The Russian Oil Ban Opens Up New Prospects for Africa

Viewpoint by Olatubora Ayodeji

LAGOS, Nigeria (IDN) — It’s very important to understand that Russia is the world’s third biggest oil producer, behind the US and Saudi Arabia and of about five million barrels of crude oil it exports each day, more than half went to Europe before the sanctions were announced. Before the announcement, Russia accounted for about 8% and 3% of the UK and US oil demand respectively.

According to the International Energy Agency (IEA), Russian oil production had dropped by 700,000 barrels a day and the decline could even reach about 1.5 million barrels a day by the end of April and 3 million by the end of May.

For natural gas, Russia accounts for about 40% of the European Union (EU) natural gas imports and about 5% of the UK gas supplies, with some pipelines transiting Ukraine, while others take alternative routes such as Yamal-Europe which crosses Belarus and Poland to Germany and Nord Stream 1 which runs under the Baltic Sea to Germany. In fact, gas prices in the UK have soared since the Russian invasion of Ukraine, owing to worries of supply shortages. The US does not import Russian gas.

The Russian Invasion of Ukraine has faced worldwide opposition especially from European counterparts and the United States and its NATO Allies. This has led to sanctions and treats against Russia. For Instance, the EU has said it wants to cut Russian gas by two-third and eventually end its reliance on Russian supplies well before 2030.

Following from the foregoing, Europe could easily just turn to gas exporters such as Qatar and their African counterparts, particularly Algeria and Nigeria. In fact, Algeria accounts for about 8% of natural gas export to the European Union but there are practical impediments to an expansion of productivity. It’s very important to state that turning to Africa, is not Europe’s ultimate option as there are other options which are:

  • Germany, Europe’s biggest consumer of Russian gas which has halted certification of the New Nord Stream 2 gas pipeline (an $11 billion Baltic Sea pipeline project, which will link western Siberia to Germany and double the existing Nord Stream 1 pipeline’s capacity) from Russia because of the Ukraine crisis, could import gas from Britain, Denmark, Norway, and the Netherlands via pipeline.
  • Southern Europe can receive Azeri gas via the Trans Adriatic pipeline to Italy and the Trans Anatolian Natural Gas Pipeline (TANAP) through Turkey.
  • Norway’s Equinor has said it is considering ways to produce more gas from its Norwegian fields during the upcoming summer in Europe, a season in which output is normally affected by maintenance.
  • Germany Utility Association, BDEW has called on the Government to come up with an emergency plan to prepare the country for disruptions to Russian gas supplies.
  • The United States is also looking at supplying about 15 billion cubic metres of Liquefied Natural Gas (LNG) to the European Union this year; the US LNG plants are producing at full capacity.
  • The European Commission said gas and LNG from countries like the US and Qatar could replace 60 billion cubic metres (bcm) of the gas Europe gets annually from Russia.
  • New wind and solar projects could replace 20 bcm of gas demand this year, while tripling capacity by 2030, adding 480 GW of wind and 420 GW of solar energy, could save 170 bcm a year.
  • Turning down thermostats by 1°C could save an extra 10 bcm this year, while by 2030, replacing gas boilers with 30 million heat pumps could save 35 bcm.
  • Europe has been trying to shift away from coal to meet climate targets but some coal plants have been switched back on since mid-2021 because of surging gas prices.
  • Germany has said it could extend the life of coal or nuclear plants to cut reliance on Russian gas.
  • The transition to clean energy by Europe is also rapidly accelerating even as renewable energy and energy diversification is the future of the energy regime.

Following from the foregoing, it is evident the wide range of options before Europe. However, and undoubtedly, African countries look in good position to supply Europe with gas.

Africa is richly endowed with natural resources with almost half of its 55 nations having proven natural gas reserves, with a combined 800 trillion cubic feet or thereabout: with Nigeria having the largest reserves of proven deposits of 206.53 trillion cubic feet.

