11 July 2017, Sweetcrude, Lagos — Africa’s oil and gas projects represent one of the continent’s most valuable investment sectors. However, with low global energy prices and declining revenues impacting the ability to invest in new projects, the oil and gas sector needs to find ways to accelerate the economic return on these massive capital expenditures.
This according to Victor Mallet, Africa-based sales director for APR Energy, who says Africa’s oil and gas industry has the potential to stimulate even more international investment into the continent if certain obstacles can be overcome.
He points out that the two most valuable construction projects in Southern Africa are oil and gas related. “In Angola, there are two projects valued at $16 billion and $8 billion, respectively. Oil and gas projects also appear on the top-10 lists of most valuable construction projects underway in West and North Africa.”
Nonetheless, Deloitte’s Africa Construction Trends Report points out that only 4.5% of all the active construction projects on the continent are oil and gas related.
“The market is still in recession, and oil and gas projects are under pressure to attract more capital. One of the most effective ways of stimulating investment is the ability to quickly expand and ramp up production,” says Mallet.
He explains that mobile fast-track power solutions offer this capability to ongoing projects as well as new ones. “For oil and gas projects in their initial stages, deploying temporary power as an interim solution offers them the ability rapidly to ramp up or scale down production. Being able to deliver profitable production in the shortest possible time span will encourage outside investment for a project,” he says.
Fast-track power installations – using mobile aero-derivative gas turbines and reciprocating engines – can be scaled to generate from 10MW to 500MW or more in as fast as 90 days. “With 502 million cubic feet of proven gas reserves across Africa, fast-track power creates an opportunity for many African economies to rapidly monetize their gas. The opportunities for investment and economic growth across the continent are massive,” Mallet says.
Mobile turbines offer another economic benefit: the ability to burn associated gas that currently is being flared into the atmosphere.
“In terms of carbon emissions, the burning of gas from these operations add unnecessarily to the project’s carbon footprint. A case in point is Nigeria, where the country’s Department of Petroleum Resources recently estimated that it has already lost an estimated $850 million in wasted gas and oil, as well as $400 million worth of carbon credits as a result of gas flaring,” Mallet says.
“Rather than wasting its energy value, oil and gas projects will be much better served by diverting gas that would otherwise be flared through gas-powered turbines to generate power for the operation. This not only saves the operation costs by utilising resources that historically have been wasted but also reduces the project’s overall carbon footprint, which is something that investors are becoming increasingly sensitive to.”
Another important benefit of mobile fast-track power is that the generating capacity is treated as an operating expense, rather than a long-term capital expenditure. “With fast-track power, the customer pays a monthly fixed cost for access to the generating capacity and a variable cost for the power consumed. Moreover, it’s a full-service, turnkey solution that includes installation, operation, and maintenance, which allows oil and gas customers to focus on their core business,” Mallet says.
“Given the financial constraints facing the oil and gas industry and the reluctance to make major investments until oil prices recover, the ability to rapidly access affordable power generation that doesn’t tie up capital could be what’s needed to jump-start exploration and development activities across Africa,” he says.
Mallet also points out that mobile fast-track power can be used to help modernize existing oil and gas operations, such as refineries in Africa that were built 30 or 40 years ago and are still being powered by previous-generation turbines. “Mobiles turbines provide refineries the ability to replace their old turbines without interrupting operations. The fact that this solution is quite cost effective also is appealing since the savings generated by the improved efficiency and output of the new turbines will more than cover the cost of the mobile bridging power during the months-long replacement process.”
Finally, Mallet says that mobile power solutions offer the reliability of electricity supply, which is especially important in regions that experience frequent blackouts. “It is important for a project to be able to prove that it can maintain its production levels and offer a consistent return on investment. Avoiding downtime due to power disruptions is vital for the future of any project.”
“Africa’s oil and gas sector has the potential to become an even bigger contributor to the global economy, but it hinges on projects being able to deliver more to investors. Access to reliable, cost-effective power should not be a stumbling block in this endeavour,” Mallet concludes.