• Monday, May 27, 2024
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Gas development the next big frontier for West Africa economy

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In recent years, gas production has grown more rapidly in West Africa than in any other region, while the production of gas has increased more rapidly in the region than anywhere but the Middle East.

There is no gainsaying the fact that West African gas has become important components of the world’s hydrocarbon supply-demand balance. West African gas projects have attracted substantial investment thanks to their cost competitiveness versus those in other regions.

The gas sector is gradually becoming a foundational element of economic growth for Nigeria and Ghana who are significant producers. It accounts for a significant part of the state’s revenues and represents a prime mover for employment, domestic power development, and, in many cases, infrastructure development.

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Gas is now, globally, the fastest-growing fossil fuel. Gas will likely emerge as a crucial source of energy for local use and to meet export demand in West Africa, with a 25 per cent production growth forecast over the next 5 years by the International Energy Agency (IEA). On Africa’s west coast, which holds 32 per cent of natural gas reserves, increases in gas production will mostly be driven by LNG exports. In Nigeria and Equatorial Guinea exported 39.30 and 8.28milliion liquid cubic metres respectively

Analysts observe that the sources of growth gas are evolving. In the past decade, production increases came primarily from Nigeria. Production of deepwater gas will continue to grow, while onshore gas and new-resource development are expected to become the other main engines for growth. They opine that international companies as a group have fared well in West Africa, as the licensing of acreage and Mergers and Acquisition gave them access to valuable properties. These companies have also moved expeditiously into the new, technically complex frontiers of liquid natural gas.

Superior operating capabilities and financial muscle continue to give the internationals a competitive advantage in West Africa; however, sustained growth has eluded those that acquired little and mainly operated more mature fields or had operations in countries with geopolitical and security risks. Indigenous national companies have set ambitious goals to become stand-alone, commercially viable domestic (and in some cases international) operating organisations. The inefficiencies of working in bureaucratic environments where these companies must strive to meet economic and socio-political missions have stifled their development, however.

National companies have been further constrained by the challenge of developing local technical, commercial, and managerial capabilities. These companies must transform them fundamentally and create systems, a performance culture, and governance models along the lines of those found in commercially driven enterprises.

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According to experts, “In recent years, new kinds of competitors have entered and grown in West Africa, once the domain of the large international companies. Have also aggressively invested in the region, linking broader infrastructure investments and government-to-government relationships with access to resources.

The challenge for these competitors in the years ahead will be to build sustainable enterprises and local capabilities beyond the scope of an individual project or investment. As for the countries that host gas operations, they should continue to offer international and national companies alike an attractive investment environment, which ought to foster competition for natural resources, greater efficiency in the oil and gas sector, and the building of sustainable capabilities.

Industry close watchers called on Governments to also focus on new ways to leverage their resource sectors to capture the economic multiplier of broader GDP growth by using gas as the catalyst for downstream energy (such as power stations, refineries, and retail outlets) and related industrial development (petrochemicals and basic materials).