Keywords: Africa, natural gas resources, Mozambique, Tanzania, shale gas potential, environmental risks

The last decade has seen significant changes in the global natural gas market. An important factor influencing its configuration was the development of shale gas resources in the United States, and then in China. The so-called "shale revolution" has become a challenge for global producers of gas from traditional sources. Recent studies have shown the presence of large shale gas reserves in several countries of the African continent. Another significant event was the discovery of unique natural gas deposits on the shelf of two East African states-Mozambique and Tanzania.

Africa's role in the global natural gas market was significantly strengthened in the 2000s. This fact was noted by the International Gas Union (IGU), which unites more than 80 countries, including 10 African ones. According to forecasts presented by the head of the IGS, Jerome Ferrier, as a result of a significant increase in proven gas reserves in Africa in the 2000s, its production and export volumes may double by 2035, to 400 and 230 billion cubic meters, respectively.¹

"The development of the gas industry is a real source of opportunities for Africa and is a major driver of development on the continent," says Zh. Ferrier ². This is all the more important because, according to experts, natural gas will serve as an intermediate fuel for several decades before switching to low-carbon energy, and the demand for gas in Africa, Asia and Latin America may increase by 60% by 2040.

Global oil and gas corporations are showing great interest in developing African fields and creating an appropriate export infrastructure. In addition to the African and European oil and gas giants, companies from China (CNPC, CNOOC, Sinopec), India (ONGC), the Republic of Korea (KNOC), Malaysia (PETRONAS), Thailand (RTTER), as well as Russia's Gazprom are gaining their positions in the hydrocarbon sector of the African economy.

MAJOR PLAYERS IN THE AFRICAN GAS MARKET

Algeria, Nigeria, Egypt and Libya continue to be the most significant participants in the African natural gas market. However, the last two countries have seen a decline in gas exploration and production since 2010 due to the unstable political situation, as well as the decommissioning of a number of infrastructure facilities (see Table 1).

African Governments strive to make better use of the unique natural resources they possess. Particular attention is paid to reducing the proportion of gas flared. First of all, this applies to the countries of West Africa, where most of the gas reserves are associated with oil. There are examples of regional gas cooperation, including the West African Gas Pipeline (WAGP), which supplies Nigerian gas to Benin, Togo and Ghana. It may be extended to Cote d'Ivoire ³.

There is a tendency to increase the share of gas in the energy balance of African countries. It is increasingly used as a fuel for power generation and as a raw material for the chemical industry. The leaders of gas-producing countries pay great attention to developing a strategy for the development of the gas sector of the economy.

For example, the activities of companies in the hydrocarbon sector-

Table 1

Dynamics of commercial gas production

Source: BP Statistical Review of World Energy. L., June 2015. P. 22.

The Algerian climate is regulated by a special Carbon Act of 2005, which was amended in 2013. According to this document, tax incentives are introduced to attract investment for the exploration and development of traditional and shale gas deposits, deposits on the shelf, with complex geology and in areas with undeveloped infrastructure. However, the amendments did not affect the state-owned company Sonatrach's share in joint ventures (at least 51%). The latter owns approximately 80% of the country's hydrocarbon production.⁴

According to Sonatrach experts, two-thirds of Algeria's territory remains poorly explored for the presence of raw materials. However, in the part where the main consumers are located, the country has an extensive network of gas pipelines, providing 60% of energy needs in general and 90% of electricity production.

