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African liquefied natural gas (LNG) makes sense for Europe, now and in the future (by NJ Ayuk)

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  By NJ Ayuk CEO of the African Energy Chamber www EnergyChamber org In the months since the European Union declared that it would reduce its dependence on Russian oil following that country s invasion of Ukraine much has been said about the new opportunities this moment is creating for Africa s natural gas industry I myself have been part of that conversation and stand by my past statements Africa s capabilities are considerable as the African Energy Chamber AEC makes clear in our Q2 2022 State of Africa Energy Report What s more certain developments within Europe are putting African natural gas producers in a stronger position than before with respect to being able to fight for and win larger market share Quite simply there are gaps in the European gas market that did not exist in the past gaps that urgently need to be filled The existence of these gaps means that there is now more room for African gas than ever before particularly liquefied natural gas which is easy to store and transport As our report notes 50 of the 2022 25 cumulative gas flows from Africa s top 10 producers are expected to be exported as LNG And interest in African LNG is not likely to be a momentary problem In the future new technologies and changing geopolitical conditions should make it easier for African producers to maintain their market share in Europe In short things are changing More market space right now For decades Russia was the EU s largest single supplier of gas supplying at least a quarter to a third of its total consumption According to data from the International Energy Agency IEA the figure was even higher in 2021 when it supplied 155 000 million cubic meters bcm of gas equivalent to 45 of total imports and 40 of total consumption The numbers for 2022 will surely be different The volume of Russian gas entering European markets began to decline significantly soon after the start of the war in Ukraine In April 2022 the share of Russian gas in total EU imports was reported to be 31 up from 45 in April 2021 There is no reason to believe that the figure has increased since then as that April was the last month Russia was willing to accept payments from most EU customers in US dollars or euros instead of using special ruble denominated accounts that are subject to sanctions Indeed since Russia s new payment requirement took effect European customers have had to learn to live with abrupt cuts or reductions in pipeline gas deliveries with their Russian supplier Gazprom citing payment difficulties or lack of resolution of technical problems as reasons for outages Since the end of April such outages have occurred in Poland and Bulgaria in Finland in Germany and in all other countries served by the Nord Stream I network cuts occur before the end of the year and no one knows exactly how much they will affect the total volume of Russian gas shipments to Europe The result however is that in 2022 the volume of gas delivered is likely to be slightly lower than the 2021 figure of 155 bcm And that s where African gas starts to come into the picture If the EU doesn t have enough Russian gas this year it will have to make up the shortfall elsewhere in order to make it through the upcoming heating season And in part it has been trying to do so by importing more LNG from established large scale producers such as the US and Qatar The EU has also been buying more LNG from small producers like Peru But it also reached gas producing states in Africa Italy for example has negotiated the purchase of additional gas from Algeria in 2022 and is also looking to buy more gas from Egypt and Angola in the short term More market space for years to come And European buyers are not just treating African gas as a quick fix but as something to fill the gap for now Italy expects Algeria to continue supplying additional volumes beyond 2022 and is also in talks with Angola Egypt and the Republic of Congo about broader deals Germany is looking to cement ties with Senegal in light of that country s future gas production which is on track to start next year The EU has signed a trilateral memorandum of understanding MoU with Israel and Egypt in the hope of boosting future gas imports from the Eastern Mediterranean region In addition the EU has sent Matthew Baldwin the European Commission s deputy director general for energy to Nigeria to discuss the possibility of increasing gas supplies Baldwin who heads the EU Energy Platform Task Force EPTF created in May 2022 to help reduce Europe s dependence on Russian oil and gas was enthusiastic about Nigeria s contribution to supply EU gas company in an exclusive interview with Premium Times He noted that the West African country already accounted for 14 of EU LNG imports suggested the figure could rise to 30 or more in the long run and described Nigeria as a supplier that European gas buyers they can count We need more gas from Nigeria as a result of the terrible war of aggression that Russia has mounted against Ukraine Baldwin declared We can no longer count on gas coming from the Russian Federation and we want to build a new partnership with countries like Nigeria with whom we already have a well established partnership to get more gas and LNG from you on good commercial terms The window of opportunity will remain open It is somewhat tempting to greet these statements with skepticism given that the EU has talked about diversifying gas supplies for more than 20 years and has done relatively little to make that diversification a reality Yes Brussels has supported initiatives such as the Southern Gas Corridor SGC which began delivering gas from Azerbaijan to Italy in 2020 However in the time it took to carry out that project Gazprom managed to plan a bigger gas pipeline across the Black Sea South Stream scrap that plan come up with a plan for another bigger oil pipeline TurkStream and then execute that plan all while working on an even bigger undersea pipeline to Germany Nord Stream 2 However I think such skepticism would be misplaced at this point The EU no longer works in a context where the benefits of supply diversification are theoretical and abstract now it is a concrete and immediate matter For political reasons the EU wants to deny Russia access to revenue from gas sales and strip it of its status as a normal trading partner For practical reasons European gas buyers need to find a way to make up for missing supplies in Russia And for both political and practical reasons Brussels wants to deny Moscow the opportunity to continue using gas supplies as a blunt instrument with which to threaten Europe in the future The change will not be immediate It will take time to lower Russia s profile in the EU s energy mix But the process of supply reduction is underway and has already opened up new opportunities for African gas producers to gain market share in Europe I expect those opportunities to last beyond the short term as the EU tries to establish a new mix of gas suppliers to replace Russia in the coming years I also hope that emerging gas producers in Africa will take advantage of new LNG technologies such as Fast LNG modular solutions offered by New Fortress Energy NFE a US based company to meet European gas demand With these technologies they won t have to wait as long or spend as much money to start producing the LNG that European consumers are clamoring to buy They can start in two years or less instead of waiting five years or more as is common with more conventional land projects Between these new technologies and the EU s new political stance the African gas sector is likely to look very different in a few years I encourage you to read the 2022 State of Energy in Africa Report Q2 2022 and find out more for yourself
African liquefied natural gas (LNG) makes sense for Europe, now and in the future (by NJ Ayuk)

