As tensions between Russia and the United States over Ukraine continue to rise, various scenarios for the near future are being considered and tested. Germany may have to consider a slower exodus from coal-fired energy, Economy Minister Robert Habeck said, if Russia suspends gas deliveries to Europe in reaction to sanctions over its invasion of Ukraine. The comments on public radio Deutschlandfunk is another indication of how the Ukraine crisis has thrown Germany’s planned transition to carbon neutrality into disarray, compelling the government to reevaluate its scheduled nuclear and coal phase-outs. In the short term, it may be necessary to keep coal-fired power facilities on standby and possibly even operating,” Habeck added, in statements that would have been inconceivable a week ago from a Greens minister. “Pragmatism must take precedence over all political commitments,” he added, alluding to concerns about blackouts and gas rationing for heating. Protection of supply must be ensured.
Germany recently put a halt to the certification of the Nord Stream 2 gas pipeline, which is intended to transport natural gas from Russia directly to Europe. This follows Russian President Vladimir Putin’s recognition of the breakaway regions of eastern Ukraine and his dispatch of troops to the area. Germany’s chancellor, Olaf Scholz, stated that his country would not accept the recognition of the two self-proclaimed pro-Russian separatist regions in the Donbas region of eastern Ukraine, and that Germany would have to reassess the situation regarding Nord Stream 2. Scholz stated that he had requested that the German Economy Ministry take steps to ensure that this pipeline cannot be certified at this point in time and that Nord Stream 2 will not be able to operate unless this certification is obtained.
The latter issues pose severe challenges for Europe, and while efforts are being made to develop contingency plans in the event of a power outage, a long-term solution is urgently required. One of the ways for Europe to wean itself off Russian gas is to do so as quickly as possible by investing in and expediting intercontinental energy projects with Africa. Africa has the ability to meet some of Europe’s energy requirements while also reaping the benefits of such transfers. Of course, given the development status of many African countries, as well as the political and security instability in some African countries, this will not be without its difficulties. This is precisely why a reliable source of energy as well as a secure route for transferring energy from Africa to Europe must be developed.
At the European Union-African Union (EU-AU) Summit in Brussels, one of the items on the agenda was a partnership of equals between the EU and its southern neighbor continent on energy policy. Josep Borrell, the EU’s High Representative for Foreign Affairs, revealed that the EU is in talks with gas-producing countries, including Algeria, about expanding LNG supplies. He hinted at a shift in strategy from the previous administration. In light of the Ukraine crisis, which is putting Europe’s gas supply from Russia at risk, there is a window of opportunity for Africa’s gas producers to offer exports to Europe. According to Abdur-Rasheed Tunde Omidiya, president of the African Energy Chamber in Nigeria and West Africa, the Ukraine crisis and its implications for EU energy supply “provide a golden opportunity for African gas producers to develop a robust, bankable gas strategy to cater for motherland Africa and our European friends’ energy demand.”
The European pursuit to secure energy supplies puts Algeria firmly in the spotlight, as the EU’s third largest gas provider, behind Russia and Norway. According to Eurostat, the country, which has pipelines running across the Mediterranean Sea to Spain and Italy, as well as an LNG terminal, exported approximately 34 billion cubic meters of natural gas to the EU in 2021, accounting for approximately 8% of the union’s total imports. Any increase in Algeria’s volumes would not come close to offsetting a complete shutdown of Russian imports, which totaled approximately 130 billion cu m in 2021, but it would provide some measure of relief to a continent that is already experiencing tight supplies and skyrocketing energy prices during the current winter heating season.
Africa, with approximately 7% of the world’s oil and natural gas reserves, is still far from reaching its full potential in the oil and natural gas industry. The European Commission’s decision to award natural gas a green label under its taxonomy on sustainable investment in its rulebook has been interpreted as a green light for some African countries to step up their search for investment in infrastructure and pipelines that will enable them to increase production and supply of natural gas to European markets. Algeria, Niger, and Nigeria recently reached an agreement on the construction of the Trans-Saharan Gas Pipeline, which will run through the three countries and into Europe and cost several billion dollars. Once completed, the pipeline will be capable of transporting 30 billion cubic meters of natural gas per year. Additionally, Italy and Spain are looking into ways to increase their imports from Libya and Algeria while also figuring out how to get them to the rest of Europe.
