East Africa potential LNG market for investors

Posted on : Wednesday , 21st January 2015

Vast amounts. Mozambique alone is estimated to have gas reserves of up to 4.25 trillion cu/m and Tanzania potentially as much as 1.41 trillion cu/m (Petroleum-economist). But in a global economy where commodity prices, consumer demand and ‘timing to market’ are crucial, there is no guarantee that even these amounts can be commercialised in the foreseeable future. However, for both countries the prize is great. In an article written by Nadja Kogdenko - East Africa: The Newest LNG Frontier - the Mozambique Natural Gas Master Plan indicates that the country could potentially earn up to US$5.2bn per annum by 2026 from liquefied natural gas (LNG) exports, creating over 70,000 jobs in the gas sector. If fully monetised Tanzania could also expect a large inflow of revenue into its treasury.

Although both Tanzania and Mozambique are forecast strong economic growth, there is no possibility that either could hope to consume such quantities of gas if produced at the maximum economic rate, which is the business model that investors and oil companies alike will use.

Globally, the picture is more positive. The US Energy Information Administration (USEIA) in their International Energy Outlook for 2013 give the reference case for World GDP increasing on average between 3.5 per cent and 4.6 per cent per annum between 2010 – 2040. It predicts that over the same period the global annual demand for gas will rise from 3.73 trillion cu/m in 2010 to 5.23 trillion cu/m. Much of this demand will come from Japan (its nuclear industry unlikely ever to recover fully from the shock of Fukushima), India, China and southeast Asia all of whom rely heavily on LNG imports. Geographically East Africa is ideally placed to supply LNG to these markets