Page 6 - AfrOil Week 23 2022

AfrOil COMMENTARY AfrOil

bna: But you said Mozambique and Tanzania bna: And yet there are so many news sto-
have “proven” gas reserves? ries at the moment about how Africa can meet
JH: Indeed. The oil companies are sure that Europe’s energy needs?
the fields there can produce gas for the next 25 JH: Yes, and there are lots of new deals. The
years. That means they can sign offtake agree- upstream oil sector is looking better than ever.
ments with consumer countries in Europe or That’s what always happens when oil prices go
wherever. And that makes investors willing to up. Companies start seeing into the future and
lend the billions of dollars needed to get started. investing. But my point still holds: It is hard to
bna: And can’t this all now be speeded up? imagine Angola or any African country ramping
JH: Well, now we come to the political and up gas or oil output in the short term.
security constraints. TotalEnergies started build- bna: Only Israel?
ing their $20bn LNG project in Mozambique in JH: Yes. The gas will be coming to Europe
2019 but they suspended operations following from Egypt but it will, in fact, be mostly Israeli
a nasty terrorist attack in March 2021 in Palma gas. Doing that requires a relatively minor
near the Tanzanian border. Meanwhile, Exxon- investment. The pipeline is already there. It can
Mobil, the operator in Tanzania, still doesn’t feel get the gas to an existing LNG terminal in Egypt
comfortable enough to give the green light for which currently has spare capacity. That’s a real
the project there. It could be a couple of years, or solution.
it could take several more. It turns out to be not bna: But will that meet Europe’s short-term
so easy to say: “Yes, we will make this multi-bil- needs?
lion dollar commitment.” JH: No way. The short-term solutions require
bna: Even if the Europeans throw around what is called a “near-field strategy.” That means
their money and influence? exploiting small gas fields which are close to an
JH: They can and are working on technical existing field. The company Eni is starting to do Gas is not like oil.
assistance and financing. But will that make a that in Egypt. With just a few kilometres of new It’s not easy to
difference in the short term? Not really. Ulti- pipeline, they can connect to the existing infra-
mately, the end consumers, which in this case structure. That’s how you add extra production hold it in reserve
are the Europeans, have to be ready to sign deals quickly. Maybe at some point, Cypriot gas could
that commit them to pay higher prices, even also be added in. But for the short term, the and decide from
though this will only solve their problem a few amounts we are talking about are quite marginal.
years down the line. It certainly won’t guarantee bna: It sounds hopeless. one day to the
that Europe will get more gas in the next year JH: There is one other thing that gas-pro- next how fast you
or so. ducers in North Africa could do to increase gas
bna: But all over Africa there are gas fields. exports to Europe that might be short-term. want it to flow
Analysts say Angola could boost its production
and it is already exporting gas to international Other forms of energy
markets? bna: Let me guess: Stop consuming their own
JH: Gas is not like oil. It’s not easy to hold it in gas and give it all to Europe?
reserve and then decide from one day to the next JH: Good guess. You see, the more electric
how fast you want it to flow. With gas, you can’t power that countries like Libya and Algeria can
just say: “Okay, we’re going to pump a bit harder.” produce domestically with renewables, the more
bna: So then what about oil? Can any African gas they would have available for export; that
countries quickly pump a bit harder? at least in theory. I haven’t yet calculated what
JH: I don’t know of anywhere in North the opportunity cost would be if the gas is not
Africa that has spare oil capacity, and the big burned domestically. But it’s clear that the gas is
oil-producing countries in sub-Saharan Africa currently sold locally for a subsidised price, so
like Nigeria and Angola are currently produc- nobody makes money. If those countries were
ing below their OPEC quotas. That means they to get cheap renewable energy, they could shut
have serious structural and organisational prob- down their gas-fired power plants and sell the
lems in the sector. It doesn’t mean they just have gas to Europe.
to open the tap a bit more. If it did, they would bna: Why is that not already happening?
already be doing that. JH: Let’s start with the problem of quickly
building solar plants when China still has
Angola COVID and there is a shortage of solar panels.
bna: Why, then, are analysts saying that Angola bna: So whether North Africa could quickly
has the best potential to meet Europe’s energy scale up renewables to help out Europe export
needs in the short term? gas is an open question?
JH: I would say they are exaggerating. On JH: It is absolutely an open question. But with
paper, it could be true. Angola does have the Europe’s energy shortfall, there are all sorts of
reserves and the infrastructure. But Angola is weird and wonderful futuristic solutions being
producing way below its OPEC quota and recent considered now, like GH2. People are suddenly
upstream licensing rounds have not attracted taking unproven technologies very seriously
strong international interest. The one that con- because the options they thought were on the
cluded in October 2021 only brought in local table, like ramping up energy production in
investors and minnows, none of the majors. Is Africa, are not really viable. It turns out you can’t
Angola better placed than Nigeria? Maybe, but just say to Africa: “Hey, we need more gas. Please
I’m afraid that isn’t saying much. send some over.” ™

P6 www. NEWSBASE .com Week 23 08•June•2022