May 23, 2017

Africa: Planning and global partnerships critical for gas-to-power’s future

The need for reliable power to fuel growth and environmental considerations are paving the way for natural gas to reshape Africa’s electricity landscape – proper planning and sound execution are key to bringing these to life, explains Webb Meko, Business Development Director,  Sub-Saharan Africa, Black & Veatch.

Africa is home to one of the greatest future energy sources: gas.

Continuous exploration and talks, combined with gas’s low carbon make-up, have paved the way for a potentially powerful emerging gas-to-power market.

However, bringing gas-to-power facilities online involves a complex process of planning, including fuel supply and site reviews, technology assessments, the development of supporting supply infrastructure, followed by detailed design, procurement, and construction of separately-packaged or integrated gas-to-power facilities.

The combination of these and other critical elements can take years to complete, even under optimal conditions. Given rising demand for new, lower emission energy, the time to begin planning for Africa’s gas-to-power future is now.

Proactive and accurate planning will help project sponsors establish early market positions with the prospect of bringing reliable energy to 600 million citizens and businesses across the continent, providing gas for both local use and export potential, ultimately establishing a thriving domestic gas sector, thus driving economic progress and creating jobs in the region.

It is vital that careful planning is championed, particularly in locations such as South Africa, Mozambique, Ghana, Tanzania, Kenya and elsewhere, where early gas-to-power facilities are earmarked for completion as the 2020 Paris Agreement for climate change ratification deadline nears[1].

 Dilemma: Investing in gas or growth before gas?

Africa’s electricity generation is expected to quadruple by 2040, and gas-to-power projects could grow by up to 25 percent with a strong push in west, east, and southern Africa.

Already identified as part of South Africa’s diversified energy mix, gas-to-power is especially favourable when considering the continent’s need for an additional 250GW of capacity by 2030.

South Africa’s Department of Energy (DoE) estimates that gas industry development would boost GDP growth in the medium to longer term as well as employment prospects for around 1,25 million individuals over a 25 year period.

The recent DoE announcement that 2,000MW of generation from liquefied natural gas (LNG) imports will be sourced from the Richards Bay and the Coega Industrial Development Zones  – and that project management bidding will commence soon – have inspired renewed confidence in South Africa’s gas-to-power build and future.

But which comes first as a kickstarter to bring this opportunity to life – infrastructure or economic growth?

Though the end of the commodity super cycle and lowered global economic growth projections have tempered capital investment, continued project development and planning to facilitate gas-to-power generation is the prudent path to meeting Africa’s demand for power.

It also sets the stage for the country to diversify its power portfolio for a more balanced mix of complementary generation sources.

Additionally, economic studies indicate that investments in power infrastructure and greater energy capacity correlate directly with higher levels of economic growth.

Turning up the heat

Creating a thriving gas-to-power industry requires a strong infrastructure foundation that can have immediate and long term GDP impacts.

Gas-to-power infrastructure includes heavy drilling operations, pipelines, storage, roads, towns and more.

Costs may seem prohibitive – and are amplified by financial concerns, policy and regulation, political will, favourable agreements, adequate skills, adequate investment returns, and ultimate buy-in from host country citizens and groups.

Yet, the benefits are undeniable – a secure and competitive fuel supply is also an imperative – and can only be achieved through dedicated and collaborative buy-in. Global strategic partnerships bring the best industry players together and their respective strengths to the table. In addition, development of necessary infrastructure will enable thousands of workers to develop new, high-value skills that will improve the productive capacity of a well-versed gas-to-power workforce of the future for generations to come.

This is particularly important in a country such as South Africa where the future demand for electricity – both internally and within the South African Power Pool – could surpass energy infrastructure build,  creating a market for lower cost imported gas and LNG.

With access to the existing Mozambique reserves, and the requirement to deliver on the Integrated Resource Plan (2030), tapping natural gas provides a logical win-win solution.

While pipelines provide a means of high volume cross-border LNG transport, a typical terminal also needs other primary systems such as ocean water access, storage and transportation tankers, among other resources.

Each of these factors have a unique role in vapourisation, which converts gas for re-use, including sales readiness. In addition, LNG terminals also require supporting facilities, and control and safety systems to ensure safe and reliable gas supply.

African nations are also showing interest in smaller scale LNG applications, particularly floating LNG (FLNG) production facilities. Offshore FLNG has many benefits for this region, including: cost competitiveness, shorter schedules/faster commercial operation, access to multi-financing options, controlled shipyard construction with available skilled labor resources, and flexible solutions for shallow or deep water. Moreover, producers can: monetize small stranded gas fields, alternate to building fixed assets gradually, and redeploy gas to the most attractive import markets in Africa and elsewhere.

Be it land-based LNG-power schemes or FLNG-power infrastructure, sound project plans and complex project execution acumen are needed if the gas-to-power panacea is realised. Expertise must be applied by industry providers who understand the benefits of LNG and power integration.

The importance of gas-to-power – Mozambique example

Despite economic headwinds, investment scrutiny, and pockets of unrest, Mozambique remains a front-runner in the race to gas development given the country’s progress in its gas-to-power initiative.  Both government and private sector support has resulted in continued upstream development, as well as confirmation of constructing a R2,7 billion natural gas pipeline, for the Republic of Mozambique Pipeline Company (ROMPCO) Loop Line Project,  with the second loopline expected to increase pipeline capacity from 169 to 191 billion standard cubic feet per annum.

This integral project will supply South Africa, support regional integration and become a milestone for intra-continental gas supply. The pipeline will prove to be especially beneficial to Mozambique’s economy long-term where annual electricity demand is expected to grow significantly over time.

Taking gas-to-power forward

Africa has the potential to solve its energy challenges by tapping its significant gas reserves, in turn providing citizens with much needed access to power, improving air-quality, and building new skills in the region. Additionally, economic growth could stem from gas-rich African countires becoming dominant players  in the global gas industry.

That said, critical policy, funding and technical challenges must be addressed to advance this sector and harness the promising opportunity for reliable power, lower emissions and a more diversified electricity portfolio. At the same time, experienced global participants, and proven planning, engineering, procurement, and construction methods associated with LNG and FLNG, power generation, and related infrastructure also should not be overlooked.

Gas-to-power projects are undoubtedly complex endeavours. Successful deployment requires well-defined plans, adequate project funding, consideration of LNG supply, import infrastructure, efficient and reliable power generation equipment, proven cost and schedule control methods, and complex project management abilities, including solutions for local construction risks.

Partnering with experienced global development and execution organisations, particularly those with proven expertise, can help mitigate gas-to-power project risks.

These factors will help to set the continent on a path of regional growth and long-term sustainability, while strengthening intra-African and global ties.

[1] The agreement will come into force 30 days after at least 55 nations responsible for at least 55% of global emissions submit their ratifications. The Paris Agreement becomes operational after 2020.

Webb Meko is the Business Development Director Sub-Saharan Africa, Black & Veatch. He has provided technical expertise, management and advisory services for more than 20 years to South African and global clients in the energy sector within Africa. His areas of expertise include power system planning and electrical power system design, electri cation, project management, program management, feasibility studies, private power projects development and power plant maintenance. Meko is based in Johannesburg.

 

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