Gas supply shortage from Nigeria, others poses risks to Europe

With African gas exporters including Nigeria, Algeria, Angola and Libya considered to have medium to high political risks levels, analysts have said that Europe would have to contend with gas supply shortfalls and rising costs from producing nations in Africa in the near future.

Aside from the political instability and production inefficiencies in the supplier nations in Africa, the increasingly competing demand from Asia would increase the likelihood of gas supply disruptions in Europe, and result in a risk premium that will be priced into European gas markets.

It will also make Europe’s gas market more like oil, which often sees price spikes due to security problems in Africa and the Middle East.

A report on African natural gas from Ernst & Young flagged high security risks in Algeria, Angola, Libya and Nigeria, and said that overall risk levels in all African countries with major natural gas export potential were either moderate or high.

Gas supplies to Europe will become less reliable as much of its new demand in the coming decade will have to be met with gas from politically unstable countries in Africa, Reuters reports.

Europe’s gas demand is expected to rise by around 20 percent to 580 billion cubic metres (bcm) per year in the next 10 years as economic growth returns and governments plan to switch from coal to gas for power generation.

 By: FEMI ASU