Energy Capital & Power

Harnessing the Power of Natural Gas in Angola

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Natural Gas. Angola. Bigstock

Despite holding 27 trillion cubic feet of natural gas reserves, Angola has been slow in monetizing its gas resources to date, instead concentrating almost exclusively on crude oil production.

However, as the natural gas sector increasingly positions itself as a key component of the energy transition – as well as a means of generating power, easing fuel shortages and diversifying revenue streams  – Angola is launching a series of comprehensive gas monetization and utilization initiatives. 

While the country currently exports 95% of its natural gas production in the form of LNG, it is aiming to retain 25% of production in-country via associated value-added industries by 2030. Coupled with efforts to initiate its transition towards cleaner fuel sources, the southern African nation is prioritizing the development of natural gas projects, initiating infrastructural investment with the purpose of utilizing the resource as a power generation solution. 

Angola LNG Maximizes Use of Associated Gas, Reduces Gas Flaring

The expansion of natural gas across the continent is, in part, being fueled by the global energy transition, with gas serving as a relatively clean burning fossil fuel that releases 50-60% fewer emissions from combustion than coal or petroleum products. Gas-fired plants also complement the generation profiles of renewable sources, thereby increasing the reliability and availability of power. At present, the Angola Liquefied Natural Gas (LNG) plant in Soyo is the country’s only active gas monetization facility, processing gas from seven offshore fields and representing one of the largest single investments in the Angolan oil and gas industry. The plant has the capacity to process 1.1 billion cubic feet of natural gas per day, supplying natural gas to the Angolan market to meet local industrial and energy needs.

Notably, the Angola LNG plant is the first facility to develop the country’s abundant natural gas resources and reduce gas flaring and greenhouse gas emissions in the process. Its use of associated gas as a primary feed source makes it unique in the region, as most facilities utilize non-associated gas. As a result, the plant contributes more significantly to the elimination of gas flaring in Angola and related environmental stewardship concerns. The monetization of natural gas works with the elimination of gas flaring, and by creating economic pathways to gas monetization, particularly for marginal fields in which gas flaring is a common practice, producers can capture more value from their resources, often able to monetize marginal or stranded fields through small-scale LNG and compressed natural gas infrastructure.

Sonangol Enhances Gas Availability in the Market

Natural gas also represents a critical solution to easing fuel shortages in Angola, while creating new revenue streams for regional gas exports. In September 2021, national oil company Sonangol completed the modernization and installation of the gas filling unit in Cabinda, which tripled the plant’s filling capacity from 3,000 12-kilogram gas cylinders per day to 9,000 cylinders. Located in Cabinda’s Ocean Terminal, the facility also underwent rehabilitation between January 2020 and June 2021, which expanded gas storage capacity from 72 to 224 cubic meters. These upgrades, in conjunction with an increase in gas pumping and the modernization of the bottle filling system to an automated system, are expected to enhance gas availability in the market by up to 28%, easing fuel shortages in the northern region of the country.

Angola has also been following in the footsteps of other African gas-rich countries in utilizing gas for domestic transportation. In November 2021, Sonangol relaunched rail transportation services powered by butane gas from Luanda on the west coast to Malanje in the northern region, after more than 30 years of interruption. During the launch, Sonangol also announced plans to build a modern facility in the Kinguila locality in the northwestern region, with storage capacity of up to 400 cubic meters of gas, in line with aims to increase gas storage and delivery volumes in both Malanje and neighboring provinces.

Soyo LNG Plant to Facilitate Gas-to-Power

In addition to representing an intermediary step in the energy transition, gas-to-power technology presents a cost-effective alternative for power generation, of which Angola is in short supply. In July 2022, Angola’s Ministry of Energy and Water announced plans to increase the electricity access rate from 42.8% to 60% by 2025, on the back of new gas-fired and renewable power generation and the expansion of the national distribution network. The country currently derives 12% of its installed generation capacity from natural gas. Efforts to expand this capacity include the planned 750 MW Soyo II combined-cycle power plant, which is currently in permitting stage and is expected to enter into commercial operation in 2024.In October 2021, Sonangol launched the second phase of the Falcão Natural Gas Project, in a bid to increase the processing, storage and distribution capacity of natural gas. The project comprises onshore infrastructure connecting the Angola LNG plant with the existing Soyo I combined-cycle power plant. With the launch of the project’s second phase, Sonangols’ processing capacity is expected to double, taking natural gas figures from 75 to 125 million cubic feet.

Meanwhile, in November 2019, Angola formed a New Gas Consortium (NGC) comprising its national oil company and leading international operators to explore and produce gas, representing the first upstream natural gas partnership in the country. In August 2022, the NGC reached a final investment decision on the Quiluma and Maboqueiro (Q&M) fields, which will be the first non-associated gas development project in Angola and feeds gas from the Q&M fields to the onshore Angola LNG processing plant. In addition, the NGC is working to construct another LNG plant in Soyo, designed to process 400 million cubic feet of gas per day and which will also be connected to the combined-cycle plant to generate electricity for domestic use, as well as regional export. While large-scale gas projects typically require a built-in market to be viable, fortunately, Angola holds just that – able to export surplus electricity to gas-deficient neighboring countries.

Falcão Phase 2 Project Offers Diversified Downstream Industries

Natural gas also holds the potential to transition Angola away from its dependence on crude oil and towards the establishment of diversified, non-commodity-based industries. The aforementioned Falcão Natural Gas Project, for example, cements the country’s intent to monetize natural gas reserves and diversify both the energy matrix and national economy, specifically by creating new opportunities in fertilizer production. Phase 2 is set to significantly increase reception and processing capabilities, enabling the distribution of gas for both industry and petrochemical plants across the southern region.

In terms of agriculture, natural gas provides the ability to reduce costs of food production and importation and to establish large-scale industrial farming through the development of locally manufactured chemical fertilizers. Natural gas plays an integral role in fertilizer production, as it is used as a primary raw material for the production of liquid ammonia and resulting carbon dioxide gas, which is then combined to create urea fertilizer. Industrialization through gas monetization initiatives – refining gas into liquid fuels, fertilizers and other derivatives – also carries the ability to boost domestic incomes, produce more exports and in greater quantities, and reduce vulnerability to global market volatility. As a result, gas monetization, coupled with the development of biofuels, holds the pathway to diversification in its ability to fuel downstream industrial and agricultural sectors.

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Grace Goodrich

Grace Goodrich

Grace Goodrich is a Publications Editor at Energy Capital & Power, where she writes about the intersection of energy, policy and global finance in sub-Saharan Africa's fastest-growing economies. Grace produces our Africa Energy Series investment reports in Angola and Equatorial Guinea (2019), as well as co-authored African Energy Chamber: Road to Recovery (2021).