LNG/Natural Gas: Africa's New Prize

By George L. Kirkland, President
ChevronTexaco Overseas Petroleum Inc.

Corporate Council on Africa Oil and Gas Forum

Houston, Texas, November 20, 2003

Thank you for that warm introduction. First, let me extend my thanks to Stephen Hayes and his very strong team at the Corporate Council on Africa (CCA) for once again putting together another excellent program. Well done.

Three weeks ago, Kenya-born novelist M.G. Vassanji won Canada's Giller literary prize – for the second time. "I feel dazed and numb," the former physicist told a reporter. "The second prize feels like a bonus."

Today, I'd like to suggest that Africa is on the verge of winning a second prize – in the form of a new and rapidly growing natural gas business. It too is a bonus. The growing world demand for natural gas has enormous potential to bring added benefits to Africa's economy and its people.

For years, Africa's natural gas has been a resource looking for a market. Today this gas is becoming a bonus. It flows directly from the continent's successful energy development; development in which ChevronTexaco, and our partners, will invest more than $20 billion over the next five years.

The benefits of natural gas go beyond new jobs and capital. Natural gas offers Africa environmental gains, greater industrial diversity, more prospects for regional cooperation and new trading opportunities and relationships with the rest of the world.

To quote Daniel Yergin and Michael Stoppard, "A new global energy business – natural gas – is emerging. The United States needs it to keep the lights on; Europe to rejuvenate its industry; and developing countries to boost growth." These quotes are quite dramatic and may overstate the issues. However, all of these regions need natural gas for a cleaner environment.

Small wonder then that in some African nations, a resource which, for lack of local markets, was for years burned away is now suddenly in great demand.

In the United States, where gas well-heads are being depleted at 29 percent annually, demand for imported gas is expected to surpass that of Japan – today's leading importer – in less than 10 years.

Liquefaction is a key to globalizing natural gas and finding a market for "stranded" reserves like those offshore West Africa. Liquefying gas dramatically shrinks required storage – a single LNG tanker can transport as much natural gas as 600 tankers at atmospheric pressure.

In the past, gas was a localized, mostly isolated business. Today, however, LNG's reduced costs make it a viable option for locations like Africa. Indeed, Nigeria, whose gas reserves are largely located offshore, arguably boasts the world's fastest growing LNG business.

By 2006, Nigeria's Bonney LNG project, with its six processing trains, will place Nigeria third among the world's LNG exporters. And, as the Nigerian National Petroleum Company recently announced, front-end work recently began on Nigeria's second LNG consortium, which includes ChevronTexaco. The project – Brass LNG Limited – would add 10 million metric tons to Nigeria's yearly LNG exports. Other African countries, notably Angola, Algeria, Equatorial Guinea and Egypt are considering or expanding natural gas and LNG capacity.

Demand for natural gas is spurring other exciting projects in Africa, ranging from trans-regional pipelines to the world's first commercial-scale, fuels-only gas-to-liquids (GTL) plant. The Escravos GTL plant would produce ultra-clean diesel fuels from otherwise flared Nigerian natural gas.

The West African Gas Pipeline (WAGP) would ship formerly flared Nigerian gas more than 600 miles to Ghana, Togo and Benin. I'm proud that ChevronTexaco is a partner in both these projects.

There are risks and concerns in all these endeavors, of course. But as I indicated earlier, the potential benefits are great.

  • First, consider the environmental impact. Much of Africa's gas development will reduce greenhouse gas emissions by using gas that otherwise would be burned off, in effect doubling the benefit. GTL diesel fuels, for example, will reduce greenhouse gases wherever they are used, and conserve 300 million cubic feet a day of presently flared gas.
  • Second, there are economic benefits. Natural gas enjoys a steeper projected growth curve than oil, at least over the next twenty years. That's good news for African jobs, investment and local contractors.
  • Diversification is a third benefit. Gas won't replace oil as Africa's dominant economic base, but it will help the continent diversify and stimulate related growth, such as natural gas-based industries like chemicals and fertilizers.
  • Finally, natural gas can improve regional cooperation. Projects like WAGP distribute economic benefits over several nations; their success depends on governments and private entities working together. The same can be said internationally. Because it is traded globally, natural gas offers a fresh opportunity for developing and developed nations to establish lasting relationships.

In many ways, the international gas business today looks a lot like the oil business did 50 years ago. This is especially true in Africa, where we are still in the early stages of building the links between gas reserves and customers.

There will be growing pains. But the potential economic, environmental and social gains will make the struggle worth it.

There is an old African saying, "He who splits his own firewood warms himself twice." This is the nature of gas in Africa's energy industry. It is the continent's bonus prize. And the world's, too.

Thank you.

Updated: November 2003