As Europe looks to new sources of gas, Nigeria is leading other African countries in finding cheaper and faster alternatives to monetise and export its vast gas reserves.
A floating liquefied natural gas (FLNG) terminal is a mobile platform or vessel used to liquefy and store natural gas from offshore fields. The have begun springing up around Africa, allowing the continent to quickly tap into global gas demand and monetise abundant untapped reserves.
Russia’s invasion of Ukraine and the consequent economic fallout pushed up global demand for gas, causing prices to skyrocket and European countries to suddenly jostle for Africa’s natural gas.
Three African countries namely Nigeria, Mozambique and the Republic of Congo launched floating terminals over the past three months to tap into this rising demand as Europe races to get its hands on as much non-Russian gas as possible.
It’s a trend that is likely to grow, according to industry insiders.
“The market for FLNG terminals is expected to grow as new offshore floating projects emerge in response to rising gas demand,” said research firm Allied Market Research, in its latest report.
A report on the FLNG market, Global Opportunity Analysis and Industry Forecast, 2021-2030 shows the boom is driven by a growing preference for natural gas.
The LNG is seen as less polluting, safer and more cost-effective at powering industry, compared with heavier carbon options like coal and oil.
“Its popularity is due in part to the environmental advantages it offers over other fossil fuels,” said the authors of the report.
The Republic of Congo has a head start over Nigeria and Mozambique, deploying two FLNG vessels with a combined production capacity of three million tonnes per year. The deployment is seen as consolidating the country’s position as a regional gas hub.
“The Republic of the Congo has the chance to become not only a regional but global producer of LNG, and the launch of a second FLNG facility by Eni will be key for making this objective a reality,” said NJ Ayuk, executive chairman of the African Energy Chamber.
With more than 10 trillion cubic metres of natural gas resources, the Republic of Congo has a national gas master plan that lays the foundation for the promotion of gas utilisation and attracting foreign direct investment.
However, in November 2022, Nigeria launched its first FLNG through a privately held company, UTM offshore, which was recently incorporated and received financial backing from African Export-Import Bank.
The facility to be built 60 kilometres from the shore of Akwa Ibom State is also backed by ExxonMobil and has a production capacity of 1.2 million metric tonnes per annum and a storage capacity of 200,000 cubic metres.
UTM Offshore managing director and chief executive officer Julius Rone said the FLNG facilities will help Nigeria and other hydrocarbon-producing African countries cut dependence on crude oil and meet global demand for gas. “For us in Africa, especially Nigeria, energy transition is steeped in harnessing our abundant gas resources the rising global demand for cleaner energy sources has offered Nigeria an opportunity to exploit gas resources for the good of the country,” said Rone.
Nigeria’s vast gas reserves are estimated to be above 200 trillion cubic feet – the largest of Africa’s over 620 trillion cubic feet, according to Statista.
Towards the end of 2022, Mozambique – with over 100 trillion cubic feet of natural gas reserves – inaugurated the Coral-SuL Floating Liquified Natural Gas project, in the ultra-deep waters of the Rovuma basin.
President of Mozambique, Filipe Jacinto Nyusi, said the project ushered in a new era of energy security for the region, while positioning the country as a globally competitive producer and exporter of LNG. “The FLNG project has raised the levels of confidence and expectations for the future so that Mozambique can occupy a significant position as an exporter of LNG in the phase of the energy transition,” Nyusi said.
Oil majors Eni and ExxonMobil are key partners and operators in the three African countries as they look to cash in on the booming FLNG market, in a strategy change that focuses on sustained investment in the continent.
The floating terminals – serving as mobile midstream assets by producing LNG directly on floating systems off the coast – are considered to have lower production costs, take less time to build and offer investors quick returns on investments, compared to traditional large onshore facilities.
“FLNG terminals provide the opportunity to reduce production costs while also increasing output, thereby improving project economics,” according to Allied’s report.
