Infrastructure investor May 2008 - Simon Griffiths

infrastructure investoroil and gas specialReutersRenewed energy forhydrocarbonsOil and gas reserves continue to dominate Africa’s export industry. Bénédicte Châtel revealsthe extent of large-scale exploration and development on every corner of the continentBenita Ferrero-Waldner’s “top priority” isdiversifying the European Union’s sourceof energy. The EU’s External RelationsCommissioner wants to start with gas,and with good reason: Europe today sources onequarter of its needs from Russia.If one does not look east for hydrocarbons,then one needs to search south, and north Africais the first port of call. In Algeria, work on themuch-delayed, eight billion cubic feet per yeargas Medgas pipeline to Spain started in March. Itis scheduled to begin transporting gas from BeniSaf by 2009. Algeria’s state-run Sonatrach, has a36% stake in Medgas, Spanish energy companyCepsa 20%, Spanish utilities Iberdrola andEndesa 20% and 12% respectively, and Gaz deFrance 12%.Neighbouring Libya launched in December itsfirst gas-focused exploration licensing round. Itaims to raise production to 3bn cubic feet perday (cfd) by 2010, with a potential for 3.8bn cfdby 2015, up from 2.7bn cfd now. It awardedpermits to Russia’s Gazprom, Algeria’s Sonatrachand Poland’s PGNiG. Royal Dutch Shell,Occidental Petroleum and United Arab Emiratesfirm Liwa, will undertake seismic surveys in theSirte Basin.And after a 30-year absence (and a year oftalks), BP made a comeback with an initialexploration budget of US $900m, while Germanenergy firm RWE will spend $76m to drill twoexploration wells.Sub-Sahara sniffs opportunityFurther south, the smell of gas persists. Nigeriahas the world’s seventh-largest reserves ofnatural gas (180tr cubic feet), of which much(2.5bn cubic feet) is being flared. PresidentUmaru Yar’Adua is in talks with his Algerian andNigerien counterparts to build a pipe transportinggas from Nigeria to Algeria and across theMediterranean, although investors still have to befound. But Nigeria is very much under pressurefrom Russia’s Gazprom, which is pushing hard forWith a barrel above thehistoric level of $100, thescramble for African crudeoil is greater than evera way into the market so as to keep a dominantgrip on Europe’s gas supplies: it hopes to finalisea $1-2.5bn gas exploration deal with Nigeria bythe end of May.Production-wise, a sixth unit at Nigeria’slargest natural gas export plant was inauguratedin January 2008, lifting annual shipments by afifth to 22m tonnes. The $1.6bn unit, controlledby Shell, Total, Eni unit Agip and state-run NigeriaNational Petroleum Corp (NNPC), took threeyears to build and should raise annual sales ofliquefied natural gas (LNG) from the wholecomplex on Bonny Island to about $6bn.Equatorial Guinea has just reached anagreement with Texas-based Marathon Oil, andJapan’s Mitsui and Marubeni to push ahead withexpansion of the Punta Europa gas plant, justoutside of Malabo. Germany’s E.ON and Spain’sUnion Fenosa are to be included in theconstruction of a second train at the $1.5bnplant, which shipped its first LNG cargo last yearand currently produces some 3.4m tonnes a yearof LNG, which is sold exclusively to the UK’s BGGas Marketing under a 17-year agreement.Even further south, in Angola, Chevron, Total,BP, Eni and Sonangol will build a LNG project thatwill treat 5.2m tonnes per year of LNG andproduce approximately 300bn cubic meters ofgas per year for export to the Gulf LNG Energyregasification terminal, which will be built inMississippi, USA.Nigerian crude sets the agendaWith a barrel above the historic level of $100, thescramble for African crude oil is greater thanever. At an energy conference in Cape Town inMarch the executive president of China Petroleumand Petrochemical Industry Association, ZhimingZhao, talked of wanting “to increase the imports,the oil and gas from Africa, from 35% to 40% inthe next five to 10 years”. Since 2004, $30bnhas been spent by Beijing in Africa’s oil and gasindustries: in Nigeria, where the three majorChinese companies are currently operating66