The steady economic growth West Africa has experienced over the last decade is slowly subsiding. In particular, low commodity prices and China’s economic slowdown have stunted growth in oil-rich countries. To overcome these challenges and sustain high growth rates, West African countries need to think innovatively and creatively about how to harness the potential of existing untapped and underutilized resources. A sector of tremendous promise is natural gas.
Policy Recommendations regarding Regional Organizations (ECOWAS and WAPP)
- Assess Potential and Suppressed Demand > Initiate a study on the impact of domestic and regional price increases on potential and suppressed gas demand in ECOWAS member states.
Nigeria is the eighth-largest natural gas reserve holder in the world and the largest in Africa. The country has proven reserves of 180 trillion cubic feet (Tcf) that are projected to supply gas for 100 years. In addition, Ghana has proven reserves of 800 billion cubic feet (Bcf), and Côte d’Ivoire has proven reserves of 1 Tcf. Unlike oil, gas reserves are largely unexplored, leaving a strong possibility of significant discoveries in member countries of the Economic Community of West African States (ECOWAS). In Nigeria, experts estimate that unexplored reserves could amount to 600 Tcf.
Policy Recommendations regarding National Governments of ECOWAS Member States
- Manage and Simplify the Expanding Bureaucracy > Encourage the establishment of country-level Task Forces to evaluate the natural gas regulatory institutions within each country and consider changes to streamline their roles and responsibilities and increase institutional efficiency. > In Nigeria, enable oil and gas rights to be negotiated and awarded within a single contract.
- Spur Domestic Resource Mobilization > Allocate a greater percentage of pension funds for gas sector-related projects, particularly as Nigeria undergoes pension fund reforms enabling investment in alternative sectors.
- Develop Pipeline Network > Increase investment in spur lines (extensions from central gas pipelines) to expand infrastructure to domestic regions not currently connected to the gas grid.
Limited access to gas, coupled with an unreliable supply of gas, discourages the establishment of new business and forces existing businesses to rely on other forms of energy. For example, in 2013, Nigerian businesses and individuals reportedly spent N3.5 trillion on backup generators, and in 2015, Ghanaian businesses suffered rolling blackouts that stalled economic output. Insufficient power supply costs the region in lost productivity—a cost that will only be compounded if gas supply cannot keep up with demand. These shortages may become more costly as industrial demand grows from 13% of total electricity demand to 45% by 2030. In order to meet demand, West Africa will need to attract substantial amounts of foreign investment; however, the existing regulation of the industry is stonewalling investors’ commitment.
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180 Tcf
Nigeria’s Proven Reserves
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600 Tcf
Nigeria’s Estimated Potential Reserves
Unlike oil production, natural gas development requires a long-term, committed buyer even before the investment in infrastructure is made. This is because gas cannot easily be put on the international market. Such long-term investment commitments can be difficult to incentivize in West Africa due to economic, political, and security risks, such as commodity price shocks, uncertainty around the Nigerian Petroleum Bill, and instability in the Niger Delta. Furthermore, if a company decides to invest, barriers to entry and bottlenecks including sustainable financing, infrastructure operations and security, and the existing regulatory structure impede the ease of doing business.
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800 Bcf
Ghana’s Proven reserves
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5 Tcf
Ghana’s Estimated Potential Reserves
If harnessed, West Africa’s extensive gas reserves could help meet the region’s existing and future energy demands. An indicator projecting the increase in energy demand is the population growth rate. Sub-Saharan Africa is expected to see a population increase of 1 billion by 2050; but the region produces the same amount of energy as Belgium for approximately 960 million more people. These numbers suggest that energy demand will increase significantly as populations expand and move higher in the economic ladder. Some experts posit that electricity demand could increase as much as fourteen fold by 2050.
