Natural Gas for Africans: Doing Good and Doing Well Africa50 General Shareholders Meeting

Melanie Kenderdine Principal Energy Futures Initiative Nairobi, July 19, 2018

confidential -- do not distribute Natural Gas: Building Block for African Economic Development and Growth in Multiple Sectors

Natural gas is an extremely flexible fuel. It can be used in all sectors of modern economy – industry, buildings, transportation, and power generation. This flexibility, coupled with abundant natural gas resources in sub-Saharan Africa, Africa’s energy demand growth, and its commitments to universal electricity access and cleaner energy, are intensifying the focus on the development of African gas.

While the flexibility of gas is attracting well-deserved attention, the inflexibility of the infrastructures for its transmission and distribution can diminish its uses in developing regions like sub- Saharan Africa.

A suite of technologies can be used to address a range of demand- limiting infrastructure issues, creating new natural gas options for both urban and rural consumers. Natural Gas: Building Block for African Economic Development and Growth in Multiple Sectors

…Ingredients in …Manufacturing of Chemicals Markets • Plastics • Ammonia • Fertilizer • Methanol • Fabrics Refining • Butane Regulation • Pharmaceuticals • Propane • Hydrogen Process Optimized Gas heat Natural Gas processing Resource Base …Heat Sources …Fuel for Power for Making -- Generation -- Efficiency Governance • Glass • NGCC baseload • Steel • Peaking plants • Cement • Small turbines • Bricks • Ceramics • Paper Infrastructure Source: EJM 2018, compiled with information from Geology.com Proved Reserves of Natural Gas in Africa by Country, 2017

Unproved Natural Gas Reserves

Est. Gas Reserves/ West Africa • / 16 Tcf but no production until at least 2023 • Over 100 Tcf • , , , ≤ 10 Tcf each , RofC,

Africa50 Shareholder

EJM, 2018. Compiled using data from EIA, 2017. Estimated Potential Gas Demand in sub-Saharan Africa, 2050

Natural gas consumption in Africa has more than doubled since By 2050, Nigeria will be third most 2000. In 2015, Africa consumed 22.7 quadrillion Btu (quads) of populous country in the world. primary energy, nearly 23% of which was from natural gas. This While they are already in the top proportion was second only to liquid fuels. 20 most populous countries, the Democratic , Ethiopia and can expect their populations to more than double by mid-century. Currently, three cities in Africa – Cairo, Lagos and Kinshasa – have 10 or more million people, qualifying as “megacities”. This number will expand to include Nairobi, Dar-es- Salaam, Khartoum and Casablanca over the next couple of decades. Between 2010 and 2050, Africa’s urban population will rise from Source: EAPIC Forum presentation, , 400 million to 1.26 billion. Gas Infrastructure Development in Sub-Saharan Africa - A 20 Year Horizon, Frost and Sullivan, Johns Hopkins Natural Gas for Urban/Rural Electrification for Africa50

Members 100/100/100 34/82/7 100/100/100 Mauritania 35 / 84 / 2 Egypt 42/81/-- 100/100/100 Senegal 52/67/-- Gambia 65 / 88 / 38 38/70/22 Burkina% FasoRural Electrification 48/ Rates/ 69 /16 % total electrification 19/61/Select1 Africa50 Countries 2016 • 1 • Guinea 7 % urban • Gambia 16 • 3 Kenya % rural • Togo 19 56/78/39 • Benin 18 • Cameroon Togo21 Cameroon 47/ 87/ 19 60/92/21 11/ 42/ 4 • RofC 23 Mauritius Republic of • Malawi 4 Benin 99/92/100 Congo • Mali Ghana 2 41 / 71 / 18 Nigeria 6/74/23 • Madagascar79 / 90 / 75 17 59/86/41 23/67/17 Compiled• withSudan data from 22 Gabon the World Bank, 91/97/55 numbers rounded Sierra Leone NA Dem. Rep. Congo 20/47/3 17/47 -- Electricity Regulatory Index (ERI) for Select African Countries High level of development, largely aligned with international best practiceAfrican governments have made tremendous strides Well-developed, but regulator or framework in still displays a number of insufficiencies not aligned its international best practicerecent years in developing robust regulatory Average level of development; regulator or frameworks framework display numerous insufficiencies; not aligned with internationalfor besttheir practice electricity sectors; however, progress has Low level of development;been regulator uneven or across the continent. As a means to framework is insufficient and largely not aligned with international best practiceidentifying areas in which improvement is most ERI by needed, Country AfDB commissioned a study to develop this Electricity Regulatory Index.