The EU is also providing financial support for the construction of the EastMed pipeline, which will connect the European network to offshore gas fields in Cyprus, Israel, Egypt, and Israel. The Transmed pipeline, which will run from Africa to Italy via Tunisia and be completed in 2027, will connect Algeria and Italy. Algeria is already Italy’s second-largest gas exporter, after Russia, and is poised to become the country’s largest. Kandeh Yumkella, a former United Nations Under-Secretary-General for Sustainable Energy, told Timmermans that the EU’s taxonomy decision means that Africa can begin to talk about gas as a transition fuel. As a result, in the joint declaration that was issued following the conclusion of the summit, it was stated that “we recognize the critical importance of making use of available natural resources within the context of the energy transition process.” Several African countries, including Nigeria, Mozambique, and Senegal, which all have significant natural gas reserves, have made a strong case in recent months for Europe to continue to provide financial assistance for new gas projects. It would make economic and political sense for the self-proclaimed geopolitical Commission to provide it if they could.
However, it is unrealistic to expect African gas to be able to fill the void left by Russian gas, at least in the immediate future. In the words of Simone Tagliapietra, a researcher at the Bruegel think tank, “North African countries are currently supplying natural gas to Europe through pipelines, but they do not have the technical capacity to increase their production and exports”. He added that, “It is difficult to see additional volumes becoming available for Europe in the near future”. Infrastructure is going to be critical. Investors in Europe may be selling solutions in order to be able to put as many terminals as possible, which will allow us to export natural gas to the European Union (EU). “That is what we require in order to be competitive in the gas market,” Gabriel Mbaga Obiang Lima, Minister of Mines and Hydrocarbons in Equatorial Guinea, told the African Energy Chamber.
A positive outcome can be used by African producers to attract the investment needed to build infrastructure that will allow them to expand exploration, production, and exports in order to meet the anticipated increase in demand in Europe. Several other African producers, including Algeria and Niger, who, along with Nigeria, recently signed the Declaration of Niamey at the Economic Communities of West African States (ECOWAS) Mining and Petroleum Forum (ECOMOF) – paving the way for the construction of the multi-billion-dollar, 4,128-kilometer Trans-Saharan Gas Pipeline, which will run through the three countries and into Europe – now have the opportunity to attract funding for the project’s rollout and to expand their production. Once completed, the pipeline will be capable of transporting 30 billion cubic meters of natural gas per year, which will be critical in meeting Europe’s growing demand.
As a potential gas supplier for Europe, Algeria’s proximity to the European market gives the North African country strategic significance as a potential gas supplier. Algeria, the world’s sixth-largest gas exporter and the continent’s largest gas producer, has already stated its intention to double exploration and production in the next five years, according to the International Energy Agency. Algeria increased its export volumes to Europe from 40 billion euros in 2020 to 53 billion euros in 2021, and it is expected to export 46 billion euros or more in 2022, as demand in Europe is expected to continue to rise. African countries, can capitalize on current trends to attract much-needed investment in order to develop the infrastructure necessary to accelerate production for regional consumption and exportation while also reducing costs. According to Abdur-Rasheed Tunde Omidiya, President of the African Economic Commission, “the time to act on the Trans-African Gas plan is NOW.”
Feel free to contact the Energy Transition Centre today with questions.
· Julius Moerder, Head of Energy Transition Centre julius.moerder@centurionlg.com
· Oneyka Ojogbo, Head of Energy Transition Centre, Nigeria & West Africa oneyka.ojogbo@centurionlg.com
· Leon van Der Merwe, Head of Energy Transition Centre, South Africa leon.vdmerwe@centurionlg.com
*Source Centurion
