African LNG plans could exacerbate Iran war oil risk exposure
The conflict raging in the Middle East has left many oil-importing nations in Sub-Saharan Africa exposed to significant crude supply shocks, but new LNG developments will only add to that risk, say experts.
Sub-Saharan Africa’s economy is heavily exposed to the Iran war that began little over a week ago due to its heavy reliance on oil imports, but plans in some countries to begin purchasing large volumes of LNG could exacerbate future supply shocks further, according to new research.
In South Africa, for instance, there are plans to develop an inaugural LNG import terminal and a fleet of gas-fired power plants in spit of “long lead times and rising costs for gas turbines globally,” said Zero Carbon Analytics (ZCA) in a briefing published on Monday.
South Africa is developing its first LNG import terminal — aimed at addressing energy shortages by supplying gas-to-power projects — at the Port of Richards Bay, an area already well-known for having the largest coal export facility in Africa.
The new LNG project is led by the Zululand Energy Terminal consortium, a joint venture between Vopak Terminal Durban and Transnet Pipelines. It involves a floating storage unit and onshore regasification, and is projected to start operating by 2028.
Yet if the first phase of the LNG terminal was already online and operating at its 2 million-tonne capacity, the LNG import bill to supply it would have surged from US$1.1 billion in 2025 to US$1.6 billion this year, assuming current European benchmark prices hold, according to ZCA calculations.
A recent report by the think-tank Ember said this is an unnecessary risk, arguing that solar, paired with battery storage, outcompetes gas in sunny countries like South Africa, particularly when the fuel needs to be imported. The two technologies alone could cover 95% of the power requirements of Johannesburg, showed Ember’s modelling.
Similar LNG ambitions in Ghana would “act as a further drain on the country’s international reserve holdings and domestic currency,” ZCA warned. The country’s first LNG terminal — which has been built near Accra and has a capacity of 1.7 million tonnes a year — would represent an annual import price tag of up to US$1.3 billion, based on current market dynamics, the consultancy added.
The current crisis in the Middle East shows “why gas is risky” in a region where the Iran war is likely to “substantially increase inflation and push up interest rates,” the briefing said.
Senegal, Benin, Eritrea, Burkina Faso and Zambia could experience the greatest economic shocks if oil prices remain high, according to the ZCA analysis, which is based on international reserves and other risk factors.
Sub-Saharan African nations can “shield themselves from gas supply shocks” by choosing renewable energy paired with battery storage instead of gas-fired power plants, ZCA said.
They can also reduce their exposure to global oil market dynamics by electrifying their transport networks, as Ethiopia has done, it added.
Since Ethiopia announced a ban on imports of vehicles powered by oil products in January 2024, electric vehicles now account for nearly 6% of all vehicles on the road in the country, compared to a global average of 4%.
(Writing by Sophie Davies)