Nigeria, like Algeria, largely relies on the use of gas as a fuel for generating electricity for its energy future, given that its territory contains more than 60% of the proven gas reserves of sub-Saharan Africa. However, the problem lies in their efficient use. In 2011, Nigeria launched the Gas Revolution Master Plan, a program aimed at maximizing the reduction of gas flared, which was not fully implemented due to a lack of investment in the necessary infrastructure. The project to build a trans-Saharan gas pipeline through Niger and Algeria to Europe has not yet found funding.⁵ The current plan - Nigeria's Roadmap for Power Sector Reform-aims to direct natural gas to generate 20 GW of electricity by 2020, which will require doubling the amount of resources used for domestic consumption. This roadmap is aimed, as experts believe,at addressing the root causes of low efficiency in the energy sector by regulating tariffs and improving the financial situation, attracting private investment, and improving the management of the industry. ⁶

TRADE PROSPECTS

Nigeria and Algeria are among the ten largest exporters of liquefied natural gas (LNG) on the world market, receiving a significant part of their budget revenues due to this. Algeria is a competitor of Russia in the European market, providing about 30% of the region's needs for blue fuel, while Russia - about 40%. It is to Europe that almost all of Algeria's export gas is sent, both in tankers and via three pipelines laid across the Mediterranean Sea to Spain and Italy. However, supply volumes have declined from the record level reached in 2005, driven by falling demand and lower prices for long-term contracts, as well as the need to meet growing domestic consumption7.

Experts are studying the possibility of diversifying the country's trade by entering the Asian direction (China, India, Japan), while not abandoning negotiations on laying a new branch of the pipeline to Italy.

Unlike Algeria, Egypt is gradually moving from being a gas exporter to an importer. Energy consumption is growing faster than its production. The country is experiencing an energy crisis and needs to develop measures to overcome it. Negotiations are underway with Israel, Cyprus and Russia on gas supplies.

Nigeria has performed well in the Asia-Pacific (APAC) market (more than 50% of total exports), especially after shipments to the United States were cut off as a result of falling demand. Among the main buyers of Nigerian LNG are Japan, the Republic of Korea, India, and China. The second most important consumer is Europe (about 30% of deliveries), represented by Spain, France, and Turkey. Other importers include Latin America, Mexico and the Middle East.

The Nigerian liquefied Natural gas facility, operated by Nigerian LNG, is located on Bonny Island in the Niger Delta. Increasing its capacity to 30 million tons per year will make it one of the largest in the world. Experts estimate that his work contributes about ¹% to Nigeria's GDP every year8. The company's shareholders include the Nigerian National Petroleum Company (49% of shares), as well as Shell, Total, and Eni.

Two other African countries - Equatorial Guinea and Angola-are working in this direction. The latter entered the list of LNG exporters in 2013 after the completion of one of the world's most advanced LNG plants, built by an international consortium in the Angolan port of Soyo. 22% of the company's shares belong to the state-owned holding company Sonangol⁹.

It should be noted that such modern high-tech factories as the Nigerian and Angolan ones are very important for the development of the economy of these countries, but so far they represent some enclaves against the background of the depressing situation of many enterprises in other sectors of the economy.

The development of the gas sector in Africa will undoubtedly have an impact on the global LNG market in the future. Between 2008 and 2014, the continent's liquefied natural gas production capacity increased by 14%, and by 2018 it may exceed 70 million tons per year, which corresponds to approximately 18% of the world's volume. Ambitious plans to put new plants online by ^2018-2020 are being developed in Nigeria, Mozambique, Tanzania, and (albeit on a smaller scale) Egypt, Equatorial Guinea, and Cameroon10.

SURPRISES OF THE EAST AFRICAN SHELF

In recent years, the attention of global oil and gas corporations has been drawn to the area of the Indian Ocean off the coast of East Africa, where many large natural gas discoveries were made on the ocean shelves of Mozambique and Tanzania in 2010-2013, which put this region among the potential leaders of the global gas market (see map).

The first successful surveys were conducted by the American company Anadarko in 2010 in the northern shelf zone of Mozambique near the coast of the province of Cabo Delgado, followed by several more discoveries. A large Mamba field was discovered by the Italian company ENI. Currently, recoverable reserves on the Mozambique shelf are estimated at 3-4 trillion cubic meters.

