IISD - International Institute for Sustainable Development

11/19/2024 | Press release | Distributed by Public on 11/19/2024 06:29

Europe’s Dash for Gas in Africa puts Private Profits First

November 19, 2024, Baku - Europe's demand for gas is contributing to expansion of liquid natural gas (LNG) projects in Mozambique, Nigeria, and Senegal. This favours the interests of European oil and gas companies over those of African countries, a new report shows.

The companies, which include UK-based BP, France's TotalEnergies, and Italy's Eni, stand to benefit from near-term revenues, finds the report A Precarious Pursuit by the International Institute for Sustainable Development (IISD). Under their contracts, African governments are often expected to wait until the mid-2030s or 2040s for significant returns.

These delays could prove economically disastrous to the African nations involved. LNG demand may have already peaked in Europe, and will likely decline globally from 2030, according to the International Energy Agency, and the EU Agency for the Cooperation of Energy Regulators.

"Europe clamping down on fossil fuels at home while expanding gas exploration and LNG terminals in Africa is problematic," said Bathandwa Vazi, Policy Advisor at IISD and one of the paper's co-authors.

She added: "The highly competitive LNG markets seen since 2022 are now forecast to give way to a supply glut, with falling prices, tighter margins, and lower profits for exporters. This price risk is being shouldered by countries least equipped to deal with it."

European governments should work with African nations to expand access to renewable energy and green jobs, not lock them into extractive sectors with high carbon emissions, report authors say.

Richard Bridle, a senior policy advisor at IISD, said: "Europe's support for LNG infrastructure in Africa is not the product of mutually respectful enterprise. It locks African nations into unstable fossil fuel-based economies, when they could be leapfrogging to clean energy and green jobs.

"At the 'finance COP', European governments must deliver the support African countries need to move beyond fossil fuels and harness their abundant renewable resources."

LNG development in Africa intensified following Russia's invasion of Ukraine in February 2022, as Europe sought to diversify supplies away from Russian gas.

For sub-Saharan economies, the potential to benefit from European gas demand may have been overstated, the research cautions. As global net-zero targets proliferate and the price of renewable energy falls, long-term LNG demand is uncertain. Meanwhile new projects are set to deliver a glut of LNG supplies later this decade, depressing prices.

The relatively high cost of LNG production in Africa makes African producers particularly vulnerable to market volatility, as lower global prices could make these projects unprofitable.

Media Contacts:

Bathandwa Vazi, Policy Advisor, Energy (Cape Town) - [email protected]

Richard Bridle, Senior Policy Advisor, Energy (Europe) - [email protected]

Vance Culbert, Senior Policy Advisor, Energy (Baku) - [email protected]

Megan Darby, Senior Communications Officer, Energy (Baku) - [email protected]