APPEC: Africa's new oil, LNG projects offer Asia supply options amid rising demand

New oil and LNG projects in Africa could provide additional supply options for Asian buyers, although growing population, refining capacity and domestic energy demand may absorb a larger share of future production, industry executives said at APPEC on Sep. 9.

"The key question that we want to answer is: Can Africa move from optional barrels to strategic supply?" Ha Nguyen, executive director and global head of long-term oil and fuels at S&P Global Energy, said during a panel discussion.

Growing geopolitical tensions and concerns over supply security are increasing interest in African crude and LNG among Asian buyers, speakers said.

"If those choke points become a long-term structural issue, then security of supply, even in Asia-Pacific, is going to become a real question," said Gilbert Kamuntu, chief commercial officer of Uganda National Oil Co. "Areas like Africa, some already established like North Africa or West Africa, will become extremely important. But some of the emerging producers like Uganda or East Africa are going to become extremely important as well."

Kamuntu highlighted Uganda's upcoming Pearl Sweet crude, expected to deliver its first cargo by the end of the year. He said comparable grades, such as South Sudan's Dar Blend and Doba Blend, have historically seen strong demand in Asia-Pacific markets, adding that around 75% of comparable crudes are placed in the region.

East African supplies could also offer a logistical advantage. Kamuntu said crude exported from Tanzania's Port of Tanga would travel roughly 4,000 nautical miles to Asia, compared with about 9,000 nautical miles for West African cargoes.

LNG expansion

Africa's LNG sector is also expected to strengthen the continent's role in Asian energy markets.

Michel Ussene, executive chairman of Mitra Energy, said Africa currently produces 40 million-50 million mt/year of LNG, but output could rise to 90 million-100 million mt/year within four years as new projects come online.

"The majority of the buyers are concentrated in Asia, from India, South Korea, China and Japan," Ussene said. "This provides a wide diversification of global supply."

Ussene pointed to major LNG developments in Mozambique and Tanzania, and said Asian companies are among the largest investors in several African LNG projects.

"If you see the largest investors today in several African LNG projects, a large part are Asian companies," Ussene said. "Having a footprint in the equity of these projects, having the optionality to acquire those molecules, it's critical."

Domestic demand growth

Speakers said rising domestic demand could increasingly shape Africa's future export availability.

Ussene said Africa's population is expected to double over the next 25 years, creating stronger demand for fuels, electricity and petrochemical feedstocks.

"There is quite a lot of pressure not only to export these commodities but also to refine them because local demand is growing," he said.

He cited refining developments across the continent, including Nigeria's Dangote Refinery, Sonangol's Lobito refinery project in Angola, Uganda's planned Hoima refinery and the proposed Lamu refinery in Kenya.

Meanwhile, Laurent Blondeau, strategic advisor for supply chain optimization at Unimot SA, said Africa is becoming more integrated across the energy value chain.

"There is a very successful project that has been starting and stabilizing, Dangote, which today, if you look at June and July, was the first single jet supplier of Europe," Blondeau said, adding that around 20% of Europe's jet imports during the period were supplied by the refinery.

Kamuntu said growing African demand would not eliminate export opportunities.

"There is going to be local demand, but there is also going to be a net surplus," he said. "There is still going to be a significant part of oil and gas that will be placed on the global market."

Economics remains the key driver

While supply security has become increasingly important amid geopolitical disruptions, trade flows remain driven by economics, according to Blondeau.

"The market is still driven today by economics," Blondeau said. "The flow will go to the best buyer."

He said some market participants have strengthened supply security through upstream investments, while others continue to rely on spot purchases.

Kamuntu said companies seeking long-term security of supply may increasingly consider equity participation in African upstream projects.

"Companies that are trying to ensure they have supply either have to go into the market and purchase, or have to take the step of undertaking geological risk and country risk and investing in upstream oil and gas to be able to then secure their supply equity alongside what they can buy in the market," he said.

The panel discussion highlighted ongoing investments in upstream oil, LNG, refining, storage and infrastructure projects across Africa, while emphasizing that rising domestic demand will increasingly influence how much future production is available for export.