The African continent, long recognized for its vast natural resources, is on the brink of a natural gas renaissance. With the African Energy Chamber’s (AEC) 2024 Outlook, produced in collaboration with Rystad Energy, forecasting a gradual yet steady year-on-year growth, the stage is set for a transformative decade in the global gas industry, particularly for liquefied natural gas (LNG).
Is one African nation set to win from this natural gas renaissance?
This report, rich with analytical foresight, posits that the LNG flows from Africa are set to witness an 8% year-on-year growth, a figure that, while modest, underscores the continent’s burgeoning role in the global energy landscape.
As the world grapples with the intricate balance of energy supply and demand, Africa’s natural gas industry stands at a pivotal juncture. The AEC’s report delineates a clear trajectory of growth for the global gas market, anticipating a supply increase to reach pivotal figures of 4,100 billion cubic meters (bcm) by the end of the decade, climbing to 4,730 bcm. This represents an average annual growth rate of 2% from 2023 through to 2030. However, the industry faces a conundrum: the decline in output from established fields, expected to plummet from 90% of supply in 2024 to a mere 55% by 2030, starkly contrasts with the projected surge in demand. It is within this looming supply gap that Africa, with its untapped potential and strategic geographic positioning, finds its opportunity for economic growth and development.
The continent’s gas sector is undergoing a metamorphosis. Initially, forecasts from the AEC’s 2023 outlook predicted a marginal increase in production in the short term, with a discernible decline in overall output anticipated between 2022 and 2025. Nonetheless, the revised projections from the 2024 outlook tell a different story, one of resurgence and vitality. By 2025, the continent’s output is expected to burgeon by an impressive 265 to 280 bcm. This surge is largely attributed to the efforts of North Africa, set to drive the lion’s share of the continent’s natural gas flows. The second half of the decade is expected to witness a considerable uptick in production as Mozambique amplifies its output and new gas projects are initiated across the continent.
On the global stage, the LNG narrative is equally compelling. The international export potential of LNG is forecasted to expand by 7% in the period leading up to 2030, with an 8% growth projected as the decade concludes. The United States and the Middle East are currently the vanguards of LNG exports, with several developmental projects nearing final investment decisions. Predictions indicate that U.S. export volumes will climb from 88 million tons per annum (mtpa) in 2023 to a staggering 230 mtpa by 2030, while the Middle East is poised to see its export volumes soar to almost 160 mtpa within the same timeframe.
Africa, however, is not far behind in this race. The continent is expected to experience a significant increase in LNG exports, particularly in the latter half of the decade, with Mozambique, Egypt, Equatorial Guinea, Senegal, and Mauritania enhancing their production capacities. The report highlights the strategic positioning of Nigeria and Algeria, which are anticipated to become the primary drivers of Africa’s export volumes, marking a pivotal shift in the global energy supply chain.
As Europe seeks to diversify its energy sources amidst geopolitical flux, Africa’s proximity and historical trade relations position it as a prime candidate to fulfill this burgeoning demand. The existing infrastructure, a legacy of earlier ventures, provides a solid foundation for the rapid scale-up of gas exports, ensuring that Africa can meet the needs of an increasingly energy-hungry world.
Algeria’s Ascendancy in the Global Gas Market
Algeria, Africa’s leading natural gas powerhouse, has been an integral member of the Organization of the Petroleum Exporting Countries (OPEC) since 1969, a decade after it commenced crude oil production. The nation’s alignment with the OPEC+ agreement further cements its status in the global energy markets. Boasting an energy self-sufficient economy, Algeria has little need for energy imports, thanks to its substantial oil and natural gas production which not only satisfies domestic consumption but also allows for significant export volumes. Both commodities are pivotal, constituting the vast majority of Algeria’s total primary energy consumption, underpinned by substantial government subsidies.
