Nigeria swims in natural gas but clean fuel eludes industries

Nigeria has been described as a natural gas territory with some crude oil reserves but the lack of a market-driven pricing mechanism, clear legal framework and gas sale agreements have discouraged investments and depressed gas supplies.

Nigeria has around 202 trillion cubic feet (Tcf) of proven gas reserves plus about 600 Tcf unproven gas reserves, according to the Nigerian National Petroleum Corporation (NNPC). Although this secures Nigeria a spot on the list of top 10 countries by gas reserves, the country is not among the top 20 gas producers in the world. This has been attributed to the lack of a comprehensive legal and fiscal regime for natural gas. Nigeria has no legal framework to attract sufficient investment in the gas industry.

Nigeria is one of the world’s largest economies where businesses rely so heavily on diesel-powered generators. Telecommunications companies need them to run their mobile phone towers across the country. Telecoms giant MTN told local the media in 2015 that it spends N8 billion ($26 million) annually on diesel.

The Manufacturers Association of Nigeria has estimated that its members spent N129 billion in 2016 and N117 billion in 2017 on private diesel-powered generation. The data also revealed that the manufacturers spent a further N43 billion on private power generation in the first half of 2018. The machines guzzle cash and spew pollution.

This is despite the country’s abundant gas reserves. Current opportunities to utilise gas in Nigeria include gas to reinjection schemes, gas to power schemes, gas to petrochemicals (as feedstock), liquefied natural gas (LNG), liquefied petroleum gas (LPG) and compressed natural gas (CNG).

“Fresh investments into Nigeria’s gas value chain have stalled for reasons such as the non-passage of the Petroleum Industry Bill (PIB), unclear legal framework and gas sales agreements, and the absence of willing-buyer willing-seller enablers,” Chichi Emenike, head, gas ventures at Neconde Energy Limited, told BusinessDay on phone. Neconde Energy Limited is in a joint venture with the Nigerian Petroleum Development Company (NPDC) on Oil Mining Licence (OML) 42.

Due to the inherently capital-intensive nature of gas projects, a comprehensive legal and fiscal framework is needed as an incentive for investors to bring in fresh funds. This makes creating a natural gas market in a developing country such as Nigeria a challenging undertaking. To overcome this, economic and investment policy choices are more important than the size of gas reserves.

The path toward a sustainable economy, experts have said, is deeply entwined in harnessing these resources, attracting the needed financial capital as well as nurturing productive utilisation.

Natural gas is a clean-burning, safe fuel that saves money at the pump and can benefit the environment as it reduces Nigeria’s dependence on petroleum. It is a naturally occurring mixture of gaseous hydrocarbon, non-gaseous non-hydrocarbons and gaseous non-hydrocarbons found in underground reservoir rocks either on its own (non-associated gas) or in association with crude oil (associated gas).

“There is no specific regulation for gas in Nigeria apart from the one designed to create a domestic gas market. Petroleum laws have mostly focused on liquid hydrocarbons such as crude oil. There are no clear incentives, tax regime and royalties for gas,” Ayodele Oni, energy partner at Bloomfield Law Practice, said.
“In more advanced countries, liquefied petroleum gas (LPG) and compressed natural gas (CNG) are used to power cars and trucks,” Oni said.

The use of CNG as auto fuel in Nigeria presents so many benefits. Natural gas powers more than 175,000 vehicles in the United States and roughly 23 million vehicles worldwide. The advantages of natural gas as a transport fuel in Nigeria include its domestic availability and reduced greenhouse gas emissions over conventional petrol and diesel fuels.

“I foresee more gas projects happening this year, though. At Neconde, we are doing more gas projects this year too. But gas gathering and exporting infrastructure remain one of the biggest challenges,” Emenike said.

In 2017, the Federal Executive Council passed the Nigerian National Gas Policy intended to remove the barriers affecting investment and development of the sector and transit Nigeria from an oil-based to an oil and gas-based economy but like the gas master plan, it lacked a legal framework.

 

STEPHEN ONYEKWELU