The Courier

Europe and Africa at night.

© BP Statistical Review of World Energy 2007

The explosion in petrol prices and the increasing tension in the Near East in recent years have redefined Africa’s status as an energy partner for Europe. According to the BP Statistical Review of World Energy 2007, at the end of 2006 Africa accounted for 12.1% of global petroleum production and possessed 9.7% of established global reserves – a little less than half of Saudi Arabia’s reserves.

According to the same source, Africa’s production of natural gas last year represented 6.3% of the world’s total and this share is set to grow because its established reserves located primarily in Nigeria (2.9%), Algeria (2.5%), Egypt (1.1%) and Libya (0.7%) will make up 7.8% of the world’s reserves. But from Europe’s perspective, the importance of Africa is even greater. In 2005, around 20% of EU-25 imports came from Africa – with the figure reaching 14% for natural gas mainly coming from Libya, Nigeria and Algeria. Africa, and in particular the Gulf of Guinea, holds two main attractions for Europe – geographical proximity and a means of diversifying energy supplies to be less reliant on its two main sources, Russia and the Persian Gulf. These factors have been taken into account by Europe’s military and help explain why NATO manoeuvres took place for the first time in sub-Saharan in Cape Verde Africa in June 2006. This operation involved a simulation of military intervention in an imaginary sovereign state rich in natural resources.

The hunt for ‘marginal’ deposits

Exploration budgets are soaring. ExxonMobil (15% of whose global production comes from Africa) unveiled plans in 2005 to invest US$50 billion up to 2015. According to company vice-president, Kevin Biddle, estimated total growth in demand for petrol is 2% a year until 2020, while at the same time reserves will diminish by 4% every year. For rival Shell, 20% of production comes from Africa. It also believes this percentage is set to increase. However, Africa has always been under-explored and recent increases in prices now make it economical to explore ‘marginal’ deposits, so called because they are costly to exploit. Today, exploration is gathering pace in Ethiopia, the Central Congo Basin, on the banks of Lake Albert, on the border between Uganda and the Democratic Republic of Congo and in Mali. In Chad, exploration started several years ago and there is now greater pressure there than in certain parts of the costal basin (like Cameroon) where production is in decline. The Bank of the Central African States forecasts that petrol production will fall by 15% between 2007 and 2009 across the whole of the region except in Congo-Brazzaville. However, according to International Energy Outlook 2007, production in Sudan, which is set to double, could exceed 700,000 barrels per day between now and 2010. However, the brightest hope is Angola, where – according to the same source – production could triple to 4 million barrels per day by 2030 largely due to ultra-deep, offshore exploration.

Increasingly precious reserves: the peak theory

The prospect of global petrol reserves running dry has led to a re-evaluation of the total value of Africa’s reserves, and there are various conflicting schools of thought on this. Among the pessimists are supporters of Shell geo-physician Marion King Hubbert, who developed a mathematical model in 1956 that plotted a curve (based on estimated reserves and petrol already consumed) to calculate the peak after which the world’s resources would decline forever. His prediction was 2009. Today, Hubbert’s supporters are more convinced than ever, as his predictions for the decline of American domestic production after 1970 have been proven.

However, BP’s chief economist, Peter Davies, believes that fears of an imminent shortage are unjustified. He thinks exploration of reserves located in areas difficult to reach will become possible thanks to technological innovation. In his view, conventional, established petrol reserves can last up to 40 years at the current rate of production. And Harvard University economist, Joseph S. Nye, believes there will be a decline in demand because of pressure from opponents of ‘dirty’ energy as well as diplomats concerned about dependence on foreign oil. However, this prediction does not tally with BP’s forecasts of a rise in global consumption driven by increases in demand from China and India from 85 to 113 million barrels per day between now and 2030.

For natural gas, the most pessimistic forecasts predict that reserves will start to decline 20 years after those of petrol. On that basis, the Oil & Gas Journal estimates that this corresponds to 65 years of production. However, this does not take into account a fact underlined by the US Geological Survey that there are believed to be significant resources (around two-thirds of the current proved reserves) still undiscovered. Eurogas, the organisation that represents the interests of the European gas industry, anticipates an increase of more than 40% in consumption in the EU between now and 2030.

As part of this economic energy scenario, Africa is now destined to play an important role. Currently, two major projects are in the pipeline: first the Olokola terminal to the west of Lagos, which will cost an estimated €6 billion. This involves a consortium of the Nigeria National Petroleum Corporation (NNPC), British Gas, Shell and Chevron, who aim to export 22 million tonnes of natural liquefied gas. Funding is to be provided by the European Investment Bank. Second, in July, the Algerian company Sonatrach and the NNPC presented feasibility studies to Brussels concerning the trans-Saharan gas pipeline project. At a total cost of €7 billion and 4218-kilometers in length, it would transport natural gas from Nigeria to southern Europe, via Niger and Algeria.

In addition to hydrocarbons, Africa, which contributed 4.8% to global coal production in 2006, possesses 5.5% of the global reserves, the majority in South Africa. This is more than all of Europe’s reserves put together (which total 3.9% of global coal production). However, an increasing share of these reserves is most likely to be earmarked for the generation of electricity in Africa. A good example of this is the coal power station project in Mmamabula in Botswana. This project aims to produce 4,800 megawatts of electricity by using coal from mines that have reserves of 2.3 billion tonnes, according to the South African electricity company ESKOM and the Botswana Power Corporation. This project, the first phase should become operational in 2012, is justified by its supporters as being necessary to avoid shortage in capacity in southern Africa. The same argument applies to gas. In Mozambique, Energy Minister Salvador Namburete told The Courier that production of gas is no longer exclusively destined for export. A certain proportion will be used by the new Temane power station with a combined cycle of 750 to 1,000 megawatts. This power station should be operational within three to four years. Finally, interdependence does not just involve investments in Africa by multinational energy giants or by the Brazilian steel giant CVRD, which is investing in coal mining in Moatize, Mozambique. It also involves dialogue on the conditions of entry and access to the European gas sector for companies like Algeria’s Sonatrach who are actively looking for ways and means to take up key positions in that marketplace.

Production and reserves of established petroleum at the end of 2006 (in million of barrels)

Production  -  Rest of the world  /  Percentage  -  Reserves  -  Percentage / Rest of the world

• Algeria 2.0 - 2.2% - 12.3 - 1.0%
• Angola 1.4 - 1.8% - 9.0 - 0.7%
• Congo-Brazzaville 0.26 - 0.3% - 1.9 - 0.2%
• Egypt 0.67 - 0.8% - 3.7 - 0.3%
• Gabon 0.23 - 0.3% - 2.1 - 0.2%
• Equatorial Guinea 0.35 - 0.6% - 0.23 - 0.3%
• Libya 1.83 - 2.2% - 41.5 - 3.4%
• Nigeria 2.45 -  3.0% - 36.2 - 3.0%
• Sudan 0.39 - 0.5% - 6.4 - 0.5%
• Chad 0.06 - 0.1% - 0.9 - 0.7%
• Tunis 0.06 - 0.1% - 0.7 - 0.1%
• Other African countries 0.06 - 0.1% - 0.6 - 0.1%

Total for Africa 9.99 - 12.1% - 117.2 - 9.7%

Source: BP Statistical Review of World Energy 2007

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