1 By NJ Ayuk, CEO of the African Energy Chamber (www.EnergyChamber.org) In the months since the European Union declared that it would reduce its dependence on Russian oil following that country’s invasion of Ukraine, much has been said about the new opportunities.

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2 this moment is creating for Africa’s natural gas industry.

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3 I myself have been part of that conversation and stand by my past statements.

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4 Africa’s capabilities are considerable, as the African Energy Chamber (AEC) makes clear in our Q2 2022 State of Africa Energy Report.

5 What’s more, certain developments within Europe are putting African natural gas producers in a stronger position than before with respect to being able to fight for and win larger market share.

6 Quite simply, there are gaps in the European gas market that did not exist in the past, gaps that urgently need to be filled.

7 The existence of these gaps means that there is now more room for African gas than ever before, particularly liquefied natural gas, which is easy to store and transport.

8 As our report notes, 50% of the 2022-25 cumulative gas flows from Africa’s top 10 producers are expected to be exported as LNG.

9 And interest in African LNG is not likely to be a momentary problem.

10 In the future, new technologies and changing geopolitical conditions should make it easier for African producers to maintain their market share in Europe.

11 In short, things are changing.

12 More market space right now For decades, Russia was the EU’s largest single supplier of gas, supplying at least a quarter to a third of its total consumption.

13 According to data from the International Energy Agency (IEA), the figure was even higher in 2021, when it supplied 155,000 million cubic meters (bcm) of gas, equivalent to 45% of total imports and 40% of total consumption.

14 The numbers for 2022 will surely be different.

15 The volume of Russian gas entering European markets began to decline significantly soon after the start of the war in Ukraine.

16 In April 2022, the share of Russian gas in total EU imports was reported to be 31%, up from 45% in April 2021.

17 There is no reason to believe that the figure has increased since then, as that April was the last month Russia was willing to accept payments from most EU customers in US dollars or euros instead of using special ruble-denominated accounts that are subject to sanctions.

18 Indeed, since Russia’s new payment requirement took effect, European customers have had to learn to live with abrupt cuts or reductions in pipeline gas deliveries, with their Russian supplier Gazprom citing payment difficulties or lack of resolution of technical problems as reasons for outages Since the end of April, such outages have occurred in Poland and Bulgaria, in Finland, in Germany and in all other countries served by the Nord Stream I network.

19 cuts occur before the end of the year, and no one knows exactly how much they will affect the total volume of Russian gas shipments to Europe.