The Algerian government has demonstrated its commitment to expanding its energy sector, planning to offer at least 10 exploration blocks in an upstream bidding round in early 2023, the first such initiative since 2014. This proactive approach is indicative of the country’s strategy to bolster its energy reserves and production capabilities. As per the Energy Information Administration (EIA), Algeria’s proven natural gas reserves were estimated at around 4.5 trillion cubic metres (Tcm) at the start of 2023.
From 2012 to 2021, Algeria’s dry natural gas production averaged approximately 90.6 billion cubic metres (bcm) annually, while domestic consumption averaged around 42.5 bcm over the same period. Despite a dip in natural gas production in 2020 due to the COVID-19 pandemic’s impact on economic activities and, consequently, crude oil consumption, production levels rebounded in 2021, hitting a record high of around 102 bcm. This increase was largely attributed to upstream investment leading to new project start-ups and expansions, particularly at the country’s largest gas field, Hassi R’Mel. Additionally, a reduced need for natural gas reinjection in oil fields—owing to lower levels of crude oil production—freed up more natural gas for domestic use and export.
Kpler’s data indicates that between 2017 and 2021, Algeria exported an average of around 3.24 million cubic metres per day (m³/d) of liquefied petroleum gas (LPG), primarily to Europe and Africa. Europe was the predominant recipient, accounting for an average of 76% of total LPG exports, while Africa accounted for an average of 14% during this period.
Algeria’s position as a net exporter is further solidified by its excess natural gas production over domestic needs. From 2011 to 2020, Algeria exported an average of approximately 48.2 bcm of natural gas annually. In 2021, as per BP’s Statistical Review of World Energy, the country exported around 53.8 bcm of natural gas, the majority of which was delivered to Europe. Approximately 16 bcm of this was exported as LNG, with the remaining 39.8 bcm shipped via pipelines.
Among African nations, Algeria stands as a top LNG exporter, primarily serving European markets. The country operates four LNG terminals, all managed by the state-owned hydrocarbon company Sonatrach. Between June 2020 and July 2021, operations at the Skikda LNG terminal were halted due to a turbine control mechanism failure. However, this did not impede LNG deliveries due to spare liquefaction capacity at other terminals in Arzew. In a move to bolster its LNG capabilities, Sonatrach contracted with Sinopec in February 2022 to expand and upgrade the Skikda LNG terminal, aiming to enhance storage capacity and modernize port facilities to accommodate larger vessels.
Algeria’s gas export infrastructure also includes three major intercontinental pipelines that channel natural gas to Europe: the Enrico Mattei (Transmed) pipeline, the Medgaz pipeline, and the Maghreb-Europe (MEG) pipeline. Notably, the capacity of the Medgaz pipeline, which connects directly to Spain, was increased from 8 bcm to 10.7 bcm per year at the end of 2021, following the installation of a third turbo compressor.
Political dynamics have, at times, influenced Algeria’s natural gas exports. In October 2021, the delivery of natural gas exports to Spain via the MEG pipeline was suspended due to increased political tensions with Morocco. However, in a significant turn of events, by June 2022, Spain began exporting natural gas to Morocco through the same pipeline, albeit in the opposite direction, utilising international market-sourced LNG.
The potential for regional pipeline development remains a subject of interest. The proposed Gasdotto-Algeria Sardegna-Italia (GALSI) pipeline and the Trans-Saharan Gas pipeline (TSGP) could further integrate Algeria into the European energy market. While no final investment decision has been made, the TSGP received a boost with a memorandum of understanding signed by energy ministers from Niger, Nigeria, and Algeria to establish a task force to update feasibility studies. The GALSI pipeline, initially aimed at delivering natural gas to Italy, has seen revived talks and could potentially serve as a conduit for green hydrogen in the future.
Algeria’s strategic energy reserves, advanced infrastructure, and pivotal role in the African and global energy markets underscore its ascendancy as a vital cog in the wheel of the global energy supply chain. As Europe looks to diversify its energy portfolio, Algeria’s natural gas sector stands ready, not only to meet the demand but also to drive forward the continent’s energy narrative into a future of prosperity and sustainability.
