By NJ Ayuk, Chairman, African Energy Chamber (EnergyChamber.org)

Africa has already made an indelible mark in the oil industry. It is home to four of the world's 20 largest crude oil producers - Nigeria, Angola, Algeria and Libya - and these same four countries also have some of the world's largest oil reserves.

The same cannot, however, be said of the gas industry. The only African countries on the list of the 20 largest gas producers in the world are Algeria and Nigeria, and one of the states with the largest gas reserves is Mozambique, which is still several years away from commission its main fields.

But the gap between African oil and gas does not have to be permanent. The continent's gas industry is on the brink of true transformation, as the African Energy Chamber (AEC) points out in its Africa Energy Outlook 2021, released earlier this month. I would like to outline what forms this change might take – and explain how these changes would benefit Africans.

New sources of production

Some of the changes that I foresee are going to happen in the upstream sector, that is, in the area of exploration and production.

First, the main current producers on the continent are likely to produce more. North African states such as Egypt and Algeria will be responsible for some of this increase as they seek to accelerate the development of existing natural gas fields. But another part of it will come from programs designed to reduce the flaring of associated gas found in oil fields. Nigeria and Angola, for example, plan to expand the use of associated gas. The former aims to deliver its production to the domestic market, while the latter seeks to split its production between the local market and the export-oriented Angola LNG project.

The result of these trends is that the list of major gas producers in Africa is likely to remain static until the middle of the decade. As the Chamber's outlook explains: "The top five crude oil producers (on the continent) - Nigeria and Angola to the west, and Algeria, Egypt and Libya to the north - complement the top five natural gas producers for 2020 and 2021. These five countries contribute about 90% of the continent's total natural gas production for these two years, and expected forecasts suggest that the share of these countries will remain the same in the middle of the 2020s.

At this point, however, new producers will start to play a bigger role. Mozambique is expected to launch its first project in Zone 1 in 2024, and its offshore zone could become a major source of natural gas by 2025-2026. The offshore Mauritania-Senegal area could follow a similar schedule, as the Grand Tortue/Ahmeyim (GTA) blocks could start producing natural gas in 2023, followed later by the Yakaar-Teranga and BirAllah projects. In addition, the four projects mentioned in this paragraph will support gas liquefaction plants capable of producing and exporting LNG.

By the end of the decade, more than five countries will therefore account for the bulk of total gas production in Africa. Nigeria, Angola, Algeria, Egypt and Libya will be joined by at least three others - Mozambique, Mauritania and Senegal.

Domestic consumption and exports

Meanwhile, consumption patterns will evolve along with production patterns. Once again, this change is likely to begin once the large new fields in the provinces of Mozambique and Mauritania/Senegal come on stream.

The change may not be evident at the macro level, as it will not be evident in the division between exports and domestic consumption. In other words, Africa will continue to use around 70% of the gas it extracts and will continue to export the remaining 30%. However, as the AEC outlook indicates, the geography of African gas exports will not remain static.

"The pattern has been relatively stable since 2012, with around 70% of local markets, 20% of exports to Europe and 10% of exports to Asia," the report said. “LNG project startups in the mid-2020s are also expected to distort this image by increasing the market share of LNG exports in East Asia. This evolution is not however (a consequence) of the increasing demand of the local markets, but rather of the reduced capacity of the countries of North Africa to maintain their export capacity towards Europe thanks to a strong growth of the domestic demand. By 2030, it is effectively expected that East Asia and Europe will be reversed, while the domestic market share will remain constant. »

In short, Africa is on track to produce more gas by the end of the decade, but will retain the same share of the total for its own use. At the same time, Asia will replace Europe as the most important market for African gas exports.

Natural gas = jobs

These trends are interesting, but you might want to ask: what do they mean for ordinary Africans, for people who are less concerned with production data and trade balances than with questions of how to support their families?

They mean a lot.

As I mentioned, the African Energy Outlook 2021 report predicts that gas production in Africa will increase, especially after new fields come on stream and development picks up in the middle of the decade. It also predicts that gas consumption in Africa will increase, even if domestic consumption continues to absorb 70% of total production.

As production increases, upstream operators will create jobs. They will need people to help them build, operate, maintain and repair generation, transmission and processing facilities. They will also need people to administer their local operations. In addition, they will have to meet legal requirements or contractual commitments for local content, so they will have to hire African entrepreneurs. These African entrepreneurs, in turn, will need employees of all kinds and will therefore hire African workers.

And as consumption increases, more jobs will be created. Distributors will need new pipelines to deliver gas to end users, so they will need people who can help them build, operate, maintain, repair and administer these pipelines, as well as associated infrastructure such as storage depots. And even in the absence of pipelines, they will have to acquire tankers and containers in order to be able to bring gas to customers by road, rail or river. Accordingly, they will need personnel to procure, operate, maintain, repair and administer these operations.

In the meantime, there is more. Hiring more African workers will certainly have repercussions. If, for example, employees of upstream operators need a way to get to a remote job site, local transportation companies may be able to serve them. If so, these transportation companies may need to hire more people to drive their vehicles. Similarly, if African construction companies need to procure additional construction materials to meet their contracts with upstream operators, local suppliers may be able to meet their needs. And if so, these local suppliers may need to hire more people to manage their inventory.

In other words, as the gas industry in Africa grows, it has the potential to create thousands and thousands of jobs! Of course, some of them, like construction jobs, will be temporary. Some of them, however, will be more permanent, especially if gas-producing state governments work with upstream operators to develop local hiring and training standards that expand the capacity of the local workforce.

Throughout the value chain

But the ripple effect doesn't have to stop there.

In my most recent book, 'Billions at Play: The Future of Energy and Business in Africa', I urged African oil and gas producers to look as far down the value chain as possible. I advised them to pursue projects that treated hydrocarbons not just as exportable raw materials but as inputs for value-added operations such as the manufacture of fertilizers or petrochemicals. I also suggested that they look for ways to focus on gas-fired power projects with the aim of improving household electricity supplies - and not just because new power grids would benefit African companies.

It's true, of course, that some African businesses will be able to create more jobs if they don't have to worry about power outages. Likewise, it is true that gas-fired generation projects will create their own jobs in areas such as construction, operations, maintenance and administration. But it is also true that African households need and deserve access to reliable energy supplies, regardless of their level of employment – and that gas-to-power schemes can help them!

I am not the only person to come to this conclusion. When I wrote Billions at Play, several African countries had already implemented ambitious gas-to-power projects. Nigeria, for example, was implementing a program to promote associated gas as a fuel for new power plants. Since then, others have followed suit. For example, as reported in the Chamber's Energy Outlook, Senegal has unveiled plans to use its future gas production to generate electricity for the domestic market. Mozambique already has a few gas-to-power projects in the pipeline.

But it shouldn't stop there. I would love to see more gas producers do this as they ramp up gas production in the second half of the decade. If they do, they will have accomplished something beyond just increasing production levels. They will have taken concrete steps to strengthen their economies and benefit their own citizens. And in doing so, they will have left their mark on the world!

NJ Ayuk is Chairman of the African Energy Chamber, CEO of Centurion Law Group and author of several books on the oil and gas industry in Africa, including Billions at Play: The Future of Energy and Business in Africa.

Distributed by APO Group for African Energy Chamber.