Infrastructure will hamper Africa trade agreement impact on LNG for now

Author: Daniel Stemler


MADRID (ICIS)--Infrastructure constraints are set to prevent the Africa Continental Free Trade Agreement from driving intra-African gas and LNG trade in the short-term.

But in the long-term it could potentially encourage the creation of a much larger continental gas market.

Trading based on the Africa Continental Free Trade Agreement (AfCFTA) officially started on 1 January 2021, with the project aiming to boost intra-African trading by creating a single market for goods and services across the continent.

However, AfCFTA is unlikely to have an immediate impact on gas and LNG flows between African countries because most of them still rely heavily on diesel and fuel oil for power generation, while also lacking LNG import infrastructure.

The West African Gas Pipeline has been unable to provide reliable gas supply from Nigeria to Benin, Togo and Ghana for several years.

Despite various African countries announcing ambitious LNG import projects in recent years, none of them have so far come to fruition and continue to face delays.

The one exception is Ghana, where the Tema floating storage and regasification unit (FSRU) project is seemingly close to start operation in the coming months and will supply local power plants with gas, following delays.

Future LNG imports coupled with domestic gas production could even allow Ghana to export gas. Neighbouring Ivory Coast could emerge as the buyer of surplus indigenous gas, according to Nick Branson, director at Gondwana Risk, an Africa-focused consultancy.

Abidjan’s [the largest city in Ivory Coast] power stations provide ready offtakers for Ghanaian gas, which prompted ministers from the two countries to sign a Memorandum of Understanding for a potential gas pipeline before the COVID-19 pandemic struck, Branson told ICIS.

“Since Accra hosts the AfCFTA secretariat, Ghana could potentially position a new pipeline as a flagship energy project for the continental free trade area,” he said.

However, the proposed pipeline would need to cross two national parks, raising environmental concerns, while an offshore version would require a vast capital investment, Branson added.


In the long-term, the key element that will drive intra-African gas and LNG trading is to switch from burning diesel or fuel oil for electricity generation, to gas.

Switching to gas for power generation could accelerate in the coming years across various countries in Africa.

Turkish Karpowership operates several powerships across the continent, including in Senegal, Gambia, Ghana, Guinea Bissau, Guinea, Mozambique and Sierra Leone, which are currently generating electricity by burning low-sulphur heavy fuel oil.

However, Karpowership, in a joint venture with Japanese shipowner Mitsui OSK Lines, is set to embark on an LNG-to-power project in Dakar, Senegal in June.

The project will see Karpowership’s 235MW Karadeniz Powership Aysegul Sultan, which has been operating in the port of Dakar since 2019, link up with a 125,000cbm FSRU and switch from running on low-sulphur heavy fuel oil to LNG.

Karpowership said that it plans to switch its entire fleet of powerships to LNG, which could eventually boost LNG demand across Africa.

Increased demand could potentially result in supply from African exporters such as Nigeria or Angola, creating the kind of internal market that the AfCFTA is aiming to promote.

“Successful implementation of the AfCFTA could provide a much bigger domestic market for gas rich nations on the continent such as Nigeria, Angola to export their gas locally rather than just mainly to the global markets,” said Olumide Ajayi, LNG analyst at ICIS.

The AfCFTA could also prompt the emergence of multiple gas hubs across the continent such as Equatorial Guinea’s Gas Mega Hub, according to Ajayi.

“The Gas Mega Hub which is currently under development is expected to process stranded gas fields from the Gulf of Guinea and also potentially commercialise stranded offshore gas assets in Nigeria and Cameroon.”