British companies BG Group and Ophir Energy, as well as Norwegian Statoil and American ExxonMobil, have discovered gas deposits estimated at about 1.3 trillion cubic meters in the southern shelf zone of Tanzania, where this geological structure extends.

In general, the recoverable reserves of "blue fuel" on the shelf of East African countries are estimated at 5-7 trillion cubic meters. m. However, exploration of resources continues, and some experts believe that the natural gas reserves of this basin may exceed 12 trillion cubic meters. m. Over the past decade, no region in the world has made such sensational discoveries ¹¹.

Major oil and gas monopolies in the world compete for the right to create infrastructure in this region for the production and liquefaction of gas for export. Potential buyers may be the countries of the Asia-Pacific region, which account for 70% of its global imports. Although in this market segment, African exporters will face strong competitors in the face of Australia, Qatar, Indonesia, and Malaysia.

African states that have become owners of such promising deposits are faced with a choice - how to use their resources: as a source of foreign exchange earnings or direct them to the development of their own country's energy sector. If Mozambique, with its huge, though not yet fully certified reserves, can develop both directions, then Tanzania intends, first of all, to direct gas to meet domestic needs.

Both countries have started to develop strategies in this segment of the economy. Mozambique has developed a Master Plan for the development of the gas industry( Gas Master Plan), according to which the annual additional income can reach $5 billion. The Mozambique Petroleum Institute is working on a gasification strategy for the country. The national hydrocarbon company Empresa Nacional de Hydrocarbonatos de Mocambique (ENH) has the right to issue licenses for the exploration of oil and gas masternodes, as well as participate in their evaluation ¹².

Tanzania's National Gas Policy, adopted at the end of 2013, is being implemented in Tanzania, according to which priority is given to ensuring domestic consumption. About-

Map. Major gas fields and infrastructure in Mozambique and Tanzania.

Source: Africa Energy Outlook. OECD/IEA. Paris, 2014. P. 155.

gas producers are required to sell some of their products on the domestic market.

The first results are already available. Mozambique is developing infrastructure for future gas liquefaction near the ports of Pemba and Palma. In Tanzania, the existing offshore gas pipeline was extended, and gas from fields in the south of the country was delivered to consumers in Dar es Salaam in the summer of 2014. Over time, all industrial and municipal facilities will be connected to gas supply, which will reduce the import of expensive diesel fuel. Residents of the capital hope that the gas will help reduce the use of charcoal, which leads to mass deforestation.

SHALE GAS POTENTIAL

The discovery of natural gas deposits on the shelf of Mozambique and Tanzania occurred at the same time when active development of shale gas resources began in the United States and then in China, which raised a number of questions for world (including African) producers of gas from traditional sources.

According to experts, African LNG exporters to the American market have lost about $1.5 billion since the start of shale gas production in the United States. The situation may be worsened by China's planned reduction in natural gas imports by 2020 due to an increase in its own shale gas production in the amount, according to various forecasts, from 60 to 100 billion cubic meters. And Egypt, Nigeria, Algeria, Angola, and Equatorial Guinea, which export LNG to China, may feel the negative effects of these changes.¹³

In 2013, experts from the American Energy Information Administration investigated oil shale formations in 41 countries and assessed the prospective volumes of shale gas production at the current level of technology. According to preliminary data, the African continent contains 15% of the world's resources of this type of fuel, suitable for commercial extraction.¹⁴

Based on these forecasts, as well as data from national African companies, the African Development Bank (AfDB) analyzed possible changes in the market for gas from traditional and non-traditional sources in order to determine the direction of investment in projects for the development of hydrocarbon reserves. Among the countries of the African continent that are promising for shale gas production in this study are the countries located in the north - Algeria, Egypt, Libya, Tunisia, Morocco, Western Sahara, Mauritania, and in the south - South Africa (see Table 2).

To develop a strategy for the development of shale gas resources, the AfDB identifies a number of groups of state-owned enterprises.-

Table 2

African countries with natural and shale gas reserves (trln cu m, 2013)

* Rating.

