by Mortimer McKechnie ,
Vice President, Power & Renewable Energy
06/06/2023 · 4 minutes-read
While almost 18% of the world’s population lives in Africa, the continent contributes less than 5% to global greenhouse gas emissions. However, the continued social and economic development of many African countries is tied to their ability to utilise the continent’s abundant natural resources, including natural gas, and diversify their energy mix.
As we stand today, energy sectors in many African countries face several challenges, including insufficient power generation, inadequate infrastructure, and a high level of energy poverty.
Growth of a sustainable energy system will require significant investment and policy coordination — Nigeria alone requires approximately US$410 billion by 2060 to reach targets in energy access and transition outlined in its Energy Transition Plan (ETP). Risk management and insurance will play a crucial role in these investment opportunities, helping to unlock capital and de-risk efforts across both private and public sectors.
In the short-to-medium term, natural gas can play a crucial role as a transition fuel to help meet the continent’s growing electricity demand, replace high-content fossil fuels, and accelerate the introduction of renewable energy sources.
According to the investment platform Energy Capital & Power, Africa’s natural gas reserves amount to a total of more than 800 trillion cubic feet with almost half of its 55 countries known to have proven natural gas reserves.
While natural gas has similar uses to other more traditional fossil fuels such as coal and oil, it has some distinct advantages. Producing less emissions and pollutants, it is a cleaner, less expensive fuel than either coal or oil. It is also ideal for industrial use as a valuable feedstock and an efficient source of process heat. It is also a flexible energy source, as gas plants can be built on a modular scale and are able to ramp up or down quickly, according to energy demand.
These characteristics make it an excellent option for a transitional energy source, particularly in countries with limited access to renewable energy.
There are several reasons why Africa would benefit from the acceleration of gas projects:
There are nonetheless challenges to developing gas projects in Africa. One of the main challenges is the lack of infrastructure in the region, such as pipelines and liquefied natural gas (LNG) terminals. This can make transporting and storing gas difficult, increasing costs and reducing efficiency. However, there are solutions to these challenges. For example, smaller-scale, modular LNG plants can be developed or compressed natural gas (CNG) can be used for storage and transportation. Compressed natural gas (CNG) is derived from compressing methane down to less than 1% of its volume creating a clean, odourless and non-corrosive fuel, which is safer and more efficient.
Developing gas projects can also require significant investment. Crucial to the success of these investments is an understanding of the key regional risks associated with developing projects of this nature. Supporting private capital investors and project developers to reduce and transfer risks is a pivotal role of a strategic risk and insurance advisor.
Natural gas can play a critical role as an energy source during Africa's energy transition. The development of gas projects can provide African nations with numerous benefits, including improved energy security, wider investment opportunities, and a greater ability to meet growing energy demands.
Despite the challenges, there are solutions that can be implemented to accelerate the development of gas projects in Africa. With the right investments made alongside strong commitments and consistent policy, and regulatory frameworks, Africa can lead the way in the transition to a cleaner, more sustainable energy future.