The ongoing Ukraine-Russia conflict has exposed the lack of foresightedness in the management of Nigeria’s oil and gas industry. Since the beginning of the conflict, crude oil prices have risen to a record high, crossing over a $100 per barrel. Notwithstanding, Nigeria has not benefited from the upswings in crude oil prices as other crude oil producing countries. The reasons are not far-fetched.
One, Nigeria is unable to meet its crude oil production quota owing to persistent pipeline vandalism and crude oil theft. Two, the revenue Nigeria realises from the sale of crude oil leaves its coffers through debt and subsidy repayments. Three, Nigeria’s energy sector has not received the kinds of new investments that will make it ready to tap emerging opportunities.
This is why it is now difficult for the nation to be the last resort for the European countries seeking alternatives to the crude oil and gas they currently buy from Russia.
This means between 2020 and 2040, the world will consume additional 340 million tons of LNG. This additional demand will be met by shrewd investors and countries
According to data provided by the Gas Exporting Countries Forum (GECF), Nigeria has 5,750 billion cubic metres of proven natural gas. The country has a natural gas marketed production of 47.94 billion cubic meters; 0.89 billion cubic metres of pipeline exports; 31.04 billion cubic metres of LNG exports while domestic natural gas consumption runs into 13.19 billion cubic metres.
Nigeria is the sixteenth country in the world in terms of natural gas production, accounting for 2.9 percent of the global natural gas production. The country is third in Africa, after Algeria and Egypt.
The lack of investment in natural gas means that the proposed ban on Russia’s energy imports by the European Union cannot benefit Nigeria. This is because it takes a period of about five years to get a liquefied natural gas plant ready. Besides, Nigeria has not consistently increased her natural gas production in the last decade.
In 2010, Nigeria produced 2.392.84 billion cubic feet of natural gas, out of which 1,811.27 billion cubic feet was utilised while 581.57 billion cubic feet was flared. Fast forward to 2020, Nigeria produced 2,729.10 billion cubic feet of natural gas, out of which 2,535.97 billion cubic feet was utilised, while 193.13 billion cubic feet was flared.
The only sector where significant progress was made was in gas flaring, which was reduced by 66.8 percent. In other segments, gas production rose by 14.1 percent while utilisation increased by 40 percent.
A number of liquefied natural gas projects during this period did not see the light of the day. A case in point is the Brass Liquefied Natural Gas. Others are the Nigeria LNG Train 7 and the Olokola Liquefied Natural Gas(OKLNG) between Ondo and Ogun states.
Available data show that the Federal Government of Nigeria has spent about $1.2 billion on the Brass LNG since 2003, when the project kicked off. The OKLNG has gulped $600 million since inception in 2005. The Brass LNG is a $20 billion project while OKLNG is a $9.8 billion project.
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Brass LNG is owned by the Nigerian National Petroleum Corporation (NNPC) that controls 49 percent; Eni International, 17 percent; Phillips (Brass) Limited, an affiliate of ConocoPhillips, 17 percent, and then, the Brass Holdings Company Limited, affiliated to Total, 17 percent. Due to the lack of direction by the Nigerian government, ConocoPhillips and Chevron have withdrawn from the Brass project.
The OKLNG was designed to produce 12.6 million tons of liquefied gas per annum. It is fast turning into a white-elephant project for its stakeholders. In 2020, NNPC reported the OKLNG project’s unrecognised losses worth N10.66 billion. This is a project that is yet to take off, and yet it is already incurring losses due to non-completion.
The Federal Government is of the position that the market for liquefied natural gas is depressed, which explains why these projects have not made much headway. Some stakeholders also posited that the Federal Government did not have enough resources to prosecute three LNG projects at the same time.
However, market realities today are in contrast to the views expressed by the Federal Government. According to Shell, the global demand for LNG rose by 6 percent to 360 million tons in 2020. The rising demand for LNG is expected to be sustained over China’s announcement to become a carbon neutral by 2060. Consequently, the global demand for LNG is expected to reach 700 million tons by 2040.
This means between 2020 and 2040, the world will consume additional 340 million tons of LNG. This additional demand will be met by shrewd investors and countries. It is high time the Nigerian government made the right investment choices in the oil and gas sector, especially natural gas.
Moreover, such is the abundance of gas at our disposal that we can always look inwards. This is with a view for using this resource as the basis for our power system and industrialisation. In metaphorical terms, we wish to urge that the rich boy should stop behaving like a poor entity.
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