Oil is fast losing its lustre as gas rises to the top of the hydrocarbon investment agenda in Africa. With estimates that $130-billion in hydrocarbon investments will flow to sub-Saharan Africa between now and 2030 with gas taking a rising share, South Africa risks losing out on the bonanza.
Aname change can be revealing.
The first Africa Oil Week was held 30 years ago but the annual shindig in Cape Town is now called AOW Investing in African Energy. Oil is now a four-letter word as the global economy embarks on a decarbonisation drive to curb the rapid pace of climate change linked to fossil fuel usage. But gas is not so toxic — its CO₂ emissions are significantly lower than those of coal or petroleum — and the swelling pipeline of gas projects was a focal point of this year’s conference.
“Natural gas is at the centre of what we are doing in Africa,” Mario Bello, the head of the sub-Saharan Africa region at Eni, said at the conference. “It’s the cleanest fossil fuel, producing fewer emissions than coal, so it plays an important role as we transition to renewables.” On that note, it’s instructive to see how fast the investment winds have shifted in recent years, and South Africa may lose out if it doesn’t get its sails up to catch them.
For example, just a decade ago there was a lot of hype about coal in Mozambique. But in July 2015, a coal stacker collapsed at the Mozambique port of Nacala, dealing a blow to Brazilian miner Vale’s plans to begin exporting the fossil fuel from the country. The twisted wreckage became emblematic of the fate of Mozambique’s coal sector. Vale in 2021 exited Mozambican coal as part of its plans to no longer own any coal assets.
New gold
But gas is a different matter and has become the new gold for Mozambique and Africa more widely. Mozambique’s massive offshore deposits are coveted because even by gas standards the resource is seen as clean, making it a perfect alternative to the coal that companies like Vale would have been exporting to Asian markets. Gas activity there includes ExxonMobil’s Rovuma Liquified Natural Gas project. In a presentation at the conference, Exxon’s Mozambique General Manager Arne Gibbs said Mozambique had the potential to become a global top five Liquified Natural Gas producer. But timelines are long and security is a major concern in the face of an Islamist insurgency that erupted in Mozambique in 2017. A final investment decision on the project is not expected before early 2026, and Gibbs’ presentation pointedly noted this assumed a “sustainable secure operating environment”.
Namibia by contrast is both stable and has also had massive offshore oil and gas discoveries. “Namibia is getting the industry very excited,” Mansur Mohammed, the head of upstream West Africa for energy consultancy Wood Mackenzie, told Daily Maverick on the sidelines of the conference. He said Namibia could become one of the top five investment destinations over the next decade because of its hydrocarbon endowment.
$130-billion baby
Wood Mackenzie estimates that investment into sub-Saharan Africa’s oil and gas sector could amount to $130-billion between now and 2030, with gas accounting for a growing share of that capital surge.
“We are seeing more and more investment in gas in sub-Saharan Africa, and it’s a function of two things: more gas has been discovered in the region over the past decade than oil, and a lot of it is offshore, which lends itself to the export market,” Mohammed said.
“So the trend is that we are seeing more gas investment coming into the region than oil. Gas is a transition fuel so governments are putting in place the right regulatory frameworks for gas incentives.”
Nigeria, for example, earlier this month unveiled tax incentives aimed at attracting up to $10-billion in investments into deep water gas exploration.
“Regulatory clarity is important so that companies know what the rules are,” Mohammed said.
He noted that providing clarity and incentives was crucial to ensuring that discovered resources did not become stranded.
SA needs to get its house in order
On that score, South Africa has an asset that looks a bit stranded at the moment.
French energy giant TotalEnergies has pulled the plug on the Brulpadda and Luiperd offshore gas projects because it could not find a viable commercial path after failing to reach an agreement with PetroSA and Eskom over pricing.
If South Africa is serious about getting into the upstream gas business it needs to compete with its neighbours, and a growing global portfolio of projects. Incentives and clarity would help to lift its profile.
And things are changing fast. A decade ago coal was still seen as a viable asset. The global scramble for green metals is picking up pace and the drive to renewables could in a decade’s time leave gas high and dry — or maybe not. But you have to make hay while the sun shines, and right now it is shining on gas.
Source: dailymaverick.co.za