Составлено по: Technically Recoverable Shale Oil and Shale Gas Resources: An Assessment of 137 Shale Formations in 41 Countries outside the United States. IEA. U.S. Department of Energy. Washington. June 2013.

donations. One group includes the main producers of gas from traditional sources - Algeria, Libya and Egypt, which also have large recoverable shale gas reserves. These countries, in addition to their experience in the organization and management of the gas industry, have developed infrastructure that can be used for the production and transportation of shale gas.

Algeria has the largest potential for this type of fuel on the African continent, which ranks 3rd in the world after China and Argentina in terms of the current volume of recoverable reserves. For commercial mining, taking into account all costs, you can use about a fifth of them. As already noted, the tax legislation of the country was amended to attract foreign investors to explore open deposits. According to the management of the national company Sonatrach, shale gas production in the country is planned to begin after 2020. Moreover, several pilot wells have already been drilled in the fields near the Ain Salah oasis.¹⁵

However, the local population opposes the start of full-scale work. It insists on thorough research of the environmental consequences of the "shale revolution", fears that too much water resources are being spent in the region, as well as pollution of the environment with toxic waste when using hydraulic fracturing of shale formations.

Opportunities for shale gas production and use are also being explored in Egypt. In 2015, the Egyptian General Petroleum Corporation, together with the American Apache Corporation, conducted a test drilling at the Amon field in the Western Desert, where 4 geological basins with the presence of shale gas resources were identified. A number of foreign companies, in particular Shell, show great interest in continuing geological exploration in this region16.

ENVIRONMENTAL RISKS

AfDB experts believe that in the countries of the "second group" - such as Tunisia, Morocco, Mauritania and South Africa, which do not have large proven resources of traditional gas, there are promising shale gas reserves. Thus, in South Africa, significant reserves of such gas were found on the Karoo Plateau - the initial estimate of technically recoverable resources here is 10.9 trillion cubic meters. However, commercial reserves, according to the Petroleum Agency of South Africa, are several times less than ¹⁷.

Experts believe that when developing shale gas deposits, the Republic of South Africa will have to face such problems as the lack of an extensive network of pipelines and necessary equipment, and a shortage of water resources in the arid regions of the Karoo basin. In addition, a number of environmental organizations oppose the implementation of such projects.

Until September 2012, the country had a moratorium on shale gas development, which was then extended for another two years, due to the need to assess environmental risks. In 2013-2014, the Government of South Africa developed a number of laws that would place the management of this segment of the economy under State control. President of South Africa J. P. MorganZuma, in his annual address to Parliament, stressed the need for a balanced use of various types of energy, including shale gas, and always "...within the framework of strict environmental laws " ¹⁸.

In the neighboring countries of South Africa - Botswana, Zimbabwe and Namibia-the presence of gas in shale rocks is also confirmed, which in the future opens up opportunities for these states to meet growing energy consumption.

The Ministry of Natural Resources of Botswana in 2014 announced the development of a state strategy for the development of gas reserves. South African and Australian companies are actively involved in the research on the basis of partnership agreements. However, a number of public figures in the country oppose permission to develop gas deposits in the Kalahari ancestral lands and demand a thorough discussion of this problem. They believe that this kind of activity will lead to a violation of the balance of the unique nature reserve, which is also home to a large population of elephants.¹⁹

AfDB experts believe that in all African countries, when making decisions regarding shale gas production, it is necessary to assess the extent of possible environmental damage with particular care. In some cases, it may be more appropriate to use renewable energy sources in order to preserve the nature of Africa with its unique flora and fauna. The AfDB recommends that leaders of the continent's States develop evidence-based master plans for the development of the energy sector when defining their economic strategy. The Bank expressed its readiness to provide loans to countries for the preparation of such plans, the core of which should be to minimize environmental risks.

