Magazine article New African

Gas to the Rescue: After Years of Neglect, Fuelled by the Obsession with Oil, African Oil Powers Are Now Taking the Opportunities Offered by the Gas Sector More Seriously

Magazine article New African

Gas to the Rescue: After Years of Neglect, Fuelled by the Obsession with Oil, African Oil Powers Are Now Taking the Opportunities Offered by the Gas Sector More Seriously

Article excerpt

The European Union (EU) is liberalising its gas and power regime, and a genuine dash for gas is taking place as many member states seek to phase out coal and oil-fired generating capacity in favour of using gas as a feedstock. Algeria is already leading the way in supplying this growing market to the north, and Nigeria is keen to participate.

The Trans-Sahara Gas Pipeline (TSGP) project has been designed in transport natural gas from Nigeria across Niger to the Algerian gas transportation network, from where it can be piped directly to Southern Europe.

Although the project may not be able to get off the ground because of the development costs involved, the fact that Nigeria and Algeria are seriously discussing it indicates the importance with which the sector is now being taken.

In a similar vein, the much vaunted West Africa Gas Pipeline (WAGP) project, which has been on the drawing hoard for some time, looks like finally being built.

The governments of Nigeria, Ghana, Benin and Togo have signed a treaty agreeing to the construction of the pipeline, which will enable the transportation of natural gas from Nigeria to the countries to the west for use in power generation projects. The 20-year deal allows for the creation of a legal framework, the formation of a single WAGP authority in oversee the development of the project and the harmonisation of regulations across the four countries.

The WAGP consortium consists of ChevronTexaco, with a 36.7% stake, the Nigerian National Petroleum Corporation (NNPC) (25%), Shell (18%), the Volta River Authority of Ghana (16.3%) and new gas companies being set up in Benin and Togo (2% each).

While oil exports undoubtedly generate large amounts of income for Africa's producing states, they have sadly failed to make the most of the opportunities in associated industries.

An extremely limited proportion of oil services work required to support production in the Gulf of Guinea is carried out in Africa. Local engineering and ship building enterprises have failed to evolve with the limited exception of some in Cape Town, South Africa, and only catering and security companies have managed to secure substantial contracts.

Moreover, Africa has largely failed to make the most of its gas reserves, although this situation is gradually changing. Nigeria is leading the way through the development of its Bonny Island liquefied natural gas (LNG) plant and other major schemes, partly because of growing global demand for gas but mainly because the government has resolutely stuck to its insistence that gas flaring be phased out by 2008.

Refining is another area of major potential that has largely been ignored, although the proposed 200,000 b/d Lobito plant in Angola could at least take a step in the right direction if it gets off the ground.

The development of associated industries such as the gas and refining sectors could help African oil producers to make the most of their hydrocarbon sectors. If countries like Nigeria and Angola could refine a far greater proportion of their crude oil output domestically, they could help to keep more of the benefits of processing within Africa.

It is noteworthy that both Ghana and Cote d'Ivoire have large refineries that process more crude oil than they produce, while Congo-Brazzaville, for example, processes only a tiny percentage of its oil production. It seems that only net oil importers can genuinely grasp the importance of refining.

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The ebb and flow of oil prices has a varied effect upon African nations, according to whether they are net oil importers or exporters. …

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