The vast and well-documented gas reserves in East Africa continue to whet the appetite of investors along the New Silk Road — stretching from Beijing to Lagos — especially as the global population and subsequent energy demand soars. China, Japan, India and the Middle East are particularly hungry for liquefied natural gas (LNG) and so the intensifying global competition amongst LNG exporters means East Africa’s window of opportunity is shrinking, certainly facing stiff competition.
Tanzania and Mozambique — home to East Africa’s largest natural gas reserves and with a combined capacity of nearly 250tn cubic feet (tcf), must quicken their pace as the race for supply contracts accelerates. East Africa benefits from convenient geography, with the coastline acting as a springboard to market to rising demand in the Middle East, India, China, Southeast Asia and Northern Europe. 
Global LNG production hit 250mn metric tonnes (m/t) last year, rising by 4m m/t on 2014, according to a Wood Mackenzie report. The consultancy cautions that a further 125m m/t of LNG under development means that the majority of market growth will come post-2016. East Africa’s plans to ramp up its LNG exports in the early 2020s will face strong competition from both emerging and established exporters, with everyone jostling to lock in Asian clients where possible. 
Qatar remains the world’s biggest LNG exporter, while Iran, home to the world’s second largest gas reserves, has started increasing its marketing efforts in Europe, India and Pakistan after the Western-imposed sanctions were lifted on January 17. Russia, a long-time and reliable European supplier, is also focusing on Asian clients, whilst Australia is in the running to displace Qatar as the worlds largest LNG exporter by 2018. Westwards, the first LNG exports from Sabine Pass in the US, marked a milestone in February in the country’s journey from an energy importer to an exporter. In addition, China and some Middle East energy producers — notably Kuwait — are looking to possibly develop their shale gas reserves, which, if successful, could narrow the LNG import market over the medium to long-term. 
Amid this abundant supply, natural gas prices are unlikely to recover in 2016, according to 69% of respondents to a GI Industry Survey in January. 
Despite this hefty competition, investors are still eager to develop infrastructure that leverages East Africa’s coveted gas assets. The Dubai-based Dodsal Group has discovered natural gas reserves estimated at 2.7 tcf in the Ruvu Basin near Dar es Salaam, that they estimate to be the country’s largest onshore gas discovery with a value of $8-$11bn (bn). The company has earmarked $300m to invest in Tanzania over the coming two years. 
State-run Tanzania Petroleum Development Corp (TPDC) is working alongside Shell, Statoil, Exxon Mobil and Ophir Energy after securing a land deal for a LNG plant on Tanzania’s coastline in January. The plant is well-positioned to utilise the country’s offshore gas reserves when it starts up in the early 2020s. 
The national significance of Tanzania’s LNG export market is vast; the country’s central bank expects LNG to be the main driver of the country’s transformation into a middle-income nation by 2025. This is a valid target considering that the International Monetary Fund (IMF) expects Tanzania to continue reporting the 7% growth it achieved in 2015. Tanzania will also partly help fill the economic vacuum left by the weak economic performances in historical powerhouses Nigeria and South Africa. Flows of cross-border trade, investments, human capital and politics are entrenched throughout Africa’s economies and Tanzania’s bullish streak could act as a support for the continent’s sliding performance. Low commodity prices mean the IMF has put Africa’s 2016 growth rate at 3%, down from the initial 4.3% outlined last October. 
Meanwhile, the incentive for Mozambique to nurture political stability and lure more investors to Maputo is clear; the country could earn up to $5.2bn a year by 2026 from LNG exports, creating over 70,000 jobs in its gas sector.
The country’s national oil company ENH, South Africa’s SacOil Holdings, China Petroleum Pipeline Bureau and China Petroleum & Technology Development Corp are pushing ahead with a joint-venture to build a $6bn natural gas pipeline by 2020. The 2,600km gas pipeline will run from Rovuma Basin in northern Mozambique to South Africa’s Gauteng province, where there will likely be offtakes for others in the South African Development Community — Botswana, Namibia, Zimbabwe, Angola and Malawi to name a few. Mozambique supplies two-thirds of South Africa’s current consumption and is also eyeing supply deals with India. 
The vast potential of East Africa’s LNG reserves faces little debate. But, Tanzania and Mozambique must quickly court investors to leverage their assets and secure clients in Africa and along the New Silk Road before other LNG exporters cross the finish line. 

* John Roper is the head of Middle East, Uniper Global Commodities.

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