Fading African LNG exports could be redirected to electricity

African natural gas that is now being liquefied for export could be redirected to domestic electric power generation as customers in Europe, Asia, and the US exploit shale gas resources in their own countries, experts suggested during a discussion of African energy needs.

“I think in the near term, gas has the biggest potential in Sub-Saharan Africa because it is so abundant,” said Paul T. Hanrahan, president and chief executive of AES Corp., a global power company based in Arlington, Va., during the Oct. 6 seminar at the Center for Strategic and International Studies.

“Its potential is enormous,” observed Joseph C. Brandt, president and chief executive of ContourGlobal, a New York-based company that also builds power plants worldwide. “It should be a source for indigenous power. Much of it has been converted into LNG for export, but that could change as demand falls. This could be a beneficial, if unintended, consequence of more shale gas development in consuming countries.”

Brandt noted that Chevron Corp., which cosponsored the seminar, holds an interest in the West African Gas Pipeline (WAGP). The 421-mile system supplies Nigerian gas to Ghana, Benin, and Togo for industrial use as well as electric power generation, according to a supplement to Chevron’s 2010 annual report. It noted that in February, start-up of facilities to increase the pipeline’s compression raised its capacity to 170 MMcfd; Chevron holds a 36.7% stake in WAGP.

Lack of electricity infrastructure probably comes near the top the list of African economic challenges, according to Richard Downie, deputy director of the CSIS Africa program. In his opening remarks, Downie said foreign investors demand reliable power for their projects no matter how great a country’s potential market. “Nigeria is a major oil exporter, but also has to import huge amounts of electricity,” he said.

Electricity from any source

While some international organizations emphasize renewable power projects, most countries would welcome more electricity from any source, Brandt said. Africa has significant hydropower potential, but its development raises population displacement issues when a project reaches a certain size, he added.

“Institutions that refuse to fund fossil fuel projects will become increasingly irrelevant because Asian capital sources are ready to jump in,” Hanrahan warned.

But Robert Mosbacher Jr., the former president of Mosbacher Energy Co. in Houston who was president of Overseas Private Investment Corp. from October 2005 to early 2010, said calls are growing stronger for more transparency in overseas energy projects. It’s as important for countries that collect taxes and royalties from US and European multinationals to disclose where the money is spent as it is for the companies to report such payments, Mosbacher said.

“It may seem great to bring Chinese capital into a continent that’s starved for financing, but it might not be as transparent,” he stated.

Hanrahan said governments are becoming more discerning about choosing their foreign development partners, while Brandt added, “I think development in Africa will need to reserve some of the resource that’s produced for domestic markets in the future.”

Contact Nick Snow at nicks@pennwell.com.

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