African countries also want to increase gas exports to the EU after the EU pledged to reduce its reliance on Russian supplies following its invasion of Ukraine.
Russia has suspended deliveries to Poland and Bulgaria for refusing to pay in Russian currency rubles, a stark reminder of the threat facing the euro zone. Russia has the world’s largest natural gas reserves and is the largest exporter, accounting for around 40% of European imports.
The EU wants to cut supply by two-thirds by the end of this year and wean itself off all fossil fuels by 2030.
However, energy economist Carole Nakhle said that since Africa’s key players in the industry – Algeria, Egypt and Nigeria – collectively export less than half of what Russia supplies to Europe, They are “currently unlikely to make up for any losses in Russian supplies”.
“The good news is that there will be greater interest from countries that already have alternative sources of Russian gas, and Africa is in a very strong position. We will see more investment,” she said.
However, this will take time because of various logistical issues if the major exporters on the African continent arise.
Algeria is well positioned to benefit from a shift in EU energy policy. The North African country is the largest gas exporter in the region and currently has a well-established gas connection infrastructure with Europe.
Last month, Italian Prime Minister Mario Draghi signed a new gas supply agreement with Algeria, increasing gas imports by about 40%.
This is Italy’s first major deal to find alternative supplies after Russia’s invasion of Ukraine.
However, Uwa Osadieye, senior vice president of equity research at FBNQuest Merchant Bank, said there were concerns about Algeria’s ability to increase production capacity due to rising domestic consumption, insufficient investment in production and political instability.
He pointed to the recent sharp drop in gas exports from Algeria to Europe due to Dispute with Moroccoleading to the closure of vital pipelines to Spain, increasing from 17 billion cubic feet per year to about 9 billion cubic feet per year.
These concerns are echoed by Pier Paolo Raimondi, an energy researcher at the Instituto Affari Internatzionali in Rome.
“The agreement will allow them to take advantage of the available pipeline capacity and can gradually provide up to 9 billion cubic meters per year in 2023 and 2024. [But] We don’t know how quickly Algeria can ramp up production. “
Despite reservations, the deal is seen as a solid first step for Italy, Europe’s second-biggest buyer of Russian gas.
Italian ministers have also traveled to Angola and Congo-Brazzaville, where they struck new gas deals, and Italy is eyeing opportunities in Mozambique to end its dependence on Russia by mid-2023.
Meanwhile, West African LNG producer Nigeria LNG has been inundated with gas demand from European countries since the conflict in Ukraine began.
Currently, Spain, Portugal and France are the three main destination markets for Nigerian LNG products, and the company can only fulfill existing contracts with buyers, according to a source who asked not to be named.
“There is an opportunity to increase production. Today, only 72% of Nigeria’s LNG is plant mobilized, which means there is still 28% of capacity available as long as they have access to gas, and that’s where the biggest challenge lies right now,” the message people said.
He cited numerous issues preventing the company from increasing its production capacity, including a reduced number of gas wells and a lack of funding for upstream activities.
“They are problems that can be solved in the short term – between six and 18 months.”
Discussions are ongoing with gas suppliers to address these issues, according to Andy Odeh, general manager of external relations and sustainability at Nigeria LNG, who hopes to increase LNG production levels “from the end of the year” .
A new Nigerian LNG natural gas project, Train 7, will increase capacity by 35% from the current 22 million tonnes per year by 2025.
However, contracts with buyers mainly in Europe are already in place. LNG Nigeria is also conducting a feasibility study for another project, Train 8, to further increase supply.
The West African country is also a key player in the stalled Trans-Saharan Pipeline Project – a 4,400-kilometer (2,735-mile) natural gas pipeline from Nigeria to Algeria via Niger.
It will connect to Algeria’s existing pipeline infrastructure, linking the West African country with Europe.
The project was proposed in the 1970s but has been plagued by security threats, environmental concerns and a lack of funding.
At a meeting in February, regional officials promised that it would eventually be implemented.
However, Kayode Thomas, head of Bell Oil and Gas, said another project — the Nigeria-Morocco gas pipeline, which will link infrastructure in West Africa and Morocco to reach Europe — is gaining traction.
“We’re still not sure if this will cannibalize the Trans-Saharan Pipeline or run alongside it,” he said.
The project, which is expected to cost $25 billion ($20 billion) and link 13 West and North African countries, will be completed in phases over 25 years.
A shift in sourcing gas from Africa could also benefit countries such as Tanzania and Mozambique, Ms Nakhle said, although a major project operated by French giant Total in the country is currently on hold for the following reasons. A major attack by Islamist militants stationed in the region.
“Africa has huge potential, but I would say it’s very limited in the short term because gas projects take time to materialize,” she said.
But in the medium to long term, “you’re going to see more investment to improve the ability to extract more gas from the ground and bring it to Europe”.