Will natural gas power Africa?
Article by Susan L. Sakmar, independent consultant, author and adjunct law professor at the University of Houston Law Center.
There is no question that Africa as a whole presents a complicated energy landscape with varying patterns of resource endowment, energy consumption, and a myriad of governmental and policy challenges. Yet one thing remains constant and consistent throughout much of Africa – the limited access to electricity. This is especially true in sub-Saharan Africa where more than 620 million people lack access to electricity.
It is widely recognised that the lack of electricity constrains both economic and social development in this region, which accounts for 13% of the world’s population, but only 4% of its energy demand. As a result, many governments are intensifying their efforts to tackle the numerous barriers that are holding back necessary investment in Africa’s power and energy sector.
One such effort is President Obama’s Power Africa Initiative, which was launched in 2013 and aims to increase electricity access in sub-Saharan Africa by adding more than 30,000 megawatts of electricity generation. In a rare showing of bi-partisan support, the US Congress also approved the Electrify Africa Act of 2015, which President Obama signed into law on February 8, 2016.
Led by USAID, the Power Africa Initiative provides technical and financial assistance to promote construction and improvements to electricity generation, transmission, and distribution infrastructure. Although the US, through various funding agencies, initially committed $7 billion for the Power Africa Initiative, it has since leveraged nearly $43 billion, including more than $31 billion in commitments from USAID private sector partners. Public sector participants include the African Development Bank, the World Bank, the government of Sweden, and the European Union.
Power Africa partners are currently working with African governments to create the legal, policy, and regulatory frameworks needed to attract private sector investment in the energy sector. While progress has been slow due to a wide-range of economic and political challenges in many African countries, Power Africa has provided transaction support for 13 projects across Africa that have reached financial close and involve a combination of renewable energy projects and natural gas projects.
One of Power Africa’s main focus areas has been to help Ghana expand its nascent gas sector following the 2007 discovery of the Jubilee Field, Ghana’s first offshore oil and gas field. Currently, Power Africa is supporting the Government of Ghana in closing a number of priority natural gas transactions: Bridge power (400 MW), Ghana 1000 (375+375 MW), Amandi (192 MW), Globaleq (450 MW) and Jacobsen (400 MW).
Power Africa is also helping the Government of Ghana in the development of another offshore discovery – the Sankofa field. When fully developed, it is expected that Sankofa gas will support more than 1,000 MW of generation capacity, increasing the country’s electricity output by about 40 percent. Italy’s ENI and Swiss commodities trader Vitol, hold major stakes in the $7B Sankofa project, which received a $700 million partial risk guarantee and loan package for the project from the World Bank, a Power Africa project partner. Power Africa Transactional Advisors helped facilitate commercial negotiations between the gas supplier and potential Independent Power Producers for the Sankofa project.
Power Africa’s Roadmap prioritises “energy deals” and supports transactions “rooted in a country’s national power strategy.” The Roadmap compares the opportunities for four major technologies – natural gas, solar, wind, and geothermal. While there are opportunities for all technologies, the clear winner going forward is natural gas, which is expected to be the largest contributor to new MW of installed electricity capacity in sub-Saharan Africa by 2030.
While there are no doubt many hurdles to getting more than 620 million people in sub-Saharan Africa “on the grid,” the Power Africa Initiative makes clear that natural gas has a key role to play. As such, the natural gas industry should view Africa as a long-term opportunity, not just a short-term challenge.
Join the Conversation: What’s the role for gas in Africa’s power mix? Leave a comment below.
Susan L. Sakmar, independent consultant, author and adjunct law professor at the University of Houston Law Center.
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