Africa's $245Bn Planned Gas Investment Poses Stranded Asset Risk

A $245 billion planned expansion of gas infrastructure is underway in Africa, representing an enormous, stranded asset risk especially as much of this gas is intended to correct for Europe’s short-term energy crisis.

The Global Energy Monitor said in a report that the war in Ukraine had precipitated increased investment plans in African gas across the upstream and midstream value chains, with countries such as Mozambique, Nigeria, and Tanzania on the brink of making major investments in gas export infrastructure.

But these multi-billion-dollar bets risk being driven by Europe’s renewed but temporary interest in natural gas, which will likely lead to stranded assets and a failure to invest as strongly as necessary in Africa’s domestic generation capacities and renewable energy future.

Planned investment in gas pipeline and LNG export infrastructure competes with domestic demand for gas and much needed renewable energy investment for Africa to realize universal access to clean, affordable, and reliable energy.

This report describes existing and planned LNG terminals, gas pipelines, and gas plant projects, including the use of gas in Africa’s electricity generation.

The report notes that investments in planned LNG export terminals dwarf planned investment in gas plants to power Africa. Estimated capital expenditure for in-development LNG terminals is $103 billion, 92 percent of which would be for LNG export terminals.

This total estimated investment would increase the region’s 79.3 mtpa of LNG export capacity by 111 percent, while doing little to improve electrification on the continent. Nigeria and Mauritania have the greatest in-development export capacities at 24 and 20 mtpa, respectively.

Also, much of the continent’s gas pipeline buildout has yet to secure investment. The planned gas pipeline buildup in Africa would require $89 billion in investment. Only $4 billion is attributed to projects under construction, while $85 billion is attributed to proposed projects.

Nigeria leads planned regional gas pipeline development with 1,427 kilometers in construction. South Africa and Mozambique lead in proposed gas pipelines, with 4,792 and 4,352 kilometers, respectively.

The Global Energy Monitor added that, while Africa has an estimated 23,932 kilometers of gas pipelines in development, most projects remain in the proposal stage with only 1,872 kilometers currently under construction.

Regional imbalances in gas plant generation persist. The planned gas plant buildout in Africa would require $62 billion in investment. Yet only $9.7 billion is attributed to projects under construction, while $52.3 billion is attributed to proposed projects. Nigeria and South Africa have the greatest estimated required investment with $21.2 billion and $16.3 billion, respectively.

In the report, Global Energy Monitor claimed that 109.2 GW of operating gas-fired power plants exist in Africa, much of which is in North and West Africa while 64.1 GW of gas power plant capacity is in development, of which only 10.5 GW is under construction, 17.3 GW is in pre-construction, and 36.4 GW has been announced.

Nigeria and South Africa have 22.5 GW and 16.6 GW of in-development gas plants, respectively, and while both are gas producing countries, each face inadequate installed electricity generation capacity.

To contact the author, email bojan.lepic@rigzone.com