Europe is currently experiencing a prolonged energy crisis. The continent’s significant reliance on gas imports, coupled with market instability caused by the COVID-19 pandemic and demand fluctuations have resulted in restricted gas supplies and price increases by almost 400%. As winter approaches the continent and demand for gas increases even more, a unique opportunity has emerged for African supply networks. With the expansion of cross-border projects and pipelines, as well as enhanced gas linkages between Africa and Europe, Africa can offer a solution to Europe’s gas crisis, if stakeholders capitalize on the presented opportunities.
Europe’s energy crisis can be attributed to a multiplicity of factors. Firstly, the continent’s reliance on imports has left it at the mercy of international market fluctuations. This has created a significant challenge, particularly as the COVID-19 pandemic hit and the market collapsed. According to Eurostat, natural gas dependency in the European Union reached an all-time high of 89.5% in 2019, with domestic production experiencing a decreasing trend by 11%. Consequently, as domestic supply wavers, Europe has placed a heavy reliance on international supply chains.
Additionally, as demand for natural gas increases in Asian markets, European supplies have been spread thin. The global energy transition has called for fossil fuel consuming markets to shift towards natural gas in the medium term, and to renewables in the long-term. Consequently, many countries worldwide have seen an upward trend regarding natural gas consumption, and in conjunction with weather fluctuations in Asia and South America, global gas demand has increased significantly, leading to shortage of supply and price increases in Europe.
However, Europe’s energy crisis has created a significant opportunity for African markets. The majority of Europe’s gas supply comes from Russia – approximately 41% -, and with H.E. President Vladimir Putin announcing that the country will not be increasing supplies to Europe, despite the crisis, Africa can capitalize on this new opportunity.
Supply linkages between Africa and Europe are already established, including the Maghreb-Europe Gas Pipeline (MEG) – linking the Hassi R’mel field in Algeria through Morocco with Spain – and the Medgaz pipeline – directly linking Algeria to Spain. Algeria currently supplies Spain with approximately 9 billion cubic meters (bcm) of gas per year – 3.67 bcf via the MEG pipeline and 5.39 via the Medgaz pipeline. With Medgaz pipeline capacity enhancements expected by Q4 of 2021, African natural gas can help ease Europe’s energy crisis.
Additionally, Nigeria is planning the development of a trans-Sahara Gas Pipeline, aimed at expanding west- African gas exports and meeting European demand. The pipeline will link Nigeria with Algeria, connecting existing pipelines with Europe. Still in the planning stages, the pipeline could significantly enhance European gas supplies, enabling increased energy security for the gas dependent continent. With the implementation of the African Continental Free Trade Agreement in January 2021, cross border pipeline networks and gas trade have improved. African countries are now able to enhance natural gas trade across the continent, with simplified procedures, reduced tariffs, and market liberalization expanding opportunities.
Meanwhile, as Africa accelerates the development of Liquefied Natural Gas (LNG) facilities, Europe stands to benefit. Notably, projects such as Mozambique’s 13.1 million tons per annum (mtpa) LNG project; Senegal’s 10 mtpa Greater Tortue Ahmeyim project; and Tanzania’s 10 mtpa LNG liquefaction plant have the potential to enhance Europe’s gas supply. Through LNG shipment solutions, African LNG can be directly exported to European markets, bringing critical revenue for Africa while ensuring a stable supply for Europe. Despite the pandemic causing unprecedented development delays to African LNG projects, the continent remains on track to become a competitive LNG producer and exporter.
Accordingly, Africa’s significant natural gas reserves can not only be leveraged to accelerate socio-economic growth, but can be used to supply Europe with much-needed energy. Africa’s resources have the potential to transform the global energy space, and with the right investment and development, the continent will emerge as a frontrunner in global gas supply.