The role of gas in powering Africa’s future



Could power generated from gas be exported to regional markets?

There are four existing power pools in Sub-Saharan Africa, within which countries have interconnected power systems: the Southern African Power Pool (SAPP), the East African Power Pool (EAPP), the West African Power Pool (WAPP) and the Central African Power Pool (CAPP). In order to expand gas-by-wire imports, transmission and distribution infrastructure will require significant development to improve capacity and efficiency. In the medium-term, expansion of gas-by-wire seems most likely in West Africa, where land-locked countries or coastal countries with relatively small markets could take advantage of upstream gas  projects (or even LNG import projects) in neighboring countries.


Prospects for LNG import projects in Sub-Saharan Africa

A number of members of the WAPP have proposed LNG import projects, perhaps reasoning that any shortfall in domestic demand for power generated from gas could be exported around the power pool. Ghana seems closest to realizing this goal, having granted a concession to Tema LNG Terminal Company Limited (Tema LNG), a joint venture between Helios Investment Partners and the Ghana National Petroleum Company (GNPC), to construct an LNG import terminal. Tema LNG has entered into a construction contract with China Harbour Engineering Company to build onshore facilities and Jiangnan Shipyard for a floating storage and regasification unit (FSRU).

South Africa continues to explore options for a LNG imports12 and an LNG terminal has also been proposed at Walvis Bay in Namibia. Other LNG import projects in the region have either previously been considered and put on hold (such as in Kenya)14 or are currently under consideration (such as in Mauritius and the Seychelles). Given that a delivered gas price of around USD8/MMBtu is competitive with oil-fired power at an oil price as low as USD50/barrel;17 it is more than possible that the economics will support LNG imports to displace oil-fired power generation and to increase power generation capacity in Sub-Saharan Africa, particularly where funding can be obtained from multilateral lending agencies or development finance institutions.

Although the World Bank has announced that it will no longer finance upstream oil and gas projects (apart from in “exceptional circumstances”),18 it is expected to continue to finance midstream and downstream natural gas projects. In countries with domestic reserves, gas can undoubtedly play a major role in the development of power generation capacity. LNG import projects are also foreseeable as countries seek to move away from oil as a power generation fuel. New cross-border gas pipelines may be less likely, but LNG imports or increases in domestic production could well result in an increase in gas-by-wire exports, particularly to land-locked countries in the WAPP.


*Simon Collier is a Senior Associate at DLA Piper

preloader image