Africa’s $245billion gas investments are in danger of turning into stranded assets, as they are designed as a short-term solution to Europe’s energy crisis,Global Energy Monitor’s report,has said.
It outlines that planned investments across Africa, totalling $245 billion, for liquified natural gas (LNG) terminals, gas pipelines and power stations represent “an enormous stranded asset risk,” as much of this gas is intended to cushion and solve Europe’s short-term energy crisis, resulting from Russia’s invasion of Ukraine, rather than being used for domestic consumption.
It added:“Planned investment in gas pipeline and LNG export infrastructure competes with domestic demand for gas and much needed renewable energy investment for Africa to realize universal access to clean, affordable, and reliable energy”
Besides,the Africa Gas Tracker’s data shows investments in planned LNG export terminals dwarf money for gas plants to power Africa with estimated capital expenditure for in-development LNG terminals being $103 billion, 92 per cent of which would be for LNG export terminals.
It said this is expected to increase the region’s 79.3 million tonnes per annum (mtpa) of LNG export capacity by 111 per cent while doing little to improve electrification on the continent.
According to the report,while the planned gas plant build-out in Africa would require $62 billion in investment, only $9.7 billion is attributed to projects under construction, while $52.3 billion is attributed to proposed projects. In addition, out of 64.1 GW of gas power plant capacity in development, only 10.5 GW is under construction, 17.3 GW is in pre-construction and 36.4 GW has been announced.
While Nigeria and South Africa have 22.5 GW and 16.6 GW of in-development gas plants, respectively, and both are gas-producing countries, each faces inadequate installed electricity generation capacity, underlined the report.
The report said much of the continent’s gas pipeline buildout has not yet secured investment, the planned gas pipeline buildup in Africa would require $89 billion in investment. Only $4 billion is attributed to projects under construction, while $85 billion is attributed to proposed projects,it added.
Though Africa has an estimated 23,932 km of gas pipelines in development, most projects remain in the proposal stage, with only 1,872 km currently under construction. In line with this, South Africa and Mozambique lead in proposed gas pipelines, with 4,792 km and 4,352 km, respectively.
Christine Juta, Project Manager for the Africa Gas Tracker, said: “Investments in gas pipelines and LNG export projects compete with Africa’s need to achieve universal access to clean energy and meet domestic demand for gas. Without long-term financing and off-take agreements, African countries risk banking on what could well be a short-lived appetite for gas.”
The Africa Gas Tracker said,65 GW of gas plants, 75 mtpa LNG terminal capacity and 22,600 km of gas pipelines are identified to be in development. The report concludes that Europe’s reduced reliance on Russian gas has led to a renewed interest in African gas.
“However, planned projects still face financing challenges, with many of them yet to begin construction. Without long-term financing and off-take agreements, these assets are likely to become stranded in the very near future once the European energy crisis abates,” as underscored by the findings within the report.
