West African Market Integration

Abstract With a landmass of about 5.1 million square kilometers and a community of 15 member states, Western Africa is one of the worlds most endowed regions with energy sources. The region holds about 13% of the total proven gas reserves in the world, with Nigeria accounting for almost all that figure with 185tcf. While natural gas is fast becoming the worlds preferred choice of energy thus seeing an increase in its demand, the region is yet to fully harness the potential she possess in energy generation. West Africa still ranks amongst the regions with the lowest energy generation in the world. Major sources of energy are petroleum, natural gas and hydroelectricity and it is estimated that no more than 20 percent and in some countries as little as 5 percent of the populace have direct access to electricity. The figure falls to about 2 percent in the rural areas. This situation has become a major hindrance to the economic and technological growth of the region. Thus, energy has become a major driver for regional integration in West Africa, which can assist many of her individual economies in overcoming the mismatch between energy demand and energy resource endowments. Furthermore, this can take advantage of economies of scale and help countries develop and gain access to low-cost energy to sustain future growth. Resource rich smaller economies would then export energy which can become engines of growth and development while larger economies energy imports may help postpone, reduce, or avoid capital investments in new production facilities and thereby overcome temporal cash flow problems. To integrate the various economies of the region, the governments of the various countries have commenced a number of regional projects. The West African Gas Pipeline (WAGP) is a good example of regional energy market integration. It shows on the one hand achievements of government and regional institutions and the other, the willingness of international companies to invest in the regional market. The West African Power Pool is another regional project with the concept of integrating the national grids of the region member countries. In this paper, the huge gas potential of the West Africa region will be highlighted and the impact of the gas production from the region on the global economy. The energy situation of the region will also be discussed with the various challenges detailed. The roles of natural gas in the various regional projects being executed will be listed with status update of these projects with particular emphasis on the West Africa Power Pool (WAPP) and the West Africa Gas Pipeline project. Various geopolitical influences will be discussed with major emphasis on polices that impact integration. Finally recommendations will be made on some key success factor that will promote rapid regional development in the face of the mounting challenges.