Gas is the way to go: first Algeria, then Nigeria and now Angola have discovered the enormous revenue generating capacity of liquefied gas. The problem is in getting the gas to where the demand exists.

Position:Oil and Gas: an African Business Survey

The long predicted global 'dash for gas', involving a wholesale switch from the use of coal and oil as power sector and industrial feedstocks, never really took off. In its place, gas consumption has steadily grown year on year, particularly in South-east and East Asia but now also increasingly in the European Union (EU).

[ILLUSTRATION OMITTED]

While major Middle Eastern gas producers like Qatar, plus newer producers like Australia and Indonesia have made the most of these markets, Sub-Saharan Africa's hydrocarbon powers were largely left behind. But the tide could at last have turned, as first Nigeria and now also Angola, are beginning to take gas seriously.

At one time, African gas meant Algerian gas, as the North Africa country was among the first to join the liquefied natural gas (LNG) bandwagon in the 1960s.

Since then, pipelines have been built to export natural gas from Algeria to Italy and Spain, and with new pipelines now under development, Algeria looks set to strengthen its position as the second biggest gas exporter to the EU after Russia. As an Opec member, the Algerian government has recognised the flexibility of increasing gas exports as rapidly as possible, as there are no tariffs in either the LNG or natural gas sectors to undermine investment.

Algerian Minister of Energy, Chakib Khelil announced in January that construction of the latest pipeline had begun. The new pipeline, linking Hassi R'Mel in Algeria with Spain via Morocco, should be completed by the end of 2007 and will have the capacity to carry 141bn cubic feet of gas a year.

The existing pipeline to Spain is already operating at full capacity. Both pipelines can not only be used to export gas to Spain and Portugal, but also increasingly to the rest of the EU, thanks to the liberalisation of EU gas and power markets and interconnections between national gas transmission infrastructure.

GAS COULD RIVAL OIL

When President Olusegun Obasanjo ascended to the Nigerian presidency in 1999, one of the first steps he took was to plan the gradual abolition of gas flaring. Not only is the practice environmentally unfriendly but it makes bad economic sense. Nigeria's gas exports could one day rival its oil exports in financial terms, and no country in the world is so wealthy that it can afford to see one of its most valuable natural resources go up in smoke.

It took some years after the Obasanjo announcement that flaring was to end by 2008 for the oil majors to come to terms...

To continue reading

Request your trial