The African Gas Grid On Hold - Africa’s premier report on the oil, gas and energy landscape.

The African Gas Grid On Hold

The notion of a system of pipelines delivering methane from “rich” countries to “poorer” neighbours is passé.

A decade ago, there was much heady talk of a Pan African Gas Grid. The notion was of a series of gas lines, feeding off main lines, to deliver gas from hydrocarbon rich parts of the continent to hydrocarbon starved towns and villages.

There were conference deliberations of a system of cross-border gas lines diverted and integrated into national gas grids, giving access to several gas sources and allowing market security and flexibility to develop through storage and swaps of volumes between nations.

The idea started to gel as the 895km Mozambique-South African gas pipeline moved into commissioning phase in 2002 a year before the West African Gas Pipeline Implementation Agreement was signed at a ground breaking ceremony in Sekondi, Ghana. The 672km line running from Nigeria through Benin, to Togo and terminating in Ghana, was to deliver Nigerian gas to the “energy-starved” countries along the route. Around the same time, the earliest conversations about a 4,000km trans Saharan gas pipeline, taking Nigerian gas across the desert through Niger to Algeria, were being tabled.

So much promise.  Nigeria and Cameroon agreed to export more than 800million standard cubic feet per day of gas to Equatorial Guinean through pipelines from either country (although this was less for domestic purposes than for boosting EquatoGuinean plans for a second LNG project).  In Namibia, south west of the continent, arrangements were being made to pipe gas from the 1.5Tcf the Kudu gas field to South Africa, where it would feed thermoelectric plants meant to power both Cape Town in South Africa and power-starved Namibia.

The Moz-SA line  having been commissioned and the WAGP already under construction, commentators were touting these two as representing  the building blocks of a continental grid that could assure availability of gas to resource poor countries and lift the industrial capacity of those who inhabit the continent.

The promoters of WAGP painted it ever so brightly.  A Dames & Moore study, commissioned by Chevron suggested that between 10,000 and 2,000 primary sector jobs will be created as the new power suppliers stimulate the growth of new industry. This industrial growth, they touted, would create up to three times that number of secondary jobs due to the multiplier effect. A pre-investment study of the WAGP identified about $1.8 billion in total capital investment for the region as a result of pipeline project. “That includes the $ 400 million for the power plants, and $ 800 million in new industry, which include minerals processing.”

Whereas most of WAGP’s 140MMscf/d gas is destined for power plants in Ghana, Benin and Togo, replacing other fuels and reducing costs and emissions, the fact of its availability would open doors to other investment possibilities, we heard.

Investors actually sat down and took notice. Anglogold Ashanti, the huge gold miner, hinted of replacing fuel for its plants with gas from WAGP. Gaslink, the Nigerian independent gas supplier, said it wanted to tap from WAGP gas and deliver, through spur lines, to companies and industries in Ghana, Benin and Togo.

Much of that conversation has been scuttled. Today, with epileptic supply of gas from WAGP, ranking Ghanaian officials are openly wondering why they bought into the project in the first place. Togo and Benin, where the demand is weaker, have remained silenced with the disappointment. Nigeria, the source of the gas, is battling internal challenges of gas supply to its own growing domestic power capability and Shell, a major supplier of the gas for the pipeline, hasn’t lived up to its billing as a supplier of good quality pipeline gas. The power plants to be built in Ghana, as far as the Ghanaian Gas Masterplan is concerned, are looking more to gas supplies from the Jubilee field, a resource that was discovered four years after the WAGP Implementation agreement was signed. And as for thousands of jobs that were meant to be created in the event of the take off of the pipeline, what you have are angry Ghanaian commentators demanding accountability for what has gone wrong with the WAGP.

Since July 2009, when Petroleum and energy ministers Rilwan Lukman of Nigeria, Chakib Khelil of Algeria and Mohammed Abdullahi of Niger signed the agreement in Abuja, there has been a significant reduction in public discussion on the project which was proposed to have a capacity of 30 billion cubic metres per annum.

“Nobody talks of Trans Saharan Gas Pipeline anymore” says a ranking official at the Nigerian state hydrocarbon company, the NNPC. “The project has been put on hold”. The Algerians, who seemed the keener partners in the first place, have gone rather quiet, and the Nigerians talk about it in terms of, “when we are able to get some interested parties who will foot the bill”.

In the south west, Eskom’s enthusiasm for Namibian gas and/or of the power to be generated from the planned 800MW combined cycle plant at Oranjemund in Southern Namibia , that would be fueled by gas from the Kudu gas field, has waned.   Discussions between Tullow Oil, the British operator of the Kudu field and Eskom didn’t get anywhere. “The Kudu Gas to Power Project in Namibia was not concluded due to the economics of the project”, Eskom said in a statement.  “Electricity would have been produced at a cost well in excess of Eskom’s own options.  In addition certain risk allocations (such as fuel price currency and indexation) could not be agreed between the fuel supplier, the project developer and Eskom”.

In the meantime, however, some of the countries that were being describes as “energy-starved”, are turning round to be hydrocarbon rich. Ghana, for one, which is building a gas processing facility that will feed power plants and supply industrial parks. Just the other day, Apache encountered 52metres of net gas sand in a well in offshore Kenya. Companies have struck oil in Liberia and Sierra Leone.

The dynamics are changing.


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