Close
Opinion: Exxon Mobil’s investment in Mozambique gas project could solve Africa’s energy problems

Opinion: Exxon Mobil’s investment in Mozambique gas project could solve Africa’s energy problems

Opinion:  Exxon Mobil has taken another step toward the creation of Africa’s largest liquefied natural gas facility — a project so sweeping that it will have implications for both the continent’s and the world’s energy landscape, writes NJ Ayuk.

This week the company announced the formation of a consortium of contractors so it can begin some of the work even before it makes a final decision on going forward. 

The $33 billion enlargement of Mozambique’s Rovuma LNG complex will transform the country’s $15 billion economy, create thousands of jobs, give government more money to work with, and raise people’s standard of living.

If these reserves are exploited effectively, experts predict that Mozambique could become the world’s third largest LNG exporter, increasing Africa’s roughly 8 percent share of global gas exports.        

At the same time, it will position Mozambique as a key supplier to African countries wishing to use gas to stabilize their unreliable electrical power grids — a continent-wide problem that has hurt African economic growth for decades.

A giant is born

The stage was set for Exxon Mobil transforming Rovuma into a giant when it acquired a sizeable stake in the project from Eni in 2017. The deal specified that the Italian company would concentrate on getting the gas out of the ground while Exxon Mobil would focus on the gas-liquefaction part of the venture. 

The United States is liquefying shale gas for export. Qatar and Australia are big LNG suppliers. Even Russia, which has relied for decades on pipelines to transport gas to Europe, Turkey, China and elsewhere, is making an LNG push.

It should come as no surprise that Nigeria, sub-Saharan Africa’s longtime oil and gas leader, has long dominated the continent’s relatively small LNG sector. But other African countries are jumping in.

Besides exporting LNG to non-African countries, Equatorial Guinea has negotiated an LNG sales deal with Ghana and a transport infrastructure agreement with Burkina Faso.

Energy experts worry that a recent surge in gas discoveries around the world will lead to a glut of the resource, depressing the industry for years.

But the pundits are often wrong. In my experience as a petroleum-industry deal maker in Africa, while supply can outstrip demand at times, demand always catches up.

Africa’s natural-gas explosion

Pundits’ calculations have also failed to include an explosion in gas demand that is occurring in Africa, a continent of 1.3 billion people.

Africa accounted for less than 4 percent of the world’s natural gas consumption of 4 trillion cubic centimeters a year in 2018. The reason is that it has almost no pipelines to deliver gas from producing to consuming nations — or even from one end of a producing nation to the other.

That’s disconcerting because until renewables kick in, gas would be the best energy source for generating the electricity that Africa so desperately needs. Gas not only produces more energy but is also less polluting than other non-renewable sources.

I’m convinced the LNG revolution will lead to gas becoming available in many African countries where utilities are unable to obtain it now.

South Africa is leading the way with plans for a 3,000-megawatt, LNG-fueled electricity plant. Vessels offshore will receive, store and convert LNG imports into gas.

Egypt has already chartered two floating vessels for LNG storage, while Morocco and Ghana are also considering LNG-import facilities.

The scope of Africa’s electrical power problem shows why the continent has the potential to be a huge LNG importer.

More than 620 sub-Saharan Africans — two-thirds of the population — have no electricity at all. The other third are constantly enduring power blackouts due to most grids being antiquated and stretched thin.

And the problem is getting worse. The International Energy Agency predicts that 950 million sub-Saharan Africans will gain access to electricity by 2040, but that rapid population growth means the percentage without electricity will actually increase.

Most of Africa’s countries have coasts, which means that with enough investment they could import LNG for their electrical systems.

Another slice of good news is that gas-fired generation plants are cheaper than coal or nuclear plants, and can be built faster.

So Exxon Mobil’s Rovuma expansion story is more than just a good deal for one African country — Mozambique.

It could become part of a solution to the electrical-power shortage that has been hamstringing the continent for decades.

Why not send some of Rovuma’s LNG to South Africa instead of Asia or Europe? And to other African countries that build LNG import facilities?

By doing business with each other, African LNG exporters and importers will both prosper. So will the hundreds of millions of Africans who are without stable electrical systems.

And there will still be LNG left over to send to much of the rest of the world.

NJ Ayuk is the CEO of Centurion Law Group and the Executive Chairman of the African Energy Chamber. His experience negotiating oil and gas deals has given him an expert’s grasp of Africa’s energy landscape. He is the author of upcoming book, “Billions at Play: The Future of African Energy,” discussing the global stampede into LNG what it means for Africa. 

Related Posts

Join our mailing list to receive a sharp, curated weekly round-up of African business news.

Help us deliver better content