Natural gas in a low carbon Africa

Article by Derek Boulware, Senior Manager of Africa Oil & Gas Advisory at PwC

In today’s tumultuous economic environment with commodity prices, stock indices and exchange rates in constant flux, it probably comes as no surprise that oil & gas companies are taking time to carefully plan the way forward.  After COP21 in Paris last year, even the Supermajors are considering strategies that will not only allow them to meet commitments to reduce their carbon footprints but also to break free of the cyclical commodity curse.

Oil companies have always proven to be resilient; we expect them to take a long-term view and to innovate as they define medium to long-term investment plans.

The world remains heavily reliant on fossil fuels, and it will stay that way for the foreseeable future with oil as the dominant energy source.  However, we expect to see natural gas used as a bridging fuel as we transition to a low carbon economy.  Many parts of the world, including both developed and developing countries, are likely to expand their use of natural gas over the coming years.  This includes gas-to-power applications for electrical generation as a substitute to coal and diesel-fired power plants as well as increased use of gas to fuel vehicles. The replacement of coal alone could indicate real progress to a lower carbon future as gas emits about half the emissions of a conventional coal-fired power plant. As a result, many African countries are currently undertaking studies or developing programmes to procure gas-to-power applications.

Currently, about 5.3 trillion cubic feet (tcf) of gas is flared worldwide annually, which results in approximately 350 million tonnes of carbon dioxide in annual emissions. Africa alone flares 1.2 trillion tcf per year which equals nearly half the continent’s gas consumption! That’s a whopping statistic if one considers that 70% of Sub-Saharan African does not have access to electricity.  Making gas more marketable as an input fuel will also make it easier and more desirable to monetise, meaning that we may well make progress in reaching the World Bank appeals for zero routine flaring by 2030.

In the near future, the industry will face a transformation driven by megatrends. Many of these will have an impact on the energy future of our world.  Here are a few considerations to bear in mind:

  • Demographic and social change is coming – 40% of the labour force by 2030 will be formed of Millennials, and about 50% of the oil & gas workforce will retire in the coming five years.
  • Urbanisation is becoming more rapid – Two-thirds of the world’s population will live in cities by 2050.
  • We will be driven by climate change and resource scarcity – By 2030, the demand for energy will increase by 50%.  A challenge is the supply of resources keeping up with demand growth while reserves are finite.

PwC has considered several perspectives for the future evolution of the energy sector. One perspective is characterised by a higher level of government intervention in which we may see a stimulated and broad acceleration of the ‘green’ demand environment.  On the other hand, a similar transition may be driven by consumer demand for a low carbon world and more efficient energy system. One thing is for sure, companies must adapt to remain competitive in the future.

In Africa, economic development depends on solving the energy challenges. The role of oil & gas will depend on various drivers, including governments’ attitudes towards oil and gas and renewable energy. No doubt, gas has the potential to play a very pivotal role in the future of Mother Africa!

Join the Conversation: Do you agree with Derek? What’s the role for gas in Africa’s power mix? Leave a comment below.

Derek Boulware, Senior Manager of Africa Oil & Gas Advisory at PwC

 

 

 

 

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