Nigeria-Europe gas pipeline via Algeria: A mega-project in search of profitability

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Nigeria-Europe gas pipeline via Algeria: A mega-project in search of profitability

By Reda.C Posted on Sep 16, 2021 3:33 PM

Gazoduc  Nigéria-Europe via l’Algérie : Un mega-projet en quête de rentabilité


The first phase of the process of building the Nigeria-Europe gas pipeline via Algeria has just been completed according to Mr. Toufik Hakkar, Chairman and CEO of Sonatrach Oil Group. But this process is still on paper and no groundwork has been given to start it up, as profitability depends on several parameters at their head.

"The feasibility study of the Trans-Saharan Gas Pipeline (TSGP) project, connecting Nigeria to Europe through Algeria and Niger, has been completed and submitted to companies from the two African countries" recently declared the head of the national oil company. But all the same, the feasibility of this project remains to be assessed, and is also conditioned by the growth in future world demand for natural gas and prices.

The TSGP (Nigeria-Europe Gas Pipeline via Algeria) still remains a gigantic project. It was in 2006 that it was proposed within the framework of NEPAD, an African Union initiative aimed at launching major structural economic projects on the black continent and above all establishing economic integration on the basis of the principle of good governance that would ultimately promote the increase in foreign direct investment (FDI) in the continent. And it was not until 2009 that an agreement was reached in Abuja for its realization during the time of the former Minister of Energy and Mines, Chakib Khelil, who also served as CEO of Sonatrach.

The TSGP, which is to link Nigeria's natural gas fields to the Hassi R’Mel complex, via Niger, remains a pharaonic project of 4,128 km. Its length would require the mobilization of significant financial and human resources.
For example, the last Russian gas pipeline, the Nord Stream 2, 1,230 km long, cost 10.62 billion dollars. Being longer than the Russian gas pipeline, the TSGP will require, at the very least, the mobilization of 20 to 25 billion dollars for its realization, according to several experts.


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For this investment to be profitable in the long term, ie over at least 25 years, this gas pipeline must place 30 billion m3 of natural gas annually on the European market. And it is not easy to mobilize this gigantic amount from the big international banks if there is not a firm and large demand for natural gas in Europe and especially at a price that would allow a return on investment.

Nigeria has the largest natural gas reserves in Africa with 5,200 billion m3. Being far from the European market this country, considered as the first African economy has invested in recent years in the liquefaction of natural gas. In 2020, Nigeria's LNG capacity was 22 million tonnes, equivalent to 30 billion m3 of natural gas.

In proportion to the country's large reserves, exports of natural gas in liquefied form remain, however, low. And to increase its market share internationally, Nigeria and like Algeria and Russia, rely on gas pipeline.

Aware of Nigeria's interest in increasing its natural gas exports, Morocco proposed an alternative project in 2016 in the hope of torpedoing the TSGP and reaping the dividends in a poker game.
This project, perceived as a swagger from Rabat by several experts, consists of building a gas pipeline linking Nigeria to Gibraltar over a distance of 5,660 km, ie 1,400 km more than the TSGP. This submarine pipeline is to cross the coasts of eleven West African countries. It is difficult to estimate the cost of such a project when you consider that the Russian submarine pipeline, the Nord Stream 2, which was only 1,230 km long, had cost more than 10 billion dollars. It is only the Makhzen who believe in the feasibility of such a gas pipeline, the profitability of which would be impossible to achieve.

Nigeria and Algeria pay particular attention to the Trans-Saharan Gas Pipeline (TSGP) project. The completion of this tube would allow Nigeria, Africa's most populous country, to export large quantities of natural gas to the European market. The future gas pipeline will also have socio-economic repercussions on Niger and the other countries of the Sahel, destabilized by insecurity and chronic underdevelopment. The outlook for natural gas markets around the world is very optimistic.

The fight against global warming involves a significant reduction in the use of coal and fuel oil in electricity generation. A reduction that paves the way for less polluting natural gas. For their part, European countries must overcome the dependence of one or two suppliers in their natural gas supply. Providing financial support and paying an acceptable price for natural gas would support the realization of the future TSGP. Something that would allow the European Union to diversify its natural gas supplies in the future.
 
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