Gas-to-power: Turbine take-off (The Africa Report n°39 – April 2012)

Natural gas finds off the East African coast have raised the prospect of cheaper, cleaner fuel, but transport infrastructure and administrative delays are slowing its conversion to power.

Even as a push for renewable energy surges across Africa, new natural-gas finds have the potential to bring about a golden age of gas-to-power generation for the continent. Although it is classed as a fossil fuel, gas is viewed as a cleaner and cheaper alternative to coal-or diesel-fuelled power generation and is often called a ‘transition’ fuel on the way to a renewable future.

In East Africa, huge gas finds estimated at over 50 trillion cubic feet off the coast of Mozambique, alongside further exploitation of Tanzania’s Songa Songa field, could open up a big opportunity to address chronic energy short-ages. The energy utility Tanzania Electric Supply Company (TANESCO) upped electricity prices by 40% in January 2012, citing low levels of water at hydroelectric dams.

South African energy and chemicals firm Sasol has been quick off the mark. « Sasol New Energy is looking at developing gas-fired electricity generation in Mozambique in partnership with the country’s state- owned power utility,” said Jacqui O’Sullivan, Sasol’s group communications manager. It is looking at financing options for a proposed 140MW plant with the Mozambican government.

Italian oil giant ENI has also expressed interest in building and managing gas-fired power plants in Mozambique (see TAR 38, March 2012). In Uganda, Irish firm Tullow Oil says the government is reviewing the company’s plans to build a 50MW gas-to-power plant at Nzizi, near Lake Albert, by 2013.

Others have decided to sell facilities to state-owned utilities. In Tanzania, Oslo and AIM-listed Wentworth Resources – formerly known as Artumas – sold its 18MW Mtwara gas power plant to TANESCO in February for $13.5m.

Pipeline delays. But Rob Smith, research analyst at the Frost & Sullivan consultancy in South Africa, says transforming new gas finds into power will be a slow process. Frost & Sullivan says there is potential for 20% annual growth in gas-fired power generation capacity in sub -Saharan Africa, but it predicts growth will be just 5%.

While a coal-fired power plant can take eight years to build, gas fired turbines are « relatively quick and simple » pieces of infrastructure, according to Smith, taking between 20 and 30 month to construct. But the pipelines to transport the gas and the processing capacity to clean it need to be in place beforehand. « What has typically happened is that there’s been corruption or mismanagement from the political side that has resulted in the failure to deliver in terms of electrical infrastructure, » he says.

Global shale gas exploitation – though controversial – could also slow the speed of development of Africa’s gas finds. If large new fields start flooding the market with gas, the demand and price could slump, impacting the viability of extraction, processing and power plants.

In Ghana, delays by the government on releasing guidelines for the gas industry left the consortium managing the offshore Jubilee field no choice but to re-inject the gas because there was no way of transporting it. The government now plans to transform existing thermal power plants – which use steam to turn a turbine – to be run by gas, as well as to install combined cycle gas turbine (CCGT) plants that use both steam and gas turbines (see TAR 37, Feb. 2012).

In North Africa, a 10-year gas contract was signed in November 2011 between Morocco’s electricity producer ONE and Algerian gas giant Sonatrach. Each year 640m cubic meters of gas will be exported via the Maghreb-Europe Gas Pipeline, to feed ONE’s Ain Beni Mathar hybrid solar-gas power station and gas and steam turbine plant at Tahaddart.

Shale gas exploitation. Even as it steps up plans to export solar energy to the EU through the Desertec project, Algeria’s state-owned gas and electricity utility Sonelgaz is currently building two new gas turbine plants at Labrag and Ain Djasser. But analysts from UK-based African Energy suggest that the prospect of depleting production from veteran Algerian fields such as Hassi R’Mel has injected an urgency into the need to develop new fields. In February, Sonatrach’s chief executive Abdelhamid Zerguine said the state-owned energy company would invest $68bn by 2016 in the energy sector. It is now pursuing shale gas exploration, and says a first well will be drilled in May followed by a second in October.

In South Africa, the energy industry is waiting to find out whether the government will lift or extend a moratorium on exploration for shale gas in the Karoo Basin. The moratorium was due to expire in February 2012, pending a government review. In early March, the Department of Mineral Resources said it would not comment on whether the moratorium would be lifted or not. Shell still has an application for a license pending. A spokesman for Shell in The Hague said the company was « keen to see the moratorium lifted so we can see what’s there”. Environmental groups, however, have raised strong opposition to the plans.

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