Rystad Energy, a global market research firm, has projected that Africa has the potential to triple its LNG export capacity by 2040 from the current 77 million tonnes per annum.
A report by the African Energy Chamber, The State of African Energy 2023, shares those sentiments and has tipped Nigeria, Algeria and Egypt to drive Africa’s LNG exports over the next three years.
“Africa stands at a point where it can benefit from historical gas trade relations with Europe, existing infrastructure to export gas to Europe, geographical vicinity to the demand centres and, most importantly, abundant natural gas potential,” said the report.
Other gas-rich African nations projected to drive exports are Equatorial Guinea, Mozambique, Senegal and Mauritania.
To support the drive, minister of state for petroleum resources, Timipre Sylva, was selected to lead investment-focused dialogue during the Invest in African Energy Reception which took place in London on January 26.
With the Nigerian energy market on the precipice of another transformation on the back of diversification and market-driven policy implementation, the participation of Sylva is key for securing new capital for Nigeria’s rapidly growing market, while enabling new players and financiers to expand their footprint in one of Africa’s biggest oil producing countries.
Nigeria has emerged as one of the most attractive destinations for foreign investment owing largely to the signing into law of the Petroleum Industry Act in 2021.
With the Act having overhauled the country’s regulation and governance, addressing key growth inhibitors by prioritising transparency, procedural clarity and attractive fiscal terms for regional and international players, the Nigerian energy market is more enabling for business than ever, and the Minister will showcase opportunities in the sector during the Invest in African Energy Reception in London.
The Act itself has already unlocked tangible benefits, with the country positioning itself as the biggest oil producer in Africa in 2023, despite a year of production declines owing to challenges associated with oil theft and reduced exploration. With the state-owned company, the Nigerian National Petroleum Company Limited identifying and shutting down an illegal pipeline responsible for the loss of up to 600,000 barrels per day (bpd) of crude oil, production has rapidly increased to approximately 1.2 million bpd in December 2022, setting the country up for an exciting year in 2023.
The country is more ambitious than ever when it comes to expanding the oil and gas market even further, with the government incentivising E&P activity in a bid to boost production levels further. As such, opportunities for upstream players have opened up and Minister Sylva will be making a strong case for hydrocarbon exploration during the reception in London.
Opportunities in the oil industry, over 200 trillion cubic feet (tcf) of proven natural gas reserves and opportunities to increase this figure to 600 tcf with advancements in exploration have positioned the country as the destination of choice for financiers and project developers from across the natural gas landscape.
At a time when global markets are urgently seeking alternative gas supplies in light of ongoing supply constraints, Nigerian gas has emerged as a top solution, and investors are encouraged to capitalise on the opportunities present across this rapidly growing market.
However, Nigeria’s oil and gas market opportunities transcend exports, with the country well-positioned to feed into regional supply chains.
Having signed a deal with Equatorial Guinea that would see Nigerian gas being processed at the country’s Punta Europa facilities while making steady progress to complete the Trans-Saharan Gas Pipeline and breaking ground of new project developments, Nigeria is opening new opportunities for electrification and industrialisation in Africa on the back of intra-African gas trade, made possible through initiatives such as the African Continental Free Trade Agreement and the progressing Central African Pipeline System.
“Through his participation at the Invest in African Energy Reception in London taking place in partnership with the African Export-Import Bank and Rystad Energy Sylva has made clear his commitment to securing new capital for a suite of large-scale projects across the entire energy value chain in Nigeria. During the event, the Minister will be driving market-focused dialogue on why investing in Nigeria is so critical, both for the African economy and for the global energy market at large. The London event provides financiers and energy players with the unique opportunity to directly engage and connect with a leading government representative from the biggest oil producer in Africa, and the AEC is encouraging all of those interested in expanding their footprint in Africa to join us at this high-level event,” states NJ Ayuk, Executive Chairman of the African Energy Chamber (AEC).
