The International Energy Agency (IEA) said in its first Africa Energy Outlook this week that it expects the continent’s electricity generation to quadruple by 2040 with gas-to-power growing its share to 25 per cent, from 17 per cent now.

In West Africa, gas will make up 50 per cent of overall electricity output by 2040, the IEA said, driven by reforms in Nigeria, home to the world’s eighth largest reserves.

In Nigeria, gas prices have risen from $1 per million British thermal units (Mbtu), to around $3 Mbtu in the last three years and should increase further, trade sources say.
International Energy Agency
A United Nations backed report has calculated gas in East Africa could reach power plants at between $5-$15 Mptu, depending how close they were to the source. Diesel can cost African industry $20-$40 Mbtu, experts say.

“We believe surging domestic demand coupled with growing regulatory changes take the economics of sub-Saharan gas to a new level,” Russian investment bank, Rencap, said in a research note this month.

Further impetus has been provided by U.S. President Barack Obama who has made cutting electricity shortages his legacy policy on the continent, in a project called “Power Africa”, which will include $7 billion in U.S. financial support.

There remain major hurdles, including implementing commercial gas pricing, building expensive infrastructure and working alongside competing liquefied natural gas (LNG) projects.

Both Nigeria and Tanzania are prioritising the use of domestic gas over LNG and US firms Symbion Power and General Electric have already committed nearly $1bn to building power plants there.

Mozambique, which has had the world’s largest natural gas discoveries in a decade, two months ago passed a petroleum law which will force oil companies developing LNG projects, including U.S. firm oil Anadarko Petroleum and Italy’s Eni, to use 25 percent of production domestically.

Mozambique is also carrying out a study, partly-financed by the World Bank, for a pipeline linking its gas reserves to neighboring countries with the continent’s most developed economy, South Africa, offering a huge potential market.