In one of the most ambitious projects of its kind, Algeria, Nigeria and Niger are collaborating on a pipeline to supply Nigerian gas to Europe. The proposed $15bn Trans-Saharan Gas Pipeline (TSGP) will cross 4,300 kilometres of largely desert terrain between Brass in southern Nigeria and Beni Saf on the Algerian coast, before joining up with Algeria’s 550km-long trans-Mediterranean pipeline network.
The scheme’s promoters, Nigeria and Algeria, expect it to carry 20 billion cubic metres a year (cm/y) of gas to Europe from 2015, and 30 billion cm/y by 2030.
Trans-Sahara Pipeline in Numbers
Length of planned pipeline – 4,300km
Projected cost – $15bn
Initial pipeline capacity – 20 billion cm/y
cm/y=cubic metres a year. Source: MEED
The proposed trans-Saharan pipeline would have substantial benefits for the project’s main sponsors. For Abuja, it is a way of monetising its gas, much of which is currently flared, and providing energy to remote regions in the north of the country.
Algiers would benefit from the chance to free up some of its own gas production to serve its domestic market and expand its power generation capacity, and the project would enhance its reputation as a key gas supplier to the international market.
But it is not only the project’s local backers that stand to benefit from the scheme. The pipeline has a strategic significance that extends well beyond its African footprint.
In Europe, a combination of declining domestic gas production, rising energy consumption, and environmental considerations make gas an increasingly appealing power source.
The TSGP also offers Europe the chance to reduce its dependence on Russia, which currently supplies about a quarter of its gas.
EU Energy Commissioner Andris Piebalgs has given his political backing to the scheme, and the European Commission has offered to play a role in the funding of the project.
“It is a very interesting project,” says Ferran Tarradellas, spokesman for the energy commissioner. “Nigeria is a non-traditional supplier, so it would help the diversification process.”
Europe has long been keen to reduce its dependence on Russian gas, but recent events have made the task more urgent. Russia has increasingly used energy supply as a foreign policy tool, and interruptions to gas exports to the Ukraine in January 2006, and Belarus a year later, have heightened Europe’s sense of vulnerability to its political machinations.
While Russia can claim, with some justification, that it has long been a reliable gas exporter to Europe, the sight of Russian tanks rolling into South Ossetia, a region of Georgia with separatist ambitions, in early August despite EU protests will have done little to calm the nerves of Europe’s energy policy-makers.
But Russia is one step ahead. Gazprom, the third-largest oil and gas reserves holder behind Saudi Arabia and Iran, approached the TSGP’s developers earlier in the year to express an interest in building the pipeline, and has also told Abuja that it will take on the country’s gas infrastructure development programme.
“The EU is tying itself in knots trying to find non-Russian sources of gas, and the Russians are playing a good game of chess to cover every move,” says a source at one major European oil and gas engineering company. “Every move the Europeans make, they are ahead of them.”
The EU denies that it is frustrated by Gazprom’s strategy. “If someone spends $20bn building a pipeline, they are going to put gas in it,” says Tarradellas. “We consider Russia to be a reliable supplier. If Gazprom does something to reduce its reputation on the European market, then it will be the end of Gazprom.”
But Tarradellas is still keen on finding other gas sources. “We do not want to find that if there is an explosion or an accident we have no alternatives,” he says.
Should the project come to fruition, Gazprom is likely to be just one of several potential candidates for construction work, and the project’s size dictates that consortiums, rather than individual companies, are likely to be involved. France’s Total is another company that has expressed interest in the work.
If politics turns out to be a factor in contractor selection, Gazprom will not necessarily be the main beneficiary. Although Moscow and Algiers have held periodic talks on gas co-operation, their friendship has not been productive. Algiers let a high-level energy agreement between the two countries lapse in late 2007, admitting that little had come of it.
Algiers’ abundant capital and rising gas production contrast sharply with burgeoning Russian debts and plateauing production, and with both countries developing their upstream activities throughout Africa, they may come to see one another as competitors rather than allies.
If the TSGP is to progress to the construction stage, it must address a range of challenges. The project is technically complex, requiring 15-18 compressor stations to keep gas flowing through the 48-56-inch-diameter pipe, but not impossible.
A study by UK companies Penspen and IPA Energy in 2006 confirmed the economic and technical feasibility of the project, and pipeline projects of a similar scale have been successfully delivered elsewhere in the world. Although the oil price, to which gas prices are linked, has fallen dramatically in recent months, it is still understood to be well above that on which the project was benchmarked.
Concerns over the security of a pipeline traversing an area known for being home to terrorists and guerrilla movements may also be overstated. “Pipelines are very hard to blow up,” says the engineering source. “They are made of top-grade steel and buried 1.5 metres below ground. You have to know where they are, find them and uncover them.”
But other obstacles remain. Decision-making involving several countries is often a difficult process, and transit payments, which have caused problems for other cross-continental pipeline projects, could be a sticking point. Gas availability could also be an issue.
Nigeria has nominally allocated gas reserves for the TSGP, but is also developing its liquefied natural gas capacity and has pressing domestic demands on its gas. “Its power generation is in a shocking state, so the government is championing power sector development,” says one international energy consultant. “I imagine that at the moment, the TSGP would be a low priority.”
These hurdles, combined with the considerable practical challenges involved in such an ambitious project, could yet stymie the scheme.
For all their political manoeuvring, Russia and Europe may prove powerless to turn the dream of the TSGP into a reality.