Nigeria faces more challenges as Cameroon becomes liquefied gas producer
One of the reliable sources of economic recovery lies on Nigerian exploit in natural gas. But Cameroon has come into the market with its attendant competition…. Read detail:
There is an anxiety that as Cameroon plans joining the league of sub-Saharan African countries producing Liquefied Natural Gas(LNG), there is bound to be competition in the industry.
But the cost of pipelines and onshore liquefaction facilities means that relatively few gas finds have been developed.
However, a new technology has the potential to boost West and Central Africa’s efforts to exploit its vast gas resources by allowing smaller plants to ship gas from less accessible fields.
A specialised vessel owned by Golar LNG will dock offshore Cameroon’s Atlantic coast in the coming weeks for testing.
It will liquefy natural gas produced in nearby offshore fields for shipment directly overseas.
Russia’s Gazprom has the rights to ship the gas to customers in Asia, Europe or South America.
“Deploying offshore liquefaction facilities bypasses some of the difficulties associated with building infrastructure onshore. Sometimes, offshore is simply easier,” said Jean-Baptiste Bouzard, sub-Saharan analyst at Wood Mackenzie.
But those kinds of onshore facilities, which require large refrigeration units and storage tanks that take up acres of land, can be prohibitively expensive.
The dominance of cheap diesel and fuel oil in the region’s domestic power markets also hindered the exploitation of reserves.
“Demand in the region is, at present, insufficient to justify the development of such big gas reserves for domestic consumption only,” CITAC analysts said in a report this month on LNG in sub-Saharan Africa. “Consequently, most projects…are liquefaction units for exports.”
The new offshore vessels will do the same job as the onshore facilities, albeit in smaller volumes, for a fraction of the cost in infrastructure.
Cameroon, Equatorial Guinea and Congo Republic are already developing four such offshore plants. Together they are expected to cost around $6 billion, a price tag comparable to that of some single onshore facilities.
In Senegal, BP is also considering using similar technology to export newly-discovered gas in deep waters there.
The exact volumes produced by the new offshore projects is not yet clear. Cameroon’s project, a joint venture between Golar, Perenco and Cameroon’s state-run SNH, will produce 1.2 mtpa.
Together, the four planned offshore projects are unlikely to produce much more than 7 mtpa of LNG.
But small scale has its advantages. In a market already glutted by a 7.5 percent growth in supply last year, having the cheapest gas will help win customers. A smaller-scale plant could help keep costs down.
Only one other plant like the one in Cameroon currently exists. It went online in Malaysia in March, and the market will be closely watching progress in Cameroon.