Eastern Africa to become major player in energy geopolitics

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Recently discovered gas in Mozambique could transform the country into a major player in the world LNG market, speakers said at a public event in Brussels. But some of them warned against high expectations of prosperity and warned that revenues won’t come fast.

Barely appearing on the energy radar until very recently, eastern Africa has become one of the world’s hottest spots for oil and natural gas reserves, said speakers at a 21 March conference organised by Ifri, the French Institute for International Relations.

The aggregate gas reserves of Mozambique and Tanzania potentially have the same size as those of Australia, which has become a leading supplier of liquefied natural gas (LNG) in the Asian market, which accounts for two-thirds of the global LNG demand and is growing fast.

Big plans

Experts at the conference said Mozambique and Tanzania ranked first and second among the top 10 gas discoveries in 2012. Most of the prospective gas fields are offshore, and stakes were high that new discoveries would come, one expert said. He presented statistics showing that Mozambique ranks 12th in terms of proven gas reserves worldwide.

By comparison, Russia is the leader in terms of proven gas reserves with 1.575 trillion cubic feet (tcf). Mozambique has 127 tcf, according to the same chart.

Experts said that as the Asian market and especially China were overtaking the OECD, the newly discovered gas in eastern Africa was bound to fill a large portion of demand gap for the next decade. Some of the gas could also reach Europe through the Suez Canal, he added.

The big players in the region appear to be were Norway’s Statoil, Brazil’s BG, USA’s Anadarko, Italy’s ENI, France’s Total, UK-listed Cove Energy, Thailand’s PTTEP, as well as BP and Shell.

Mozambique has also coal and could become one of the world’s largest producers in the next decade, producing 25% of the world’s coking coal used for steel production by 2025. According to various speakers, the development of the coal and gas reserves requires building infrastructure: roads, ports, rails, power grids, telecoms.

“Building institutional frameworks and human resources are seen as very important, training being needed both for the state institutions as well on the business side.

All this needs public as well as private financing, and it remains unclear what the role of the IMF or the EU will be, speakers said.

Speakers warned that high expectations that Mozambique and Tanzania would soon prosper needed to be managed. Enormous investments are needed and some companies spent a lot before the production started, building schools, hospitals, bulking up university education, and making sure that the environmental footprint becomes as limited as possible.

Business representatives also said that the tax system of some countries did not always take account of such investment and that there was a need to “communicate” with the respective governments.

Another issue was the weak administrative capacity of local governments and the reported slow delivery of permits that could bring substantial delays to the industry.

Eloise Todd, Brussels director of the campaign group ONE, said populations trapped in poverty should be beneficiaries of the natural resource wealth of their nations. “It’s absolutely crucial that the EU backs a strong transparency law next month, in line with US rules agreed last year.  Shining a light on oil, gas and mining deals will help communities in resource-rich countries hold their governments accountable for spending this money responsibly.”

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