The Nigeria LNG Train 7 project may not be operational until the next five years but investors, operators, and government officials are already exploring the prospect for more LNG trains.
Africa’s biggest gas producer has ramped up proven reserves of natural gas from 203 Trillion Cubic Feet (TCF) to 206.53 TCF largely on the back of indigenous producers who are derisking exploration in troubled Niger Delta areas.
In the 2020 marginal oil field bid round, gas rather oil was the major focus as half of the fields awarded to producers were in offshore areas where gas is stranded because the big oil companies did not see the potential for monetising gas locally.
These developments speak to Nigeria’s desire to turn the corner from treating gas as an irritant in the search for oil to viewing the natural resource as an enabler for the economy.
Nigeria has the biggest gas reserves on the African continent but is energy poor, push more gas molecules to the international market while its local industries pine away.
This realisation underpins the declaration by President Muhammadu Buhari last year that the years 2021 to 2030 would be Nigeria’s ‘Decade of Gas’.
Following this declaration, the government and operators have demonstrated a new resolve to do things differently.
In the over 40 presentations, several panel discussions, at the 4tH edition of the Nigerian International Petroleum Summit (NIPS) which held in Abuja from June 6-10, stakeholders made bold commitments to take gas more seriously.
Even the Minister of State for Petroleum Resources, renamed the summit, the Nigerian International Energy Summit (NIES), to underscore the reality that crude wasn’t Nigeria’s only natural resource.
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The Department of Petroleum Resources (DPR), the upstream regulator who had hitherto stood in the way of a liberalised gas pricing regime, now allows investors to do contracts on a willing buyer/willing seller basis.
On the back of this development, the NLNG has signed a gas supply agreement with three off-takers to begin delivering LNG to the local market.
The Company will supply 1.1 Million Tonnes Per Annum (MTPA) of LNG on a Delivered Ex-Ship (DES) basis to Asiko Power Limited, Bridport Energy Limited, and Gas-Plus Synergy Limited.
The SPAs will facilitate the project execution and infrastructural development by off-takers to aid LNG delivery into the domestic market.
“We are also looking to expand the LPG value chain by increasing our supply to the domestic market, guaranteeing LPG supply and enhancing its affordability, and enabling the development of a value network for a sustainable ecosystem,” said Tony Attah, the managing director/CEO of NLNG.
Nigeria’s current biggest gas deal the Train 7 project would be flagged off this week with a 5-year completion schedule already clearly mapped out.
The project will provide direct employment to 12,000 people and indirect employment to over 40,000 Nigerians. Local vendors and contractors would be taken to task to provide the materials required.
Timipre Sylva, minister of state for Petroleum Resources, said the industry must move from discussing the problems of the sector to taking concrete actions that will correct the ills in the sector.
He said the government of Muhammadu Buhari was committed to supporting their efforts to ramp up gas production and domestic utilisation.
A ministerial committee at the highest organs of government which includes the minister, the Finance Ministry representatives, industry operators, the NNPC, and a steering committee as well as a consultant who will all work together to deliver action for the Decade of Gas pronouncement has been created.
Several presentations by government officials betray an impatience to get things going and indicate that the government’s traditional cavalier attitude towards investors may have begun to thaw.
Investment opportunities
Greenville Energy, a local gas company has recorded massive success trucking LNG to locations far from natural gas sources in 16 Nigerian states and is moving to 20 states in a few months’ time.
There is a growing market to move gas to industrial customers, the creation of gas hubs to serve SMEs in commercial clusters, conversion plants for autogas vehicles, and the widening LPG market.
The NLNG’s shift towards supplying LNG to the local market opens new opportunities as it would mean an additional 1.1million MT of gas entering the local market creating thousands of new jobs.
It was the company’s effort to take up the challenge of supplying the local market LPG that largely accounted for the growth of LPG consumption from 50,000 metric tonnes in 2007 to over 1million metric tonnes today.
Emeka Ene, the CEO of Oildata Energy group in his presentation said that the winning strategy in Nigeria’s gas to power value chain is to deliver it sustainably, guarantee the security of supply and deliver socio-economic impact.
Ene argued that rather than build large power plants which cannot be easily maintained, investors should consider generating electricity in smaller amounts in locations closer to end-users, create distributed gas supply hubs to make up for gas supply shortfalls, and deliver energy in an environmentally friendly manner.
Better regulation
The presentations made by the DPR, the Nigerian Content Development and Monitoring Board, (NCDMB) suggest that the country is now becoming amenable to sensible regulations that would promote gas business.
“We were able to achieve the buy-in of the DPR because we keyed into the government’s programme and ensured that their interest to promote the good of Nigeria aligned with ours,”Attah said in a press conference on June 9.
The learning outcome for investors is that a government that is actively pushing a decade of gas, is not going to stand in its own way.
The DPR and the Gas Aggregation Company of Nigeria severally urged investors to discuss their plans with them promising to be a willing partner.
Even if the government’s intentions are doubtful, its finances indicate that it is running out of options. Nigeria spends almost 90 cents on every dollar earned servicing debts. Oil proceeds are falling and government expenditure is through the roof.
The NNPC did not remit to the Federation Account Allocation Committee (FAAC)in April leading the Federal Government to raid the income earned by the DPR in the marginal field bid rounds as part of funds to shore up FAAC.
The reality of energy transition is rousing the government from inertia as the surreal prospect of crude oil without buyers now appears possible.
New approach
This situation is prompting industry players to act differently. For the duration of the conference, collaboration, cost savings, and developing local content were the commonest expressions.
According to Sarki Auwalu, Director of the DPR, said the levers to attain a gas-powered economy are growing gas reserves, improving domestic gas utilisation and market development, building new gas infrastructure, focused gas exports, and ending gas flares.