20 The result, however, is that in 2022 the volume of gas delivered is likely to be slightly lower than the 2021 figure of 155 bcm.

21 And that’s where African gas starts to come into the picture.

22 If the EU doesn’t have enough Russian gas this year, it will have to make up the shortfall elsewhere in order to make it through the upcoming heating season.

23 And in part, it has been trying to do so by importing more LNG from established large-scale producers such as the US and Qatar.

24 The EU has also been buying more LNG from small producers like Peru. But it also reached gas-producing states in Africa.

25 Italy, for example, has negotiated the purchase of additional gas from Algeria in 2022 and is also looking to buy more gas from Egypt and Angola in the short term.

26 More market space for years to come And European buyers are not just treating African gas as a quick fix, but as something to fill the gap for now.

27 Italy expects Algeria to continue supplying additional volumes beyond 2022, and is also in talks with Angola, Egypt and the Republic of Congo about broader deals.

28 Germany is looking to cement ties with Senegal in light of that country’s future gas production, which is on track to start next year.

29 The EU has signed a trilateral memorandum of understanding (MoU) with Israel and Egypt in the hope of boosting future gas imports from the Eastern Mediterranean region.

30 In addition, the EU has sent Matthew Baldwin, the European Commission’s deputy director-general for energy, to Nigeria to discuss the possibility of increasing gas supplies.

31 Baldwin, who heads the EU Energy Platform Task Force (EPTF), created in May 2022 to help reduce Europe’s dependence on Russian oil and gas, was enthusiastic about Nigeria’s contribution to supply.

32 EU gas company in an exclusive interview with Premium Times.

33 He noted that the West African country already accounted for 14% of EU LNG imports, suggested the figure could rise to 30% or more in the long run, and described Nigeria as a supplier that European gas buyers they can count.

34 “We need more gas from Nigeria as a result of the terrible war of aggression that Russia has mounted against Ukraine,” Baldwin declared.

35 “We can no longer count on gas coming from the Russian Federation, and we want to build a new partnership with countries like Nigeria with whom we already have a well-established partnership to get more gas and LNG from you on good commercial terms.”

36 The window of opportunity will remain open It is somewhat tempting to greet these statements with skepticism, given that the EU has talked about diversifying gas supplies for more than 20 years and has done relatively little to make that diversification a reality.

37 Yes, Brussels has supported initiatives such as the Southern Gas Corridor (SGC), which began delivering gas from Azerbaijan to Italy in 2020.

38 However, in the time it took to carry out that project, Gazprom managed to plan a bigger gas pipeline across the Black Sea (South Stream), scrap that plan, come up with a plan for another bigger oil pipeline (TurkStream), and then execute that plan, all while working on an even bigger undersea pipeline to Germany , Nord Stream 2.

39 However, I think such skepticism would be misplaced at this point.

40 The EU no longer works in a context where the benefits of supply diversification are theoretical and abstract; now it is a concrete and immediate matter.

41 For political reasons, the EU wants to deny Russia access to revenue from gas sales and strip it of its status as a normal trading partner.

42 For practical reasons, European gas buyers need to find a way to make up for missing supplies in Russia.

43 And for both political and practical reasons, Brussels wants to deny Moscow the opportunity to continue using gas supplies as a blunt instrument with which to threaten Europe in the future.

44 The change will not be immediate.

45 It will take time to lower Russia’s profile in the EU’s energy mix.

46 But the process of supply reduction is underway and has already opened up new opportunities for African gas producers to gain market share in Europe.

47 I expect those opportunities to last beyond the short term, as the EU tries to establish a new mix of gas suppliers to replace Russia in the coming years.

48 I also hope that emerging gas producers in Africa will take advantage of new LNG technologies, such as Fast LNG modular solutions offered by New Fortress Energy (NFE), a US-based company, to meet European gas demand.

49 With these technologies, they won’t have to wait as long or spend as much money to start producing the LNG that European consumers are clamoring to buy.

50 They can start in two years or less, instead of waiting five years or more, as is common with more conventional land projects.

51 Between these new technologies and the EU’s new political stance, the African gas sector is likely to look very different in a few years.

52 I encourage you to read the 2022 State of Energy in Africa Report Q2 2022 and find out more for yourself.

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