Can Africa replace Russia as the EU's main source of gas?
In 2021, Russia supplied about 45% of the European Union's natural gas, pumping around 155 billion cubic meters (bcm) of it through several pipelines. The EU is now apparently considering plans to phase out Russian gas, and reports have appeared in recent weeks that a number of African countries – such as Nigeria, Senegal and Angola – are being considered as the replacement source.
There is even more hype around African gas than American or Qatari LNG, which seem to be more obvious substitutes. Simply because deals with those states don’t require much negotiating, while African gas remains a different matter entirely.
Italian government delegations have visited Algeria, Angola, Egypt and the Republic of the Congo since February. So far, most of the visits and negotiations have ended with only declarations and letters of intent, and leading energy think tanks are expressing a certain skepticism about the prospects for gas supplies from Africa to the EU.
How much gas will African exporters be able to supply to the EU, and when?
The EU imports gas via pipelines from Algeria and Libya, as well as getting liquefied natural gas (LNG) from Algeria, Angola, Cameroon, Egypt, Equatorial Guinea, and Nigeria. The total capacity of Africa’s gas export infrastructure (both pipelines and LNG plants) is about 170 billion cubic meters (bcm) per annum. At the same time, 125 bcm of this capacity is under the control of Algeria, where annual gas exports are gradually decreasing to a level between 40 and 50 bcm. In total, export capacity utilization in Africa is about 60% for LNG plants and 40% for pipelines.
While in Algeria the right to export gas is reserved for state-owned Sonatrach, in the other African countries the export infrastructure is controlled by Western oil majors, mainly representing the buyers’ side, namely Eni, Shell, TotalEnergies and others. Consequently, the ability of African governments to influence the volumes and directions of exports is open to question.
In 2021, African nations supplied 16.6 million tons (MT) of LNG (approximately equivalent to 23 bcm) to the countries of the EU, another 7 MT was delivered to the UK and Turkey, 16.7 MT to Asia, and 0.5 MT to Latin America. Despite post-pandemic economic growth and the dynamic recovery of gas demand, Africa was only able to increase LNG exports by 2 MT compared to the crisis year of 2020. Pipeline exports to Spain and Italy from Algeria and Libya totaled 35 bcm. Thus, Africa exported around 68 bcm to the EU in 2021.
Can Africa increase exports to the EU right now?
Yes, it can. However, it would be in small volumes and involve the transfer of spot LNG cargoes from Asia to the EU. In total, such a maneuver could provide about 10 bcm per annum. Still, the EU will have to offer better prices than buyers in Asia, the UK (also planning to abandon Russian gas), and Turkey – one of the largest importers in the Mediterranean region.
African gas exporters can be divided into two categories: those with spare export capacities (Algeria, Egypt) but lacking enough supplies of their own gas; and those with gas but without the capacity to properly export it (Nigeria, Mauritania/Senegal, and Mozambique). Algeria and Egypt are taking steps to increase production, but most of this growth is spent meeting the needs of their domestic markets (electricity generation, industries, fertilizer production); liquefaction facilities are being built in Mauritania, Senegal, Mozambique and Nigeria, and it is from these countries that we can expect an increase of exports in the medium term.
Investment decisions have already been taken to build new export facilities in Nigeria, Mozambique, and on the border of Senegal and Mauritania. In total, they will add up to 14 MTPA of LNG (approximately 19.3 bcm) by 2025. The seventh train of the Nigeria LNG plant is expected to produce up to 8 MTPA, the Great Tortue project on the border of Mauritania and Senegal will supply 2.5 MTPA, and Coral South in Mozambique will yield 3.4 MTPA. Investment decisions on these projects were made in 2017-2019, long before the current stage of the crisis in Ukraine.
But this energy is not for the EU only. Nigeria traditionally sells 50% of its LNG to the Asia-Pacific region, while the project in Mozambique is also targeting markets in India, China and Japan. Finally, demand for LNG is gradually emerging in Africa itself (South Africa, etc.), so some of the gas may even remain inside the continent.
Africa’s strategic role
If Russian supplies could have been abandoned in favor of African equivalents, the EU would have done it long ago. This task has been prioritized since 2008, when then-EU Commissioner for Energy Andris Piebalgs visited Nigeria to discuss the Trans-Saharan route, and Brussels has been striving to increase supplies, from this source with all its might but without much success. It is almost impossible to squeeze more gas out of Africa. Thus the main beneficiary of the EU’s refusal of the Russian product will be the United States, alongside Qatar (where the main producer is ExxonMobil). Israel, Azerbaijan and Iran have a good chance of getting a share of the pie as well.
At the same time, Africa has been and remains an important source of energy for the EU. Given the ongoing crisis, the pressure on its countries to export more gas at the expense of their domestic markets will intensify, and Western majors leaving Russia will certainly turn to Africa in search of a resource base.
The current market situation may revive projects previously considered unviable, including the construction of pipelines across the Sahara from Nigeria to Algeria, the Eastern Mediterranean pipeline, or as many as three new projects for the export of LNG from the East African coast of Mozambique, Tanzania, or Djibouti.
On the other hand, in the next decade, gas will play a key role in the development of the energy sector and industries (production of fertilizers, cement, polypropylene, etc.) in many African countries. The main producing states, primarily Algeria, Egypt and Nigeria, will have to choose between meeting growing domestic demand and the temptation to increase exports.
The choice of priorities between exports and domestic consumption (more foreign currency earnings or a larger available supply for the energy sector and industries) will determine Africa’s role in world energy markets over the next 20 years. The distribution of gas between domestic consumption and export would depend, among other factors, on government decisions, often made under pressure from operators, buyers and donor countries.
Regulators and state-owned companies in countries like Mozambique and Nigeria often make their decisions on the recommendations of foreign consultants, and such choices do not always correspond to the interests of the host countries. Algeria and Egypt have moved much further in the development of their domestic markets and give them priority, but the same foreign consultants, acting in close alliance with European and multinational corporations, are putting enormous pressure on them to abandon subsidies, liberalize their markets, and divide state monopolies.
But the EU still has an opportunity. A devastating economic crisis, with a sharp decline in electricity demand and production in Algeria or Egypt would free up additional volumes of gas for export (as once happened with Soviet gas). But such crises would be tragedies, and fortunately are still only a hypothetical risk.
Russia could have played a role in supporting and developing African gas markets. While the office of Gazprom was operating in Nigeria, the country refrained from approving (ruinous) decisions on export projects, counting on cooperation with Russians and others to develop the domestic market. However, no investment decisions were taken, and Nigeria went back to its old ways: building new liquefaction facilities. Gazprom, Rosneft, LUKOIL sporadically participate in E&P projects across Africa, actually playing along with their own strategic adversaries. If they turn from these projects to develop African domestic markets, both Russia and Africa will benefit, but there is not much evidence of that yet.