- Several gas finds in East Africa dating decades have suffered long delays from the time they were “found”.
- Lengthy negotiations and insecurity have marred the projects, delaying a final investment decision on their development.
- Mozambique is already fighting Islamic insurgents in its gas-rich northern province, Cabo Delgado.
Economies across East Africa are losing billions of dollars in revenue every year because of key gas project delays in approving and developing liquefied natural gas investments, an analysis by The Exchange Africa reveals.
Several gas discoveries in East Africa dating decades, which were expected to power the region’s natural gas industry have suffered long delays from the time they were “found”. Lengthy negotiations, and insecurity have marred the projects, delaying a final investment decision (FID) on their development.
Mozambique’s gas finds
Take Mozambique, a regional economy of $41 billion GDP, for example. Mozambique reported huge gas finds in the 2010s. Industry experts quoted Mozambique’s gas deposits at an estimated 17 billion barrels of oil equivalent.
Out of these huge volumes, only about 700 million barrels of oil equivalent from Coral Sul field in Area 4 is currently trading. The project’s final investment decision was entered into in 2017, enabling it to make maiden export in November 2022.
Read also: Mozambique makes first export of Liquefied Natural Gas
The shipment originated from Coral Sul gas plant managed by Italian giant Eni. “This international venture is a sign of the recognition by the market that Mozambique offers a stable, transparent and predictable environment for the realisation of multi-billion investments, where high technology stands out in order to monetise resources in a phase of the energy transition; therefore it must bring pride to all Mozambicans,” said President Nyusi.
Emergence of Islamic insurgency
According to the State of African Energy Q1 Outlook survey, further development of Mozambique’s Area 4 targets 500 million barrels of oil equivalent. This is expected to start next year and hit the markets by 2027.
However, development in Mozambique’s Area 1 hit a brick wall following the emergence of Islamic insurgency. Since the militants started attacks in October 2017, over 4,500 people have lost their lives. A further over one million, mostly women and children, have been displaced from Mozambique’s resource-rich northern Cabo Delgado province.
To help tackle the insecurity, Rwandan and southern African troops have stepped in to flush out the Islamists. The war-torn area under has a cumulative gas volume of almost 3.2 billion barrels of oil equivalent. In other words, Area 1 has about 75 trillion cubic feet of recoverable gas.
With the insecurity, the project start-up is now delayed, denying Mozambique much-needed revenue to spur development. “The start-up is now delayed to late-2020s due to the operator TotalEnergies imposing a force majeure on the $20 billion project as the security situation in the northeast region of Cabo Delgado worsened,” the report states.
TotalEnergies’ $20 billion investment
Earlier this year, TotalEnergies executive Patrick Pouyanne met President Nyusi regarding the state of the humanitarian situation in the Cabo Delgado region. This was part of a review of the security situation in a block where TotalEnergies has a 26.5 percent stake. The French energy giant’s investment in Mozambique’s gas is about $20 billion.
“Since 2021, the situation in Cabo Delgado province has improved significantly, thanks in particular to the support provided by the African countries that committed themselves to restore peace and security,” Pouyanné said.
Also in Mozambique, energy giants Eni, ExxonMobil, and TotalEnergies are working on another delayed gas project with the potential of 4.5 billion barrels of gas equivalent.
Gas finds of Mamba North, Prosperidade (Lagosta and Windjammer) are projected to enter the market by the end of the coming decade.
The 2010s also saw neighbouring Tanzania announce huge gas finds. The move offered the country hope that it was entering the league of energy exporters. Tanzania’s reported recoverable natural gas finds are about 4.5 billion barrels of oil equivalent.
In May, however, operators and Tanzania’s government announced the conclusion of discussions, paving the way for a final deal on the $40 billion investment.
Tanzania realising impact of delays
Tanzania’s move signals that governments are now realising the impact of project delays. Authorities are now racing against time. They are putting in the effort to bring these projects online and also attract more exploration investments.
In 2022, Tanzania’s President Samia Hassan noted that if a Host Government Agreement could be signed by the end of last year, then the Tanzania LNG would see a possible final investment decision by 2025. This implies that the country’s first cargoes from the project could roll out by the early-2030s.
But the rotten tomato prize on delayed gas projects across East Africa goes to Ethiopia. Ethiopia discovered about 1.5 billion barrels of oil equivalent in the 1970s and 1980s. At the moment, Ethiopia’s gas finds are yet to see a final investment decision. The delays mean the country of over 100 million people can only wait further before earning from the resource.
Africa’s natural gas supply is mainly driven by key investments in North and West Africa. Across Africa, an estimated $795 billion of greenfield expenditure is required between 2023–2040 to bring all the undeveloped discoveries online.
Read also: Tanzania project to transform East Africa’s LNG sector
Globally, the Russia-Ukraine war is forcing realignments in energy markets. And these shifts are bringing interesting international deals across the African energy landscape.
EU interest in alternative energy sources
“The conflict also led the EU to step up its long-standing campaign to reduce dependence on Russian gas. Russia has long been the largest outside supplier of gas to the European market, and up until the end of 2021, it was the source of at least a third of all volumes consumed within the EU. Uncertainty over these supplies heightened European interest in alternative supply sources—and a significant portion of that interest settled on Africa,” the report states
Consequently, a number of global oil companies and EU member states began pursuing energy deals with North African states.
Read also: Mozambique’s debt repayment hinges on Total’s LNG Project
