Almost 30 percent of global oil and gas discoveries made over the last five years were in sub-Saharan Africa, reflecting growing global appetite for African resources, the World Energy Outlook Special Report said.
The report, recently released, also said that Nigeria is the richest resource centre of the oil sector, but regulatory uncertainty, militant activity and oil theft in the Niger Delta are deterring investment and production.
Consequently, Angola is set to overtake Nigeria as the region’s largest producer of crude oil until the early 2020s. It noted that the value of the estimated 150,000 barrels lost to oil theft each day – amounting to more than $5 billion per year, would be sufficient to fund universal access to electricity for all Nigerians by 2030.
According to the report, a host of smaller producers such as South Sudan, Niger, Ghana, Uganda, and Kenya, see rising output; but, by the late 2020s, production in most countries with the exception of Nigeria, is in decline.
Additions and upgrades to refining capacity mean that more of the region’s crude supply is processed locally. With regional production falling back from above 6 million barrels per day (mb/d) in 2020 to 5.3 mb/d in 2040, but demand for oil products doubling to 4mb/d, an upward trend amplified in some countries by subsidised prices. The result is to squeeze the region’s net contribution to the global oil balance.
The report also explained that natural gas resource-holders can power domestic economic development and boost export revenues, but only if the right regulation, prices and infrastructure are in place.
It noted that the incentives to use gas within sub-Saharan Africa are expected to grow as power sector reforms and gas infrastructure projects move ahead. But for the moment as much gas is flared as is consumed within the region.
According to the report, more than 1trillion cubic metres of gas have been wasted through flaring over the years, a volume that if used to provide power would be enough to meet current sub-Saharan electricity needs for more than a decade.
Specifically, Nigeria remains the region’s largest gas consumer and producer, but the focus for new gas projects also shifts to the east coast and to the huge offshore discoveries in Mozambique and Tanzania.
The size of these developments and remoteness of their location raises questions about how quickly production can begin. But they provide a 75 billion cubic metre (bcm) boost to annual regional output, which reaches 230bcm in total by 2040, with projects in Mozambique larger in scale and earlier in realisation.
East coast LNG export is helped by relative proximity to the importing markets of Asia. But alongside the benefits from an estimated $150 billion in fiscal revenue to 2040, both countries are determined to promote domestic markets for gas, which will need to be built from a very low base.
As regards energy, the report stated that since 2000, sub-Saharan Africa has seen rapid economic growth and energy use has risen by 45 percent. It said many governments are now intensifying their efforts to tackle the numerous regulatory and political barriers that are holding back investment in domestic energy supply. But inadequate energy infrastructure risks putting a brake on urgently needed improvements in living standards.
A severe shortage of essential electricity infrastructure is said to be undermining efforts to achieve more rapid social and economic development.
For the minority that has a grid connection today, supply is often unreliable, necessitating widespread and costly private use of back-up generators running on diesel or gasoline. Electricity tariffs are, in many cases, among the highest in the world and, outside South Africa, losses in poorly maintained transmission and distribution networks are double the world average.
The Report further said that reform programmes are starting to improve efficiency and to bring in new capital. This includes those from private investors, and grid-based generation capacity quadruples in our main scenario to 2040, albeit from a very low base of 90GW today (half of which is in South Africa). Urban areas experience the largest improvement in the coverage and reliability of centralised electricity supply, the report said.