This is followed by Algeria, Senegal, Mozambique, and Egypt with proven gas deposits of 159.1 trillion, 120 trillion, 100 trillion and 77.2 trillion cubic feet respectively. Africa has a wealth of natural gas to fill the gap; more particularly as the United States is helping its European allies secure alternatives from North Africa, the Middle East and Asia.

This has further led to the emerging debate about Africa filling this gap. In fact, the President of Tanzania, Samia Saluhu Hassan took the view that the Russian invasion of Ukraine proves to be an opportunity for gas sales even as the country makes effort to secure a new energy market outside Africa.

Tanzania, with the sixth largest gas reserves in Africa; being about 57 trillion cubic feet (1.6 billion cubic metres) is currently working with Shell to make use of its vast offshore gas resources and export same to Europe.

Also, the Nigerian Energy official, Timipre Sylva confirmed plans by Nigeria to build a trans-Sahara pipeline that would transport the Nigerian gas through Algeria to Europe. This was mentioned at the gas exporting countries’ forum held in Doha. 

These comments are buoyed by the signing of a Memorandum of Understanding with Algeria and Niger Republic and the ongoing construction of the 614km Trans-Sahara natural gas pipeline. This pipeline, though first mooted in the 70’s, is expected to run through Northern Nigeria into Niger and Algeria, connecting to Europe.

In spite of these, concerns as to Africa being stopgap solution for natural gas subsists mainly because of the huge infrastructure deficit. Lack of investment in infrastructure has significantly hampered the energy industry, particularly in sub-Saharan Africa. 

It’s noteworthy that North Africa already has an established gas export market with Europe. For instance, the Maghreb-Europe gas pipeline in Algeria (Africa’s largest natural gas exporter) moves natural gas to through Morocco to Spain and Portugal, while the Medgaz pipeline links Algeria directly to Spain.

In 2019, Algeria exported about 17 billion cubic feet (481 million cubic metres) of gas to Spain. This figure reduced to about 9 billion cubic feet (255 million cubic metres) in 2020. This drop was caused by breakdown in relations between Algeria and Morocco which made Algeria announce that it would begin exporting gas directly to Spain.

However, for Sub-Saharan Africa, there is a lingering crisis of infrastructure. Angola, which has about 13.5 trillion cubic feet (382 billion cubic metres) of proven gas reserves has experienced a sharp decline in oil and gas production in the last five years due to a combination of technical and operational problems, as well as a lack of upstream investment and incentives.

The Nigerian Government in 2020 announced “The Gas Decade” which is an initiative of the Nigerian Government to prioritize the gas sub sector of the energy industry and optimize the opportunities in the global transition to clean energy. This was further consolidated by the commencement of the $2.5 billion Ajaokuta-Kaduna-Kano Natural Gas Pipeline with majority of the funding coming from Chinese financial institutions. 

Significant investments are largely required to construct trans-regional and intercontinental pipelines to open access to Europe. It is expected that the newly signed Petroleum Industry Act, would provide a framework that would cut down corruption, red-tapism and waste in the oil and gas sector, reorientate the host communities and promote investment in the sector

Nigeria is currently not a top destination for investment in the oil and gas industry and this necessitated the advocacy for a competitive fiscal regime in the newly enacted Petroleum Industry Act in the legislative process that birthed the law.

Nigeria, being the largest proven reserves of would also have to incentivize policies across the value chain such that would attract private investment in the construction of a network of pipelines If there were investment in adequate gas pipeline infrastructure, it could encourage a better gas utilization regime as the bulk of gas realized in Nigeria is flared up to 80% or thereabout. [IDN-InDepthNews – 06 May 2022]

About the author: Olatubora Ayodeji, who is an attorney, development policy professional and public affairs analyst, graduated from the University of Northampton, United Kingdom. He was called to the Nigerian Bar in November 2018 and has since then been practising as a commercial solicitor in the areas of Real Estate, Energy and Maritime.

Image: Pipeline construction in Nigeria as part of the Trans-Sahara natural gas pipeline, expected to run through Northern Nigeria into Niger and Algeria, connecting to Europe. Credit: Pipeline & Gas Journal.

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