African gas producers are benefiting as investors rethink risk

The conventional skepticism surrounding African nations utilizing gas as a "transition fuel" in the transition to renewable energy has quieted. In recent years, Western institutions have refrained from investing in gas infrastructure, contending that countries would become dependent on fossil fuels. African policymakers, however, argued that advanced economies built their wealth on coal and oil, emphasizing that Africa contributes less than 4% of global carbon emissions.

Nevertheless, the energy crisis sparked by the Iran war has put an end to the debate. Essentially, the world requires gas for electricity generation and powering heavy industries.

Gulf state-owned firms are now seeking stakes in gas projects following being targeted in attacks, stated Andrew Farrand, director of Middle East and North Africa at consultancy Horizon Engage. "Producers are now forced to diversify," he commented. European nations' efforts to reduce their reliance on Russian gas had already commenced. Moreover, the Trump administration has encouraged the World Bank to halt its disapproval of financing upstream gas projects.

Nigeria, which possesses the world's ninth-largest proven reserves of natural gas, stands out as a significant beneficiary. A surge in demand for its liquefied natural gas has been accompanied by a surge in investment announcements, including for discoveries that had remained dormant for decades. Timi Soleye, president of Lagos-based energy company CRYO Gas & Power, has received an influx of inquiries from investors recently, noting that the risk assessment for large gas projects in Nigeria has "significantly altered."

The Gulf of Guinea, which transports gas from Nigeria and Equatorial Guinea, lacks choke points, implying that blocking it would necessitate "a comprehensive navy," Soleye explained. A new discourse is emerging. Policymakers in countries endowed with substantial gas reserves, such as Mozambique, Senegal, and Tanzania, must weigh the advantages of exporting gas versus retaining some for electricity generation.

Both strategies necessitate expensive infrastructure, but while exports could swiftly augment government revenue, employing gas to fuel industrialization holds the potential for a more substantial long-term gain.

Tanzania recently announced its first significant natural gas discovery in over a decade, its energy minister reported, as the nation advances plans for a $42 billion LNG project, one of East Africa's largest planned energy undertakings.