Benin is positioning itself to become one of West Africa’s major gas and power hubs at a time when countries across the continent are strategically tapping into their own energy reserves.
With a population of less than 12 million and a GDP of $10.35 billion in 2018, Benin is often overshadowed by its massive neighbour, Nigeria.
Yet, as African countries try to revitalize their energy sector, bring in private capital and develop gas-to-power, industry experts say that it is in West Africa and Benin that observers should look for positive developments.
“With recent legislative reforms and a strong political will, the small West African nation is strengthening its place as the capital of the West African Power Pool (WAPP) and positioning itself as a big hub for gas and power in the sub-region,” says Pan-African energy-focused legal services firm, Centurion Law Group.
On July 24th, French super-major Total signed a Gas Supply Agreement and Host Government Agreement with Benin and its state utility, the Société Béninoise d’Energie Electrique (SBEE). The agreement will see the development of a Floating, Storage and Regasification Unit (FSRU), the first in West Africa. LNG supplies sourced from Total’s global portfolio are set to start in 2021 and last for 15 years.
“This is no small move for a region that has repeatedly tried to develop its gas-to-power infrastructure but has remained faced with financing, infrastructure and regulatory challenges,” said Centurion in a recent statement.
Between Cote d’Ivoire, Ghana, Nigeria and Senegal, up to 7,750 megawatts (MW) of gas-to-power facilities could be installed by 2030 according to Power Africa, a US government-backed project that seeks to boost energy development across the continent. Sub-Saharan Africa has a current installed gas-to-power generation capacity of about 18,000 MW, 70% of which is in Nigeria.
“In practice however, erratic supplies from the West Africa Gas Pipeline, lack of gas and transmission & distribution infrastructure, unattractive pricing structures and outdated master plans mean that such potential might remain under-exploited,” Centurion has warned.
In this context, Centurion notes that the recent signing of agreements with oil marketer, Total “brings hope to a region hungry for power.”
It is first the result of strong political will. Under the leadership of President Patrice Talon, Benin has been implementing a strong Government Action Plan (PAG) since 2016 which places the revitalisation of the country’s energy sector and private sector capital as a pillar of economic development.
Centurion says the formula is working as Benin grew by almost 7% last year and is expected to grow by 6.5% this year (IMF), placing it in the top 15 of the world’s fastest growing economies. And political vision has led a better ease of doing business.
Benin has been revising its Electricity Code, and its Council of Ministers approved last month the new framework of intervention for the Independent Power Producers (IPPs), improving investment and operating conditions for private investors in the country’s power industry.
“As a result, the agreement with Total will not only see the development of West Africa’s first Floating, Storage and Regasification Unit, it is also reviving hopes of seeing clean LNG powering future homes and industries across the region,” Centurion Law Group concluded.