As a continent Africa represents a diverse mix of energy markets, each with its own unique set of opportunities and challenges.
Countries rich in oil and gas resources sit alongside countries with more limited, if any, hydrocarbon resources – however the projected strong growth in power demand across the continent presents a significant opportunity for gas-to-power developments: it is estimated that almost half the population of Sub Saharan Africa is presently without access to electricity. Recognition of the growing importance of gas is reflected in the focus on Domestic Supply Obligations of upstream developments and the progression of gas and LNG import projects.
The significant fall in oil prices and subsequent shift to a low energy price environment has the potential to be a double edge sword for participants in Africa’s energy sector. The often complex and high cost nature of oil and gas resource extraction will mean upstream developments face significant headwinds as players cut exploration budgets. On the other hand, falling LNG prices and growing supply availability present an opportunity for Africa to be further connected to global gas markets through import terminal construction. These issues will throw up strategic and commercial challenges that require careful planning and execution.
Despite these challenges, Africa is playing host to important LNG innovation, with floating LNG (FLNG) projects being pursued in Cameroon, Equatorial Guinea and Mozambique. The success of these developments rests with developers and host governments alike. Developers must navigate a challenging LNG market to secure necessary off-take agreements while host governments must ensure that fiscal and regulatory regimes do not become barriers to investment. The International Energy Agency (IEA) estimates that Africa could overtake Russia as global gas supplier by 2040, demonstrating the scale of opportunity should these obstacles be overcome.
- With a period of low oil prices expected, securing investment capital on a global and corporate scale for exploration and project development becomes an increasing challenge; we help clients create powerful and compelling value propositions from supply chain through to downstream market.
- LNG developments are taking place in countries without previous gas market experience: we have a proven track record in building client understanding the commercial complexity of building an LNG value chain
- New projects (including upstream, LNG export and LNG regasification) are being progressed by players beyond the traditional industry project developers and those willing to be early adopters of new technologies including small-scale and floating solutions: we have supported these “challenger organisations” through important strategic decisions across Africa
- There will always be a natural tension between fiscal and regulatory terms along the value chain that encourage upstream investment whilst facilitating downstream domestic market development. The construction of fiscal and regulatory environments that provide incentives to international investment whilst also safeguarding economic benefits for host countries will always be a balancing act