries the "risk trend" is improving, Most importantly though, the opportunities for Africa in this sector are enormous and the challenges and risks can be addressed and mitigated."

Africa's gas reserves will be more than just headline opportunities for the national oil companies (NOCs), the deep-pocketed oil and gas majors, their big international exploration and production (E&P) counterparts as well as well-known African oil and gas specialists.

Opportunities for local supplies abound

The ramp-up in E&P activity brings opportunity for the oilfield services (OFS) segment, but again, not just for the big international OFS players, but also for local and regional companies that can contribute to the supply chains and to the associated upstream support infrastructure. The broader infrastructure build-out could also include massive export facilities, as in the case of liquefied natural gas (LNG), but also smaller projects such as pipelines and gas distribution networks to support local/regional domestic gas demand.

The associated development or expansion of a domestic gas demand sector could also bring substantial commercial opportunities in the power generation, industrial and even transportation sectors. Indeed, many of the gas flaring reduction efforts are tied to domestic gas use projects.

Pungong says, "African governments and regional NGOs will of course have critical roles to play - first and foremost, developing a meaningful and practical master gas development plan, one that addresses the upstream tax and licensing models, as well as the necessary infrastructure issues and investments, and local training and job creation issues.

"Collaboration and partnerships with the IOCs, both big and small, will likewise be critical."