Time to reform West Africa gas markets for increase investments
The international energy agency projected that by 2022, gas demand will grow at 1.6 percent per year. By this, indication are that annual gas consumption may reach 4, 000 billion cubic metres (bcm) with an almost 90 percent of the anticipated growth in demand coming from developing economies.
Although gas markets are approaching saturation in many parts of the developed world, however, consumption will continue to grow as gas use continues to grow in gas-consuming regions in the world.
It is against this backdrop that industry experts have called on managers of the economy in West Africa region to look towards strategic reform in the gas markets if they ever hope to remain competitive.
Reports show that many regions across the globe are reforming their gas markets to increase the use of gas and to attract new investments. A diverse group of countries are moving ahead with important gas market reforms, allowing more private participation in the supply, transport and marketing of gas, and introducing third-party access to gas infrastructure.
Those who know in the industry argue that if implemented rigorously, these reforms can lead to more investments throughout the supply chain and generate more sustainable demand and supply balances.
To them, this practice can expose gas to more competitive pressures in relation to other fuels and technologies, but prices that reflect market fundamentals will also lead more efficient consumption and enhance incentives for investment in new supply.
According to them where there are opportunities to substitute gas for oil, as well as in the industry sector as the region’s economies grow and diversify consumption in West Africa rises even more quickly, at 3.1 percent per year, to reach more than 150 bcm.
In many emerging markets that rely on imported gas, especially those without a price on carbon or strict regulations on air pollution, gas faces very strong competition from coal.
Nigeria remains the main country pushing consumption higher, even though lower hydrocarbon revenues and economic growth hold back demand in some resource-rich parts of the continent.
However in the opinions of industry analysts, concerns about security of gas supply have appeared in some other major producing countries.
They observed that in Nigeria, militant attacks on gas facilities, the absence of political reforms and a lack of investment have led to structural gas shortages. The reduction in gas-fired power generation by 50 percent from recent average levels has deprived millions of power and hurt the economy.
Analysts opine that longer-term risks to gas security could also arise from a shortage of investment in new gas supply infrastructure.
Well-supplied markets in the short term are maintaining downward pressure on prices and discouraging new upstream investment in LNG.
Industry emerges as the main engine of demand growth, accounting for half of the forecast growth in global gas demand. A growing use of gas in the chemical sector, strong demand for fertilizers.
This growth in LNG has been helped by the increased use of floating storage and regasification units, and it will absorb some of the surplus gas on the market. Nonetheless, the growth in LNG demand is not expected to be sufficient to rebalance the LNG market before the end of the forecast period.
KELECHI EWUZIE