By NJ Ayuk, Executive Chairman, African Energy Chamber (www.EnergyChamber.org

The global energy marketplace is shifting toward the acceptance of natural gas as a pivotal component in the transition to cleaner energy solutions, and rightly so.  

Africa, with its vast untapped gas reserves, has significant opportunities in the global liquefied natural gas (LNG) trade, a market that has quadrupled over the past few decades. However, a host of challenges shadow this potential and threaten to impede its realization.  

In our recently released 2025 Outlook Report, The State of African Energy, the African Energy Chamber (AEC) covers the dynamics of Africa's involvement in the LNG sector, exploring both the potential gains and the inherent risks. 

Promise on the Horizon 

Africa's natural gas reserves are substantial, accounting for approximately 6% of global gas supply, with an expected growth of about 15% by 2030. This growth, albeit modest compared to other regions, underscores Africa's overall LNG potential, considering that global gas demand is projected to increase at a compound annual growth rate (CAGR) of 1.5% until 2030 and LNG represents approximately 10-15% of that demand.  

As covered by our report, an additional 1,000 billion cubic meters (bcm) of supply from pre-final investment decision (FID) projects will be needed to meet the anticipated 2030 demand, and African nations are poised to fill this need. Countries like Mozambique, Nigeria, Senegal and Mauritania are positioned to contribute the most. Mozambique, for instance, is on the brink of becoming a major LNG exporter with projects like Mozambique LNG, which, once operational, could significantly boost the continent's LNG export capacity. 

The strategic geographical advantage of Africa cannot be overstated. With close proximity to both the European and Asian markets, African LNG could easily find buyers seeking to diversify their energy sources, particularly in Europe, which has been looking for alternatives amid fluctuating relationships with traditional suppliers like Russia. This strategic positioning presents a unique opportunity for Africa to not only expand its economic base through energy exports but also to accelerate local industrial and infrastructural development. 

Economic and Environmental Benefits  

The economic benefits of LNG development in Africa are numerous. Job creation, both in the construction and operational phases of LNG projects, would stimulate local economies and offer new employment opportunities to thousands. Furthermore, the revenue generated from LNG exports could be transformative, potentially funding social programs, improving and expanding healthcare services, education and public infrastructure.   

Nigeria, for example, has already benefited from its LNG revenues, enhancing its industrial capabilities around gas-related industries as evidenced by a 45% reduction in gas flaring and a massive 260% increase in production since 2000.  

As a more specific example of such benefits, the Nigerian LNG company Nigeria LNG Limited (NLLNG) co-funded the 34-kilometer Bodo-Bonny Road project, committing to 50% of the project’s funding - an amount totaling N60 billion. NLLNG also worked with the Nigerian Conservation Foundation to preserve the Finima Nature Park on Bonny Island. 

Continuing on the environmental front, while natural gas is admittedly not an emissions-free fuel source, it is significantly cleaner than coal or oil, offering a transitional pathway toward more sustainable energy practices. Increased adoption of natural gas will help countries in Africa reduce their dependence on more polluting fuels, shrink their current carbon footprints, and get them closer to their climate commitments. However, delivering on these benefits depends on the implementation of stringent environmental standards to mitigate methane leaks, which have a higher potential for negative impact compared to carbon dioxide (CO2). 

Navigating Through the Risks 

Despite the great potential of a much larger African presence in the global LNG trade, several risks darken the doorway to an otherwise brighter future. 

The security of LNG production and distribution sites as well as the overall political stability of their host nations are two of those risks. The development of LNG projects in Mozambique, for example, has been significantly delayed due to insurgency and civil unrest. Such security issues extend project timelines, increase costs, decrease investor confidence, and deter future investment. 

Issues concerning regulation and financing present additional risks. Many African countries inadvertently promote regulatory uncertainty, which unnecessarily complicates project approvals and amplifies the financial risk for investors. Securing financing for these large-scale projects is already enough of a hurdle, especially when international investors are wary of the political and economic stability of the region.  

The likelihood of remaining competitive is another concern. With North America, Russia and the Middle East leading in gas supply growth, Africa's LNG industry could face difficulty in finding a secure foothold in the competitive global market. There's also the risk of market oversaturation, where supply outpaces demand, which could lead to lower prices or stranded fossil fuel assets. 

The lack of adequate infrastructure for both export and domestic use of LNG presents another barrier to success in this arena. Projects under consideration like the West African Gas Pipeline and the Trans-Saharan Gas Pipeline, which would run west from Nigeria to Ghana and north to Algeria respectively, aim to address this deficiency, but they will require immense capital and cross-border cooperation, which can be challenging to secure. 

Finally, there is much to consider regarding Africa’s environmental health. The environmental impact of LNG projects, particularly ones in ecologically sensitive areas, must be managed with care. The global push towards sustainability will also undoubtedly challenge the long-term viability of any fossil fuel projects unless they are paired with significant environmental safeguards or carbon management strategies. 

Strategic Pathways Forward 

To capitalize on their LNG potential while mitigating risks, African nations engaged in LNG production must consider a number of actions to either remedy or prevent fallout from these issues. 

Improving security environments and governance structures will be crucial to attract and retain investment. This includes transparent legal frameworks and active community engagement. To support a much greater role in the global market, Africa’s LNG producers must ensure that addressing political instability and boosting site security become and remain top-tier initiatives. 

In addition, diversifying export relationships, rather than relying on a single market, should help ensure continued income streams that can withstand guaranteed but unpredictable market fluctuations. Similarly, developing more localized natural gas markets can foster a greater degree of self-sufficiency when it comes to both financial and energy security. 

To acknowledge and address environmental concerns, both current and prospective LNG projects must incorporate environmental sustainability through investments in carbon capture and storage and/or through local renewable energy projects that run alongside LNG production developments. 

To not only secure the necessary funding, but to also bring outside LNG production expertise to the negotiating table, African LNG producers must do the work to establish strategic partnerships with foreign nations and form enthusiastic alliances with international LNG firms. 

Lastly, looking beyond the establishment of LNG production facilities, garnering investment in comprehensive infrastructure like pipelines, ports and local distribution networks is also essential. Achieving this balance can serve dual purposes in supporting both future exports and domestic energy needs. As detailed in our 2025 Outlook Report, the next decade will be critical in determining whether Africa can turn its LNG potential into a sustainable reality that benefits all stakeholders involved. 

Taking a realistic look at Africa's current position in the global LNG market means acknowledging that it is marked by both promise and the potential for peril. The African continent definitely has what it will take to become a significant player, and by following through, African LNG producers could contribute greatly to both the continent’s economic growth and the global energy mix.  

This outcome will require careful navigation through a complex web of political, economic, environmental and market-related challenges. But with strategic foresight, robust governance, and a commitment to sustainability, Africa can harness its natural gas resources not just for export but for the further development of its nations according to many overall quality of life indicators.  

For more information on this topic and others, access The State of African Energy 2025 Outlook Report at https://apo-opa.co/42POwX2.