Source: Electricity Regulatory Index for Africa 2018, Africa Charcoal Production/Tree Cover

In most Africa50 countries, less than 25% of the populations have access to clean cooking fuels

• Around 3 billion people cook using polluting open fires or simple stoves fueled by kerosene, biomass (wood, animal dung and crop waste) and coal.

• Each year, close to 4 million people die prematurely from illness attributable to household air pollution from inefficient cooking practices using polluting stoves paired with solid fuels and kerosene.

• The increased use of liquefied petroleum gas —along with more efficient cook stove technologies—would help reduce air pollution and support decarbonization efforts in sub- Saharan Africa. Some countries have already started to encourage LPG adoption through subsidies or other government programs, with mixed success. Scenario One: Natural Gas Infrastructure Build-out Utilizing Natural Gas Imports Large/Moderate-scale Power Urban Customers Generation (NGCC) (Electricity or Gas)

Domestic International Pipeline Pipeline Small-scale Power Generation FSRUs (Microturbines or Reciprocating ICE) Port Infrastructure LNG Tankers Small-scale Rural Customers LNG Shipping Regasification Micro-Grid (Electricity or Gas) Container FSUs

Port Infrastructure Delivery Mechanism Overland (LNG or CNG) Electricity T&D NG Pipeline EJM, 2018. Compiled using Noun Project. Large/Moderate Scale NGCC Power Generation

NGCC power generation is an attractive option for African Urban Customers Large/Moderate-scale markets due to its high capacity (Electricity or Power Generation relative to cost as well as Gas) (NGCC) capacity adaptability to meet individual country demand. Domestic International Pipeline Pipeline

LNG FSRUs Tankers The Kinyerezi II plant with 240 MW generating capacity and total cost of Port $353 million in Dar es Salaam, Tanzania, FSUs Infrastructure and a mega-project involving three 4.8 GW NGCC plants in Egypt are both under construction. Combined with 12 wind parks, the Egyptian project will produce 14.4 GW of power, increasing Egypt’s generation capacity by 45%. EJM, 2018. Compiled using Noun Project. Opportunities for Additional NGCC Generation/FSRUs or Both

Technology Capacity Capital Fixed Construction With the current, long-term (MW) Cost O&M (Estimated) projections of low priced natural ($/kW) ($/kW- gas, low capital cost, and short yr) construction timeline, large-scale Natural Gas Combined 702 978 11 2-3 years natural gas has become the Cycle generation technology of choice Advanced Natural Gas 429 1,104 10 2-3+ years compared to other central station Combined Cycle or baseload options. Five Africa50 Combustion Turbine 100 1,101 17.5 18 months+ countries alone (Senegal, Ghana, Advanced Combustion 237 678 6.8 18 months + Ivory Coast, Nigeria and Kenya) Turbine could use 8300 MW of gas-fired Advanced Nuclear 2,234 5,945 100.28 5.5-7.5 years power generation by 2030. Ultra Supercritical Coal 650 3,636 42.1 5+ years

Source: Energy Information Administration, Capital Cost Estimates for Utility Scale Electricity Generating Plants November 2016 Current NGCC Plants Under Assessment Floating Storage and Regasification Units

A single FSRU vessel can generate 3,600 FSRUs usually have a capacity of 120,000-180,000 cubic megawatts of power, sufficient to light up meters. Capital costs for a new FSRU are around $240 Ghana, Togo, Cote d’Ivoire and Benin. million (roughly half of an onshore regasification unit). LNG tankers can also be converted to FSRUs in about a year to 18 months, with construction costs in the $80- $100 million range. Port facilities add additional costs for either new or converted FSRUs.

