African countries seek to revive Trans-Saharan Gas Pipeline dream | Business | Economy and finance news from a German perspective | DW | 12.08.2022

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Business

African countries seek to revive Trans-Saharan Gas Pipeline dream

Nigeria, Algeria and Niger — keen to benefit from EU efforts to wean itself off Russian gas — are renewing efforts to implement a decades-old plan. But is there enough political will and funding for the project?

An African gas industry worker opening a pipeline

Africa has enough natural gas to cover Europe's needs for a long time

The Trans-Saharan Gas Pipeline (TSGP), as the trilateral project with a decades-long history is officially called, recently saw a fresh attempt at a revival when representatives from Algeria, Niger and Nigeria met in Niamey, Niger, in June. In July, the energy ministers of the three countries signed a memorandum of understanding (MoU) and agreed to set up a task force for the project with the aim of updating an existing feasibility study.

The idea to pipe gas across the Sahara to Europe was first mooted more than 40 years ago. In 2009, an agreement was signed by the three gas-rich countries, but progress has stalled since then.

TSGP, also known as the NIGAL pipeline, may now move closer to becoming reality as Europe attempts to cut its strong dependency on Russian gas in the wake of economic sanctions against Moscow over the Ukraine war.

"It [the pipeline] should allow Europe to diversify its sources of natural gas supply, but also allow several African states to access this high-value energy source," said a joint statement issued in June.

A picture of the energy ministers of Algeria, Nigeria and Niger

Now the energy ministers have signed a memorandum of understanding, their statements must be followed by action

Enough political will?

Once the $13 billion (€12.8 billion) pipeline is complete, it could transport up to 30 billion cubic meters (1 trillion cubic feet) of gas annually from Nigeria, in West Africa, north through Niger and on to Algeria. From there, TSGP gas is planned to be pumped through the undersea Trans-Mediterranean Pipeline to Europe or loaded onto liquefied natural gas (LNG) tankers for export.

Energy experts, however, doubt that African gas will flow into Europe any time soon, with some saying the pipeline won't be built in the next 10 years. Isaac Botti, a Nigerian public finance specialist from Abuja, believes a lack of political will could be the project's biggest challenge.

"I feel this is just a paper commitment. Every real commitment should be backed by actions. So far, we are not seeing commensurate efforts on the part of the Nigerian government," he told DW. Botti also noted that although Nigeria and Algeria would be the major gas suppliers, everything would "boil down to the political will of the Nigerian government to ensure that the project kick-starts."

A graphic showing various gas pipelines in West and North Africa

Nigeria — wealth for a few

TSGP will have a total length of about 4,128 kilometers (2,565 miles) of which 1,037 kilometers will pass through Nigeria, 841 kilometers through Niger and roughly 2,310 kilometers through Algeria. According to plans, the pipeline will also serve regional and local energy markets along the route.

Most of the 30 billion cubic meters of gas will come from the Niger Delta — a coastal region on the Atlantic Ocean belonging to Nigeria and boasting Africa's biggest oil reserves. Apart from its crude wealth, the delta is rich in natural-gas deposits that have already made Nigeria the continent's second-largest gas exporter after Algeria.

"Nigeria has one of the largest gas deposits in the world … about 200 trillion cubic feet, with a capacity of producing 3 trillion cubic feet a year. Looking at the monetary value of this deposit we are talking about $800 billion that could be earned from this project," said Botti.

Despite Nigeria's huge wealth in resources, its population suffers from poverty and political instability. In the Muslim-dominated north of the country, Islamic fundamentalists from the Boko Haram terrorist group are waging a civil war against central government authorities. Experts already say the worsening Nigerian security situation could ensure the pipeline remains a pipe dream.

Another uncertainty that could thwart international funding for the project is climate change and plans in wealthy Western economies to cut their consumption of fossil fuels. The EU, for example, is planning to reduce its carbon footprint by at least 55% by 2030, beginning with phasing out coal and oil, but also cutting natural-gas use. Fossil fuel is to be replaced with green hydrogen generated from renewable forms of energy.

A picture of Nigerian gas workers walking walk past a pipeline

Nigeria sits on huge deposits of natural gas that could become stranded assets if Europe changes its energy policy

Gas profits for development

Under a revised budget plan for 2022, the Nigerian government forecasts spending a total of 17.32 trillion naira (€40 billion, $41 billion), about 18% more than in the previous year. The budget deficit is expected to increase to 7.35 trillion naira, representing 3.99% of the country's gross domestic product (GDP).

Despite higher oil prices, Nigeria's oil sector underperformed in the first quarter due to "significant production shortfalls," and the government said it needed to borrow from financial markets to cover its funding targets, especially in infrastructure development. The quarter also saw Nigeria's public debt increase from 39.56 trillion naira at the end of December 2021 to 41.6 trillion naira, putting enormous pressure on debt servicing.

Botti said Nigeria's budget shortfall is "serious," and he criticized that investment expenditure was still "concentrated on the oil sector rather than the gas sector."

Moreover, political differences continue to hamper the gas pipeline project and prevent Nigeria from benefiting from the global shift to renewable energies, he said. A new government after the next presidential election in 2023 would hopefully improve the situation, he added.

Can Africa bridge the gas gap in Europe?

Algeria's growing importance

While Botti remains skeptical about TSGP, former Algerian diplomat and Middle East expert Brahim Kas sees "serious" political efforts in all of the three African countries to push ahead with the project.

"It's stronger than in the early 2000s because the geopolitical gas crisis is much more acute and will last for a longer period of time," he told DW.

Algeria in particular now has both the technical and financial ability to build the pipeline as rising oil and gas prices have given the country "enormous power to act," Kas said.

He cited the TransMed Pipeline between Algeria, Tunisia and Italy as an example of the North African country's growing energy importance. "Italy and Algeria have just signed an agreement for boosting gas supplies this year and next year. This ought to bring the TransMed close to maximum capacity," he said.

Emerging capacity constraints in North Africa could even bring the shelved GALSI pipeline back into play, he believes. Also known as the Gasdotto Algeria–Sardegna Italia (GALSI), the pipeline would link Algeria with Italy via Sardinia and is presumed canceled since construction ground to a standstill.

Kas said Algeria would be able to complete the pipeline on its own were it to get assurances from European countries for long-term contracts. Without that, Algeria wouldn't build GALSI, he said, because the Europeans could one day say "we no longer need Africa's gas."

This article was originally written in German.