THE FINAL WORD
THE VAST and well-documented gas reserves
in East Africa continue to whet the appetite
of investors along the New Silk Road – stretching from Beijing to Lagos – especially as the
global population and subsequent energy
demand soars. China, Japan, India, and the
Middle East are particularly hungry for liquefied natural gas (LNG), and so the intensifying
global competition among LNG exporters
means East Africa’s window of opportunity
is shrinking, certainly facing stiff competition.
Tanzania and Mozambique, home to East Africa’s largest natural
gas reserves and with a combined capacity of nearly 250 trillion
cubic feet (tcf), must quicken their pace as the race for supply
contracts accelerates. East Africa benefits from convenient geography, with the coastline acting as a springboard to market to
rising demand in the Middle East, India, China, Southeast Asia,
and Northern Europe.
Global LNG production hit 250 million metric tonnes (m/t)
last year, rising by four million m/t on 2014, according to a Wood
Mackenzie report. The consultancy cautions that a further 125
million m/t of LNG under development means that the majority
of market growth will come post-2016. East
Africa’s plans to ramp up its LNG exports
in the early 2020s will face strong competition from both emerging and established
exporters, with everyone jostling to lock
in Asian clients where possible.
Qatar remains the world’s biggest LNG
exporter, while Iran, home to the world’s
second-largest gas reserves, has started
increasing its marketing efforts in Europe, India, and Pakistan
after the Western-imposed sanctions were lifted on January 17.
Russia, a long-time and reliable European supplier, is also focusing
on Asian clients, while Australia is in the running to displace
Qatar as the world’s largest LNG exporter by 2018.
Westwards, the first LNG exports from Sabine Pass in the US,
marked a milestone in February in the country’s journey from an
energy importer to an exporter. In addition, China and some
Middle East energy producers – notably Kuwait – are looking to
possibly develop their shale gas reserves, which, if successful,
could narrow the LNG import market over the medium to
Amid this abundant supply, natural gas prices are unlikely to
recover in 2016, according to 69% of respondents to a Gulf Intelligence industry survey in January. Despite this hefty competition,
investors are still eager to develop infrastructure that leverages
East Africa’s coveted gas assets.
The Dubai-based Dodsal Group has discovered natural gas
reserves estimated at 2. 7 tcf in the Ruvu Basin near Dar es Salaam
that they estimate to be the country’s largest onshore gas discovery
with a value of $8-$11 billion. The company has earmarked $300
million to invest in Tanzania over the coming two years.
State-run Tanzania Petroleum Development Corporation
(TPDC) is working alongside Shell, Statoil, ExxonMobil, and Ophir
Energy after securing a land deal for a LNG plant on Tanzania’s
coastline in January. The plant is well-positioned to utilize the
country’s offshore gas reserves when it starts up in the early 2020s.
The national significance of Tanzania’s LNG export market is
vast. The country’s central bank expects LNG to be the main driver
of the country’s transformation into a middle-income nation by
2025. This is a valid target considering that the International
Monetary Fund (IMF) expects Tanzania to continue reporting the
7% growth it achieved in 2015. Tanzania will also partly help fill
the economic vacuum left by the weak economic performances
in historical powerhouses Nigeria and South Africa. Flows of cross-
border trade, investments, human capital and politics are en-
trenched throughout Africa’s economies and Tanzania’s bullish
streak could act as a support for the continent’s sliding performance.
Low commodity prices mean the IMF has put Africa’s 2016 growth
rate at 3%, down from the initial 4.3% outlined last October.
Meanwhile, the incentive for Mozambique to nurture political
stability and lure more investors to Maputo is clear. The country
could earn up to $5.2 billion a year by 2026
from LNG exports, creating over 70,000
jobs in its gas sector.
The country’s national oil company
ENH, South Africa’s SacOil Holdings, China
The vast potential of East Africa’s LNG reserves faces little debate.
But, Tanzania and Mozambique must quickly court investors to
leverage their assets and secure clients in Africa and along the New
Silk Road before other LNG exporters cross the finish line.
ABOUT THE AUTHOR
John Roper is an oil and gas executive with 33 years’ experience in
the energy industry with a strong management and technical
background. He is currently head of the Middle East region for
Uniper Global Commodities SE. Roper has a BSc Upper 2nd Class
in geology from Kings College, University of London and a MSc in
geophysics and marine geology from University College, University
East Africa’s LNG race
“The vast potential of East Africa’s LNG
reserves faces little debate. But, Tanzania and Mozambique must quickly
court investors to leverage their assets
and secure clients in Africa and along
the New Silk Road before other LNG
exporters cross the finish line.“