The FSRU space remains a Small-scale Power niche one with only a handful Generation FSRUs (Microturbines or of FSRU operators with FSRU Reciprocating ICE) operational experience, such as Port Infrastructure LNG Shipping Rural Customers the BW Group, Hoegh and Container Small-scale (Electricity or Gas) LNG Tankers Regasification Excelerate. Micro-Grid

FSUs Port Infrastructure

EJM, 2018. Compiled using Noun Project. Existing/Planned FSRUs, 2017

Existing Planned Future/additional FSRU Plan

Source: LNG World Shipping July/August 2017 Opportunities for Additional NGCC Generation/FSRUs or Both

Africa50 Countries Benin, Burkina Faso, Cameroon, Democratic Republic of Congo, Djibouti, Egypt, Gabon, Gambia, Ghana, Guinea, Ivory Coast, Kenya, Madagascar, Malawi, Mali, Mauritania, Morocco, , Nigeria, Republic of Congo, Senegal, Sierra Leone, Sudan, Togo, and Tunisia. Source: Electricity Regulatory Index for Africa 2018, African Development Bank Scenario Two: Illustrative Large-scale Natural Gas Infrastructure Build-out Using Indigenous Gas Supplies Urban Customers (Central Pipeline Export LNG Export Large-scale Power Generation (NGCC) Station Grid; Direct Use NG through distribution system) Mid-stream Gas Processing Gas Gas Gas Processing Compression Conversion Reforming Infrastructure Liquefaction & Port Infrastructure Fertilizer Large-scale Gas Additional Agricultural Area Extraction Gas Processing Processing Gas CompressionWet Gas Byproducts Petrochemicals, GasCompressed Reforming infrastructure (Ethane and LPG) e.g. ethylene Natural Gas CNG Consumer Power generationSmall-scale (large, Power Generation Rural Customers Products from moderate,(Microturbines micro) or Reciprocating ICE) Wet Gas Byproducts (Micro-Grid; Direct Use NG and/or LPG) (Ethane and LPG)NaturalConversion Gas Petrochemicals, Transportation Fuels e.g. ethylene Cooking Fuel Fertilizer TransportationChemicals Consumer Goods Delivery Mechanisms/Products Overland (LNG or CNG) Electricity T&D NG Pipeline Gas Product from Processing, Conversion, Reforming, EJM, 2018. Compiled using Noun Project. Compression Monetizing Africa’s Flared/Stranded Natural Gas

Nigeria

Cameroon

Congo Gabon

Gas fields of <1TCF are often not economical to connect with pipelines. Greater than $1T of stranded gas assets in Africa.

Source: Presentation, Monetization Options for Africa’s Conventional, Stranded and Flared Natural Gas Resources,, Manfred Boeckmann, 2013,;Radia, 2018 This flare has been burning for five years

Source: Radia, 2018 Radia Inc. Confidential Virtual Pipeline/Small Scale Power Generation Using Imported LNG

A key innovation allowing for providing gas to rural areas is a virtual pipeline that relies on the development of In the sub-Saharan International Standards Organization (ISO) shipping context, these satellite containers that have been modified for LNG or CNG. stations would probably These can be moved from one form of transportation to be paired with a small another with ease. gas generator as well. Small-scale Power Co-locating these two Generation facilities would minimize (Microturbines or the costs associated Reciprocating ICE) LNG Shipping Rural Customers with regasification, since LNG Tankers Container Small-scale (Electricity or Gas) only minor amounts of Regasification Micro-Grid connective infrastructure would need to be built. FSUs Port Infrastructure

Shipping ISO containers of LNG to remote areas is facilitated by small-scale regasification plants. These have low operating costs because they use natural or forced draft air as the heating medium (meaning no fuel costs), they require little maintenance, and are often unmanned. Airborne Virtual Pipeline for Flare/Stranded Gas

Semi-buoyant Airplane ➢ Larger than any current aircraft ➢ Large, unwieldy objects easily attach to underside ➢ Fast like a plane ➢ Lands slow like a blimp

Carries Speed of Lands on 50-200 ton/ 150 mph dirt strips or trip grass in 500 m Sub-Saharan African Countries with Mini- grid Concessions