Russian companies (and Russia currently ranks 9th in the world in terms of shale gas reserves) need to take into account the possibility of African producers entering the world market in the future.

Expanding the participation of Russian capital in the implementation of African gas projects will provide African countries with greater investment choice and at the same time allow Russian companies to reach new partners. Unfortunately, a number of joint projects in the hydrocarbon sector have not been implemented. However, business visits of delegations from a number of African countries to Moscow in 2014, including gas-producing countries (Algeria, Angola, Egypt, Mozambique), allow us to hope for a new partnership.

* * *

Recent research shows that the subsurface resources of the African continent are still insufficiently studied, and its role in the hydrocarbon market is increasing. The main task is the rational and efficient use of already known and newly discovered resource resources. Foreign corporations involved in the development of the continent's hydrocarbon reserves are primarily interested in exporting them and making super-profits. African States, in turn, should seek to use international partnerships that are tailored to their interests through regulatory, financial and other levers.

The growing population and domestic market in Africa requires an increasing use of natural gas to meet domestic energy needs, rather than just expanding its trade to generate export revenues. Therefore, the strategy for the development of the gas sector needs to find ways and opportunities for its integration into the domestic and regional economy. For example, the development of petrochemicals and the production of fertilizers for agriculture based on gas raw materials, the creation of an extensive infrastructure to provide fuel for energy facilities.

It is important to expand the practice of building gas pipelines connecting African countries. Moreover, such systems are already in operation in the Gulf of Guinea and South Africa. Only intraregional integration will allow the continent's countries to implement major gas projects at this stage of development.

¹ Natural Gas in Africa: the Frontiers of the Golden Age - www.apo-mail.org/Natural Gas in Africa_285ep2012.pdf

² ITAR-TASS. 8.11.2013.

³ Natural Gas in Africa...

⁴ BP Statistical Review of World Energy. June 2015 - www.bp.com/content/dam/bp-country/fr_ch/PDF/bp-statistical-review-of-world-energy-2015- full-report.pdf

⁵ Oil and Gas in Africa. Reserves, Potential and Prospects of Africa - http://www.kpmg.com/Africa/en/IssuesAndlnsights/Articles-Publications.General-Industries- Publications/Documents/Oil and Gas in Africa2014.pdf

⁶ Harnessing African Natural Gas. The World Bank - www.gsb.uct.ac.za/files/HarnessingAfricanNaturalGasFinal.pdf

⁷ BP Statistical Review of World Energy. June 2015 - www.bp.com/...

⁸ Facts and Figures on NLNG 2015 -www.nigerialng.com/publications/Facts_and_figures_2015.pdf

⁹ ITAR-TASS. 19.07.2014.

¹⁰ International Gas Union. World Energy Report. 2014 Edition - http://www.igu.org/igu-publications/LNG Report2014.pdf

¹¹ World Energy Outlook. Special Report. OECD/IEA. Paris, 2014. P. 156.

¹² East Africa: the Newest LNG Frontier -http://www.lngindustry.com/liquefaction/10032014/East_Africa_as_...

¹³ China Shale Gas Boom Will Hit Poor African Exporters Hard - http://america.alga-zeera.com/articles/2014/5/7/China-fracking-africa

¹⁴ Shale Gas and its Implications for Africa and the African Development Bank. AfDB. Tunisia, 2013.

¹⁵ ITAR-TASS. 8.12.2014; 21.01.2015.

¹⁶ http://www.thecairopost.com/news/119240/business/apatche-pumps...

¹⁷ South Africa. Country Analysis Brief Overview. EIA. 2014 - http://www.eia.gov/countries/counyry-data.cfm?fips=sf

¹⁸ ITAR-TASS. 18.06.2014.

¹⁹ Botswana Faces Questions over Licences for Fracking Companies in Kalahari // Guardian Report. 18.11.2013 - http://mg.co.za/article/2013 - 11 - 18-botswana-faces-questions-over-1...

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