Bunmi Bajomo, Chief Operating Officer and Group Head of Corporate Banking at Ecobank Transnational Inc., has stated that Russia’s decision to halt gas exports through Ukraine, effective January 1, 2025, presents an opportunity for African energy producers. This development poses major challenges to energy security, economic stability, and geopolitical relations across the continent.
The cessation of Russian gas exports stems from a combination of geopolitical tensions, expired contractual agreements, and strategic decisions by both Russia and Ukraine. Russia has long been a key supplier of natural gas to Europe, with pipelines through Ukraine playing a critical role. Previous disputes, such as in 2006 and 2009, had already exposed vulnerabilities in this dependency. The most recent transit agreement between Russia’s Gazprom and Ukraine’s Naftogaz, established in 2019, expired on December 31, 2024. Amid ongoing conflict, Ukraine declined to renew the agreement, aiming to reduce Russia’s energy leverage over Europe.
Historically, Russia supplied nearly 40% of the European Union’s natural gas imports, with Germany alone importing around 55 billion cubic meters in 2021. The sudden stoppage threatens supply chains, particularly in heavily reliant countries like Germany and Italy, creating potential economic shocks.
Gas prices are projected to surge by 30% in the short term due to the supply disruption. The EU may face up to €100 billion in additional energy costs if alternative sources are not secured swiftly, increasing financial strain on consumers and industries alike. Higher production costs could drive inflation, elevating the prices of goods and services across the region.
The energy shortfall has spurred renewed European interest in African gas resources, positioning countries like Algeria, Nigeria, and Mozambique as critical suppliers. Mozambique, which began LNG exports to Europe in 2022, is projected to increase exports to 10 million tons annually by 2027, significantly expanding its role in global energy markets.
Africa’s Major Gas Producers
Africa hosts several major gas producers with the capacity to play a pivotal role in global energy supply. Nigeria, holding the continent’s largest proven gas reserves, is a key player with vast LNG export capacity. Algeria, another significant producer, has long supplied natural gas to Europe through the Trans-Mediterranean pipeline. Mozambique has recently emerged as a growing force with its LNG projects, particularly the Coral Sul floating LNG platform, which has begun shipments to Europe. These producers are well-positioned to fill the gap created by Russia’s withdrawal.
Challenges and Recent Developments in Nigeria’s Gas Sector
Nigeria has faced significant policy and regulatory challenges in producing and exporting gas. Inconsistent regulatory frameworks, inadequate infrastructure, and delayed project approvals have historically hindered the full realization of its gas export potential. Additionally, security concerns in the Niger Delta and policy uncertainty have further constrained the sector.
However, recent positive developments signal progress. The Nigerian Petroleum Industry Act (PIA) enacted in 2021 has introduced clearer regulations, aiming to attract foreign investment and streamline the governance of the oil and gas sector. Furthermore, the government’s Decade of Gas initiative seeks to boost gas production and export capabilities through infrastructure investments and partnerships, positioning Nigeria to better leverage Europe’s energy crisis.
Recent policy reforms by President Bola Tinubu have further bolstered Nigeria’s capacity to increase gas production and export. Five executive orders aimed at providing fiscal incentives and reducing bureaucratic hurdles are expected to unlock up to $2.5 billion in new investments for the oil and gas sector. Additionally, Tinubu’s approval of five oil asset sales and two final investment decisions (FIDs) is anticipated to accelerate project development and increase gas output.
Simultaneously, rising oil prices further compound economic pressures. As of January 2025, Brent crude oil reached $76.22 per barrel, reflecting a 7% increase over the past two months. The surge in energy costs is straining economies globally.
Amid these developments, Nigeria’s Dangote Refinery emerges as a key player in stabilizing local fuel prices and reducing import dependency. With a daily capacity of 650,000 barrels, the refinery aims to cushion market volatility and provide long-term economic relief.
Europe’s shifting energy demands create strategic opportunities for African producers to expand capacity, encourage regional cooperation, and strengthen their positions in the global energy landscape. The evolving scenario underscores the importance of diversification and the growing role of African energy markets in global supply chains.
