Why Africa?

WHY  AFRICA?

Africa has rich energy resources, with 8% of the world’s proven oil and natural gas reserves. This is without considering alternative sources such as hydropower or its solar potential. Yet roughly 60% of Africans lack access to electricity; about 70% have little choice but to use firewood or other biomass for cooking.

As the International Energy Agency (IEA) observes in August 2014, Africa is “resource rich but modern energy poor”.

One problem is the uneven distribution of Africa’s resources. Eighty-five percent of proven oil reserves lie in just a few countries: Algeria, Libya, Nigeria and Angola. Over 90% of Africa’s gas is found in Algeria, Libya, Nigeria and Egypt. Underinvestment is another barrier. The IEA estimates US$385bn would be needed to provide universal access to electricity in Sub-Saharan Africa by 2030.

With oil production concentrated among a few big exporters, most Countries will have to turn to imports. African oil consumption will expand by little more than 1% per year until 2035, according to the IEA.

Gas however is a different story. Large offshore discoveries in Mozambique and Tanzania will help the continent’s gas production to double by 2035. This new output will go towards supplying Asia’s hunger for liquefied natural gas (LNG). But Africa’s own gas consumption will also expand robustly, growing at 2.6% per year as demand from the electricity sector picks up.

As of October 2018, according to Africa-Energy, some 633 East African projects are supplying 16,823MW, with a further 10,854MW (60 projects) under construction and another 43,428MW (485 projects) in planning stages.

Wentworth is pursuing a focused East African Domestic gas strategy to exploit a significant demand driven landscape primarily in Tanzania and Mozambique but also East Africa as a whole.

Exploration started along the East African margin in the late 1940’s – early 1950’s, dominated by several of the majors and a few large North American independents, chasing the oil plays of the Middle East southwards into Africa. In Tanzania, Shell and BP drilled 3 wells in onshore coastal settings, all encountering shows of oil and/or gas. In Mozambique Sasol discovered the Pande gas field in 1956, with ca. 2.6 Tcf of reserves, though due numerous reasons it was not in production until 2009.

The 1960s saw some diversification, with heightened activity in Mozambique resulting in the Buzi (1962) and Temane (1967) gas discoveries in Mozambique. Post-independence politics and uncertainty in Tanzania suppressed Exploration activities, and there was no further regional success until the discovery of Songo-Songo gas field in 1974 by Agip-Amoco which only commenced production in 2005. Wentworth’s Mnazi Bay field was discovered in 1982 by Agip (ENI) through the MB-1 well. Furthermore, civil war and political unrest also affected activity in Mozambique.

Tanzanian & Mozambican drilling activity over the last decade has primarily focused offshore where some 200Tcf of gas reserves have been discovered by Shell, Equinor, Ophir, ENI and Anadarko.

Material onshore basins and plays remain relatively immature in terms of Exploration but potentially able to supply the near to mid-term surging demand needs for power in both countries. Wentworth is currently focused on the onshore Rovuma basin.

 

Tanzania

According to the BP Statistical Review of World Energy (2018) Africa is forecast to double in urban population increase over the next 25 years to 2040, versus the last 25 years. Tanzania is a country of ca. 52 million people, a little smaller than the UK population of 66 million but ca. four times the geographical area.

Dar es Salaam in Tanzania in particular, is forecast by the Global Cities Institute to have ca.73 million inhabitants by 2100 from just c.5 million today, third only to Lagos and Kinshasa in Nigeria and the Democratic Republic of Congo respectively.
In terms of the Economy, 2017 GDP was US$51Bn up 7.1%, with growth up 7% for last decade (per National Bureau of Statistics) and this trend is forecast to continue. According to the Bank of Tanzania Domestic gas has the potential to add 2% to the current growth rate.

Wentworth, through the Mnazi Bay Joint Venture, currently supplies over 50% of Tanzania’s Gas to Power needs.

Tanzania has approximately 1,700MW of installed generating capacity – less than 25 per cent of the population have access to electricity. Natural Gas (H2 2018) contributes c.52% of power to the National grid- equivalent to 884 MW. For comparison UK energy use is ca. 2,500 Twh (1 Twh is ca. 114 MW for one year).

Unusually for Africa, key midstream infrastructure is in place, with a 548kms 36” transnational pipeline from Mtwara (Mnazi Bay) to Dar es Salaam able to deliver up to 765 MMscfd and currently only ca. 10% utilised.

The benefits of Gas in Tanzania are profoundly impactful and sustainable. A recent report by the Tanzanian Petroleum Development Corporation (TPDC) shows local factories using natural gas as a source of energy saved up to US$1.1 billion between 2004 and 2017. Demand for industries to be connected is high, with Companies providing funding for constructing infrastructure to their plants and being refunded through operational returns.

The Tanzania Electric Supply Company (Tanesco) is a major consumer and buyer of natural gas, taking on average 90 MMscfd. Since 2004 some 360 Bscf have been consumed to generate electricity saving ca. US$9.7 billion had the country imported fuel.

Tanzania DomGas  demand 2018-22 (source TPDC 11/18)

Mozambique

In Mozambique we are currently focused on securing optionality to grow our onshore Rovuma basin position through near term gas monetisation projects, in the shadow of the world class offshore LNG discoveries made by ENI and Anadarko in Area 4 (FLNG) and Area 1 (Palma LNG) respectively.

Per the IMF World Economic Outlook for Autumn 2018, Mozambique’s economy is expected to grow at a rate of 11.1% by 2023, by which time the offshore major LNG projects will be in production. Until that point the Mozambican economy is expected to grow at rates of 3.5% and 4.0% in 2018 and 2019 respectively.

As a result of the offshore LNG discoveries moving to production and monetisation, Mozambique is expected to have enough offshore gas reserves to become the world’s fourth largest LNG exporter.

There is a nascent but material Domestic Gas landscape opportunity that Wentworth through its asset position and unique stakeholder relationships with ENH and INP will look to successful execute and create value from over the coming years.

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