The International Energy Agency Mini-grid Program Years in # of Mini-grid Total # Avg. # Name Operation Concessions Connect- Connect- estimates that almost half of the Country operation ions Made ions per 315 million people in rural areas of Mini-Grid Sub-Saharan Africa who gain access to electricity in the next 25 years will do so through mini-grids. Although the IEA’s projections have not received universal acceptance and are viewed as being too optimistic about the long-term role of mini-grids, it is accepted that mini-grids have a significant role in increasing access to electricity in Sub-Saharan Africa. Distribution of Mini-Grids in Tanzania by Installed Capacity, 2016

Hybrid

Fossil fuel

Solar

Biomass

Hydro Nigeria’s Rural Electrification Agency: Development of Mini-grid Market Opportunities

Plan: Install 10,000 10 kW mini-grids in Nigeria over 10 years will meet 30% of demand. Target: 3,000 MW, investment potential of $20 billion, annual revenues of $3 billion.

Nigeria’s REA has a geospatial tool that “…allows easy identification of on and off-grid communities.”

NERC Regulatory Framework for Mini-grids

Source: Nigeria Mini-grid Investment Brief, December, 2017 The World’s First Fully Commercial Modular GTL Plant

CompactGTL’s project in Kazakhstan – the world’s first fully commercial modular GTL plant.

24 million standard cubic feet per day agreed with the Gas supply: oilfield owner. c.2,500 barrels per day of synthetic crude, upgraded to Production: diesel blendstock. Start of production: 2018

Source: CompactGTL leading small scale, modular Gas-to-liquids (GTL) company providing an end to end solution to the problem of associated and stranded gas in oil and gas field development. Case Study: Development of Gas Resources and Infrastructure = Economic Growth, Regional Growth and Cooperation, Access to Electricity

In 2014, ENH completed construction of 1960s, natural gas discovered PPA signed in 2000 between in Mozambique’s Pande andthe Maputo Gas DistributionENH, Sasol, Project. CMH and For IFC, Temane fields the first time, piped naturalproduction gas wasstarts in 2004 supplied to a city in Mozambique. That same year, Sasol and Shell signed agreements with ENH to conduct GTL feasibility studies. In 2016, demand for electricity in

26” 865 km pipeline built to South Africa withMozambique 5 offtake points was in 1000 MW and is expected to triple in the next 15 years. Mozambique. In 2004, Mozambique used 0.2 MGJ/a of natural Anchor customer for gas was gas and exported 120 to South Africa. After completion of the in Secunda, South Africa Source: Understanding Natural Gaspipeline, and LNG Options, its demand November 2016 went to 36 MGJ/a. Opportunities for Shale Gas Development: Shale Basins and Plays in Africa

Africa50 Countries Unconventional Oil & Gas Shale Plays and Basins, 2017

Benin, Burkina Faso, Cameroon, Democratic Republic of Congo, Djibouti, Egypt, Gabon, Gambia, Ghana, Guinea, Ivory Coast, Kenya, Madagascar, Malawi, Mali, Mauritania, Morocco, Niger, Nigeria, Republic of Congo, Senegal, Sierra Leone, Sudan, Togo, and Tunisia. EFI, 2018. Compiled using data from Resource Watch, West Virginia GIS Technical Center, DOE, NETL. Shale Gas Success:Shale RD&D, Gas Success: Public/Private RD&D, Partnerships,Public/Private Policy Mechanisms, IndustryPartnerships, Structure, Policy Significant Mechanisms Demand

40

Gas produced after tax credit 30

20 GRI Funding Steady over 16 years Annual Program Budget Budget Annual Program

Federal in Dollars) 1999 (Millions US Dollars 10 Funding Time limited tax credit Gas produced under tax

0 Shale Gas DOE Spending GRI Spending Tax Credits ($/Mcf) 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 credit2006 2007 2008 2009 Year Source: MIT Future of Natural Gas Study 27 22 Shale Gas Has Transformed US Energy Profile

Almost 60% of US production in 2016

5% of US production in 2004

28 Source: EIA Conclusion

Creating demand for gas is an essential strategy for optimizing the development and value of Africa’s indigenous gas resources. A suite of technologies can be used to address a range of demand-limiting infrastructure issues, creating new natural gas options for both urban and rural consumers. In particular, innovation in distributed technologies can positively impact the delivery of new energy services in rural settings. Key investments in technologies and infrastructures will increase sub-Saharan gas demand and grow national economies. Thank you!