- The World Bank supports that African countries that have natural gas resources should maximize them to close their electricity gaps.
- The multilateral lender said that Africa has significant renewable energy potential, but attracting investment is critical.
- Africa’s pursuit of natural gas-based economies will not add any significant addition to its low carbon emitter status.
The World Bank said it supports the use of natural gas and renewable energy technologies in closing Africa’s electricity gaps.
Making this known in its most recent Africa Pulse report, the World Bank explained that African countries can leverage their resources to bring together gas and renewable energy to meet the region’s domestic needs. Part of the report stated:
- “Natural gas and renewable energy can go hand in hand, particularly with gas as both a transition fuel and a source of export earnings.
- “Upwards of 5,000 billion cubic meters of natural gas has been discovered but not approved for development on the continent. This could produce an additional 90 billion cubic meters per year until 2030. Up to two-thirds of which the International Energy Agency (IEA) estimates could eventually be used for domestic needs and the remainder for export.
- “The use of natural gas in Africa would keep its contribution to carbon emissions at fewer than 10 gigatons over the next 10 years, and, if added to existing emission levels, it would amount to 3.5% of total emissions.
- “The International Renewable Energy Agency (IRENA) estimates that Africa could have 310 gigawatts of renewable energy capacity by 2030. This is in part due to the region’s high potential in a range of clean energy: it has 10 terawatts of solar capacity, 350 gigawatts of hydro, 110 gigawatts of wind, and 15 gigawatts of geothermal capacity.
- “African countries also have rich endowments of the “green” minerals and metals that are required to build these clean energy technologies.”
Gas for domestic consumption and exports
According to the World Bank, countries that have rich deposits of natural gas need to develop stable investment policies that are critical for leveraging domestic gas supplies for export revenue and domestic consumption.
The World Bank highlights the fact that exploiting natural gas reserves requires substantial investments, particularly for offshore and liquefied natural gas (LNG) transportation.
So, it makes sense that due to the capital-intensive and long-term nature of these gas investments, countries need to develop and maintain policies that support both export and domestic consumption, consistent with attracting sufficient investment.
The World Bank argues that while it may be appealing for countries to retain large shares of gas for future projected energy consumption, such restrictions can weaken the economic case for investment and significantly delay investment decisions. A part of the report stated:
- “Countries should seek deals to invest in their gas reserves that are consistent with meeting domestic energy and development goals while also ensuring sufficient exports of natural gas to generate fiscal and export revenues. Effective policies can support an effective transition from pipeline to operation.”
How African countries can better harness their gas potential
The World Bank advises governments to capture the full value of resource rents, subject to fiscal terms that attract investment and are robust to changing conditions.
The World Bank estimates the value of these resource rents at 2.6 times the level of government revenues currently captured in resource-rich Africa. In Nigerian circles, this just means the country needs to get rid of the subsidy regime, which prevents the country from capturing a greater share of resource rents.
The World Bank also advises governments to avoid and minimize tax incentives and design fiscal terms that can feasibly be administered and monitored. A part of the report stated:
- “Making fiscal terms robust to changing conditions, such as price cycles, also reduces the need, and pressure, to revise them frequently in response to external factors. Investors prefer fiscal stability given the time horizons of investment decisions, especially when developing new discoveries, of which the region has a disproportionate share.”
What you should know
The World Bank also advises African countries to invest in strengthening grid and mini-grid infrastructure. In the report, the World Bank said that if 4.5 million people were connected to Nigeria’s grid per year between 2022 and 2030, then 60% of Nigerians would have to access electricity through mini-grid systems. It stated:
- “These solutions are also a better fit for purpose given that 95% of Nigerians without electricity access live in rural areas, where it may be difficult to achieve the necessary scale to deliver high-quality electricity access.”
