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Liquified Natural Gas (LNG) offers a unique energy opportunity for Africa, writes Niall Kramer, former Shell and Chevron executive and ex-CEO of the SA Oil & Gas Alliance

Article by Niall KramerWhile LNG is a more economical choice over coal, it can also cut down CO2 emissions by 30%. (Image Source: Adobe Stock)

 It comes at lower environmental cost than oil or coal – and it could drive an enormous resource boom. 

Promising recent resource finds in Mozambique and Namibia – as well as Cote d’Ivoire, Uganda and Tanzania bode well for Africa’s future. Exploration is being pursued with renewed vigour, and the world’s energy companies are eyeing the continent with keen interest. 

The potential for LNG is especially attractive – as new liquefaction and regasification technologies have made LNG a competitive means of energy distribution. The recent finds also offer the promise of an LNG boom that could change the fortunes of many African nations, while also meeting their people’s energy needs – at lower environmental cost than other hydrocarbons. The key is unlocking these opportunities and providing the policy framework to enable them. 

For South Africa, refining the Upstream Petroleum Resources Development Bill into a commercially competitive and certain Act would be a great step towards enabling these opportunities. After that, another clear solution would be partnering with A-list international investing explorers, who come with their own balance sheets, skills, experience, and repetitional exposure to do the job. Even while partnering with foreign organisations, SA can retain control of resource wealth through its license terms negotiation of (free) carry, tax rates, development commitments, tenure, skills readiness and harmonised regulations. 

Fostering PPP 

Such partnerships would present an opportunity to grow South Africa’s skills base in the oil and gas sector. Public-private partnerships are good way for South Africans to gain international qualifications. Trainees could be reskilled miners, artisans, and technicians in a declining industry or a younger tranche. 

Analysts are predicting that Namibia will become the next big oil and gas player on the global scene. A recent discovery in the offshore Orange Basin of Namibia’s west coast will likely yield billions for Namibia. Both Shell and Total’s consortia have massive Namibia finds at Venus1 and Graff1. The find has been called the biggest ever in Sub-Saharan Africa

The critical issue for South Africa is that this game-changing find is in the extreme south of Namibia’s territorial waters. Neighbouring offshore blocks in South African waters likely hold very similar potential.

Recent finds in the 11B/12B exploration block 175km off South Africa’s south coast already promise to be catalytic for South Africa. Properly developed, they could easily save PetroSA and give a massive boost to the economy, save forex, grow local business, and develop skills without depleting the fiscus. We need to ensure that South Africa becomes a practical investment destination compared to rival opportunities.

Practical action 

While we accelerate our move towards renewable energy, there remains a need to underpin the intermittency of wind and solar with reliable, dispatchable baseload power. We can do that with coal, as we do now. Or more economically, with around 30% fewer CO2 emissions by using LNG. 

At a time when South Africa’s power-supply deficit has become self-evident, LNG also offers a short-term solution in that it can be imported, through the South African and Mozambican ports network, and plugged into pipeline infrastructure relatively quickly. At the same time, the PPP programme of rapidly expanding renewables can go on, while also continuing with onshore and offshore exploration for domestic natural gas resources – of which there are already encouraging signs. 

Perhaps unfortunately, the world will need oil and gas well beyond mid-century to meet all of its energy needs. And of these options, gas is the less harmful. It will enable renewables at lower environmental cost – granting medium-term energy independence to continue renewables investment. That is the “just transition” in practical action. Realistically, fulfilling SA's energy needs means multiple generation and distribution technologies. In the short term, it will also sometimes be necessary to trade off climate commitments and energy provision. That way, LNG also offers a solution – the reliability of oil and coal, with smaller environmental impacts.

As the ANC elective conference approaches, the governing party would do well to consider that oil and gas exploration could also provide capex, infrastructure and thousands of jobs in the power sector – with even further downstream effects.

Right now, just under 10% of SA's power comes from renewables. The rest mainly from coal. While this is changing, shifting demand and investment from coal is not proving easy. The policy framework, integrated resource plan, gas master plan and related licensing and regulatory instruments all need rapid simplification and integration to make investment attractive and easy.

Investment flows to the markets that are attractive, certain and ready. The forthcoming Africa Oil Week in Cape Town will be a great opportunity for South Africa to prove it is indeed open for oil and gas business.