Pipeline security seen as critical for new gas investments

The current reordering of the global energy landscape as a result of Russia’s war with Ukraine could boost African gas suppliers if they find a way around threats to pipeline security, experts say.

The reality of a world facing rising gas demands amid a push by the European Union (EU) to halt imports of Russian gas is making it imperative for Nigeria to unlock its over 600 trillion cubic feet of unproven natural gas reserves.

Analysts say the EU’s search for alternative supply to Russian gas could create thousands of new jobs, revenue diversification for the Nigerian government, and turn the country into a dominant geopolitical player in Africa, using its gas resources, just like Australia, Russia, or Qatar.

However, Nigeria’s inability to rein in oil theft and sabotage of energy assets poses threats to pipeline infrastructure such as the Obiafu-Obrikom-Oben (OB3), and the $2.6 billion Ajaokuta-Kaduna-Kano (AKK) gas pipeline projects, which are critical arteries to move gas.

Joe Nwakwue, a former chair of the Society of Petroleum Engineers, said for Nigeria to achieve its gas potential, it must avoid past mistakes with oil by having proactive structures for securing gas infrastructure.

“Without gas pipeline security for projects like AKK and OB3, there will be gas leaks, which will result in environmental footprints, inaccurate inventory accounting for pipeline gas and revenue losses to gas producers among others,” he said.

The AKK pipeline is a 614-kilometre (381.5-miles) pipeline project, a section of the Trans-Nigeria Gas Pipeline, which, upon completion, can move 2.2 billion cubic feet of gas per day from Kogi and traverse Abuja, Niger, Kaduna, and terminate at Kano.

Though they are few and far between, industries along this corridor will have sufficient gas to power growth. However, findings by BusinessDay showed there is a growing risk of insecurity for the pipeline as it traverses wide ungoverned areas in Nigeria’s volatile Northern region.

A report by Global Energy Monitor, a San Francisco-based non-governmental organisation that catalogs energy projects worldwide, believes regional infrastructure deals are required to advance pipeline infrastructure in Nigeria and other African countries.

“These pipelines remain vulnerable to political and security challenges, a lack of clear regulatory frameworks, the prevalence of corrupt practices on all sides, protracted wrangling between state governments and promoter companies, and a host of other complexes,” it said.

Kelvin Atafiri, who runs Cavazanni Human Capital Limited, an investment firm exposed to the Nigerian gas market, said although the government acknowledges Nigeria’s gas reserves are more than five times its oil reserves, it has been unable to move gas around as fast and as efficiently as possible.

“From the ‘Year of Gas’ to the ‘Decade of Gas’, Nigeria has never been short of platitudes and slogans; we need more proactive actions that will attract more private capital to the value chain of Nigeria’s gas,” Atafiri said.

At this year’s Nigerian International Energy Summit in Abuja, Mele Kyari, group managing director of Nigerian National Petroleum Company Ltd (NNPC), said the corporation was planning to create a gas hub hinged on the completion of the OB3 gas pipeline project that would serve Nigeria and neighbouring countries.

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According to the NNPC, the OB3 pipeline project is expected to commercialise over 2 billion cubic feet of gas per day and generate billions in revenue as well as create thousands of employment opportunities for Nigerians.

It is planned to feed the Asa North-Ohaji South gas project, one of the largest greenfield gas condensate development projects, that will produce 600 million standard cubic feet of gas per day, an equivalent of about 2.4 gigawatts of electricity for the country.

With gas pipeline projects like AKK and OB3 under construction, African Energy Chamber believes Nigeria’s gas is expected to see supply growth up until 2025, driven by existing producing projects and new developments.

Beyond projects, Gbenga Komolafe, chief executive officer of the Nigerian Upstream Regulatory Commission, said Nigeria is currently reviewing the field development plans by operators to ensure that more gas is produced to Nigerian gas fields.

“We are also supporting UTM offshore limited by encouraging the local investor to get the development of Nigeria’s first Floating Liquefied Natural Gas (FLNG) project completed which will add an additional 2.2 million tonnes of gas per annum to the market. NLNG also has more capacity to put more gas in the market,” he told Arise TV in a recent live broadcast.

The UTM’s project is based on an FLNG vessel at OML 104, which holds the Yoho field. The operator of OML 104 is Mobil Producing Nigeria with 40percent, while the NNPC owns the remaining equity.