Plans to create West African gas hub

06 March 2009

E.ON Ruhrga, the German utility, is becoming involved in a project for liquefied natural gas (LNG) in Equatorial Guinea in West Africa. The company has signed a Memorandum of Understanding for the creation and organisation of a company that will be the owner of a Gas Gathering System in the Gulf of Guinea - Consortium 3G.

Equatorial Guinea flag

Among other things, the agreement envisages a consortium comprising Sonagas (the National Gas Company of Equatorial Guinea), E.ON Ruhrgas, Union Fenosa gas of Spain and Portugal’s Galp Energía participating in drawing up a gas master plan for Equatorial Guinea and thus promoting the commercialisation of gas reserves - not least for future exports - in the Gulf of Guinea. "We are proud that we are now assuming a leading role in the project. The systematic expansion of our LNG business will make an important contribution towards security of supply for our markets," said Dr. Jochen Weise, member of the E.ON Ruhrgas Board of Management responsible for gas supply.

The project is in-line with the policy of the economic sub regional economical integration that the Government of the Republic of Equatorial Guinea is seeking to encourage.

In December 2008, the Republic of Equatorial Guinea became a member of the Gas Exporting Countries Forum (GECF), at the recent meeting of Ministers of Gas Exporting Countries held in Moscow, on the 22nd and 23rd December 2008.

On that occasion the Minister of Mines Industry and Energy of Equatorial Guinea, His Excellency Marcelino Owono Edu stated: “…while developing new gas resources within the framework of the gas monetisation policy of the country, the state will dedicate special attention toward the existing gas pricing structures to maximising the state take in all the project, giving special mandate to and monitoring its implementations from the fully-owned state gas company Sonagas GE…”

Africa accounts for about 8 % of the world's proven gas reserves. At a time of global competition to secure limited energy resources, it is particularly important to tap that potential. In sub-Saharan Africa, Equatorial Guinea is an important energy supplier alongside Nigeria and Angola. The country has appreciable gas reserves and already possesses an operational gas liquefaction plant.

The creation of a West African gas hub will reduce unemployment in the area and the government will have more money. European goverments believe that West Africa could be a potential route to reducing European reliance on Russian gas. However, no comments have been made regarding the cost of such a large project which will require a huge investment in pipelines and processing facilities at a time when falling oil prices are forcing energy companies to review many projects. Furthermore, the gas hub is a cause of concern for many who think the project will struggle to source enough supply. Equatorial Guinea is hoping to source gas from new discoveries in it’s waters and from gas currently flared as waste, the remainder of gas needed will come from neighbouring states. Yet previous attempts of gathering gas from neighbouring states have yielded poor results. Nigeria has ambitious plans to harness a greater share of its vast gas reserves for domestic use as well as feed a growing export market. Cameroon would also need substantial incentives to participate.