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Is the African market insulated from the United States shale gas revolution?
By Sunny Oputa
Despite the new thinking that the United States shale gas revolution will punch a deep hole in the international market – especially Europe and Asia, market optimists believe that Africa will not be impacted much by the American gas revolution. This does not mean that the African market is totally insulated from the changes the burgeoning United States gas revolution would have in the global market if it succeeds. It is been predicted that the U.S shale revolution will increase domestic production of oil and gas, thereby reducing United States dependence on imported energy.
Ceteris paribus, that United States succeeds in the technology fusion of using horizontal drilling and hydraulic fracturing to enhance domestic hydrocarbon productivity that means by 2020 the country would be producing more than enough to become net exporter. The massive injection to the global market from United States will automatically increase global supply and could squeeze the price of oil and gas in the market to drop.
Tim Boersma, a Fellow on Foreign Policy and Energy Security Initiative at Brookings, is of the opinion that while United States has good chances of success in the shale oil and gas revolution, that same shale gas boom cannot be replicated in Europe. Boersma believes that a combination of factors favors the U.S. shale gas boom, namely favorable geological conditions, easy access to infrastructure, substantial public support, available service industry, broad political support, a large market and a favorable fiscal climate. All these factors Boersma and his colleague Corey Johnson believe are lacking in Europe and would impair their ability to venture a shale gas revolution. While these postulation by Boersma and Johnson looks rational enough, the same condition will favor Africa to have much market acceptability for its natural gas production (LNG and others) in Europe and Asia where the new global market would anchor 2020 and upwards. Easy access to the new market, lower cost of production, geopolitics and recent trade agreements favor African producers. African producers will likely have more market presence in China and India the two developing economies that are becoming giant consumers of energy globally.
According to BP Energy Outlook, global energy consumption will rise by 41% from 2012 -2035. Ninety five percent of the expected increase will come from China and India. International Energy Agency also has the opinion that energy demand in Africa will increase by 85%, Middle East will have 76% spike in demand and the Old Soviet Union would experience 42% energy demand. The increase in energy demand in China, India and Africa will be as a result of increase in population and expanding economies. In Africa which had suffered lower energy consumption for decades, there will be a new wave. Africa’s economic growth and increase in population, energized industrialization will spur the continent’s energy utilization to increase by 11% in 2020. This means that some of the natural gas produced in Africa will be used domestically to generate power and running various industrial projects.
The ongoing political problem in the old Soviet Union and the yet to fine-tuned political tempo in the Middle East are helping to pave more market opportunities for Africa. Most of the buyers from Asia and other European countries are tilting towards doing business with African producers through better business initiatives. While many market observers still believe that Africa will perform very well in the global market as from 2020, there are many analysts who have the feeling that the economies of most African net exporters and emerging ones that hinge their GDP on revenue s from oil and gas would be heavily affected by the surging U.S. shale revolution.A strong panel of market and academic experts will be bisecting the anatomy of the issues of global energy outlook and the United States Shale Revolution with the hope of coming out with didactic market forecast in the upcoming 7th Annual Sub-Saharan Africa Oil & Gas Conference scheduled for May 1 -2, 2014 at Marriott Westchase, Houston.
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