Gas: Waste not, want not

By Thomas Pearmain
Posted on Monday, 1 February 2010 15:38

After decades of gas flaring in countries like Nigeria, price and legislation changes are leading to the development of more gas-to-power projects

Africa’s gas reserves are finally being utilised after decades of waste. Oil companies with no market for the gas have routinely flared reserves, burning away millions of dollars each day. But in the last couple of years, companies have finally got serious about monetising gas resources throughout Sub-Saharan Africa. This is due to two main reasons: governments have set out long-term policies, backed up with legislation, demanding that flared gas be used to increase power generation, and secondly, gas prices have increased so that oil companies can profit from the gas they have been burning.

Gas, but no power?

Nigeria has the largest gas reserves in Africa, about 187trn ft³, although the vast majority is associated gas – meaning gas that is present in a crude-oil reservoir. Nigeria’s liquefied natural gas exports have been rising, but the country is only now turning to gas to address chronic electricity shortages. Last April, the Nigerian National Petroleum Corporation confirmed the government’s shortlisting of 15 potential international oil companies and national oil companies for investment in projects as part of Nigeria’s gas master plan. The list includes StatoilHydro, BG Group, Shell and Centrica.

In Ghana, the government has set out a ‘no-flaring’ policy and said associated gas should be monetised from the start. Nigerian company Oando was selected to lead a consortium, which includes Italy’s Saipem and Japan’s Modec and Itochu, to develop Ghana’s gas sector. The $1bn deal will see gas pipelines constructed alongside processing facilities and storage tanks. Like almost all countries in Africa, Ghana has lacked the necessary infrastructure needed to drive a domestic gas market. The much-delayed West Africa Gas Pipeline could also take gas feedstock from Ghana.

A lack of infrastructure has delayed Tanzanian gas-to-power projects, but the country has saved hugely on fuel imports by utilising gas resources for the domestic market. Tanzania is unable to absorb all the gas and wants to export it to regional markets. The African Development Bank has agreed to finance studies for construction of the Dar es Salaam-Tanga-Mombasa gas pipeline to provide gas for the Kenyan market, which could displace fuel oil used to supply electricity to the national grid. Canada’s Artumas Group, which is listed on the Oslo Stock Exchange, is developing gas reserves in Tanzania and is looking to secure off-take deals with the Kenya Electricity Generating Company and Kenya Power and Lighting Company which would add 90MW to the national grid.

Cross-border ties ?

In June 2009, Russian energy giant Gazprom joined the consortium developing Namibia’s Kudu gas-to-power project.

An 800MW gas-to-power plant built on the Namibia-South Africa border near Oranjemund is planned with South African utility company Eskom. The South African parastatal is in negotiations for a 500MW purchase agreement, with 300MW directed to the domestic market in Namibia.

New gas supplies are much needed for South Africa’s power sector, which is heavily dependent on coal-fired power stations. A new gas-fired power plant is under consideration for the ?Coega Industrial Development Zone near Port Elizabeth.

South Africa is also pinning its hopes on discovering reserves of shale gas, regarded by the global energy industry as a game-changer. US energy group Chesapeake Energy is to team up with Norwegian company Statoil and South Africa’s synthetic fuels firm Sasol to explore the Karoo Basin for shale gas reserves.

Royal Dutch Shell also signed an exploration deal for that area in December 2009.

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