Aligning investment prospects for West Africa’s gas production

by | December 6, 2017 12:55 am

West Africa’s gas production has been boosted significantly by rising demand for power following the completion of several gas-fired power plants in Nigeria, Ghana, Gabon and Côte d’Ivoire. With more production expected to come on stream over the medium term in neigbouring countries, the outlook for gas production is largely positive in 2017/18

In recent years, gas production has grown more rapidly in West Africa than in any other region, while the production of gas has increased more rapidly in region than anywhere but the Middle East.

There is no gain saying the fact that West African gas has become important components of the world’s hydrocarbon supply-demand balance. West African gas projects have attracted substantial investment thanks to their cost competitiveness versus those in other regions.

A cursory look at the gas industry shows that Asia remains the leading importer of West Africa gas. This is expected to rise to 7.1bn cfd before the end of 2017. Nigeria is the West Africa’s largest gas producer, with output of over 2.5tr cubic feet per year while Côte d’Ivoire and Equatorial Guinea are also gas producers

Industry close watchers observed that gas production has become a major focus for oil companies in response to strong investment in gas-to-power projects across the region.

According to them, “Although gas output in small producers like Cameroon and Ghana has increased, these countries face infrastructural constraints that prevent them ramping up gas output significantly. They will require additional investment in gas processing and transporting infrastructure if they are to increase output significantly.

West Africa’s LNG producers accounted for 9 percent of global LNG exports in 2016. Cameroon’s floating LNG plant, which was due to start operations in H2 2017, is now expected to start up in 2018/19.

In the longer term, West Africa’s share of global LNG supply could nearly double by 2022 when the LNG plants in Equatorial Guinea, Senegal and Cameroon are completed. Nigeria is also looking to expand its NLNG plant with a seventh train, which would increase its capacity to 30mn tonnes/year.

West Africa’s gas reserves have grown significantly in recent years, boosted by discoveries offshore .Overall, Sub-Saharan Africa is estimated to hold over 500 tcf of natural gas reserves. Recent discoveries offshore Senegal and Mauritania could boost the region’s gas reserves further, once appraisals of the finds have been conducted.

Analyst are however concerned that funding gas projects remain a major challenge in West Africa, owing to the poor commercial terms for domestic gas suppliers. Despite huge demand for power and the presence of huge gas reserves offshore, governments have been hesitant to change electricity tariff regimes.

This they opined has prevented higher gas prices for power, slowed progress with gas-to-power projects and stalled the creation of a viable gas market. However, since late 2015 there have been moves to raise electricity tariffs in Ghana and Nigeria.

According to them, “These efforts were driven by the devaluation of these countries’ currencies, which drove up the cost of feedstock fuels and gas and gave greater urgency to the need to make tariffs more cost-reflective”.