Five areas Nigeria’s gas is in demand amid energy transition

Much of the focus on energy transition has been on how quickly renewables can displace fossil fuels, but reducing emissions from hard-to-abate sectors and places may boost natural gas, a report by Citi Bank has said.

Analysts at the bank say that natural gas is an energy source that could be part of the Energy Transition. The report identifies five key demand areas where the proposition for natural gas is strong and could give it an edge as a transition fuel.

These are providing reliable electric grid supply; using its smaller footprint to provide power generation in urban areas, and as a bunkering fuel to help reduce emissions in shipping.

Other areas identified in the report include natural gas as a lower-emission fuel in road transport and in the production of blue hydrogen.

The report also states that the oil and gas industry itself needs to work on decarbonising its processes — from wellhead to generation — including reducing carbon gas emissions and methane leakage in production and transport.

The Nigerian situation

Africa’s biggest oil producer is looking to play actively in three of the key demand areas for natural gas: grid power, electricity in urban areas and in road transport.

While some sections of the industry consider gas a transition fuel, the Nigerian authorities call it a destination fuel and hope to leverage the commodity along with renewables to combat the threat of energy transition.

To this end, the Nigerian government has declared a decade of gas and driven investments in pipeline projects such as the Ajaokuta- Kaduna-Kano pipelines, among others.

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Nigeria produces about 8bscf of natural gas, ships 39 percent out of the country, uses about 23 percent locally for power generation and industries, burns 26 percent as reinjection fuel and flares the remaining 11 percent.

The government has invited bids for investors to use the flared gas and is looking to ramp up use of natural gas locally as transport fuel and decentralised power plants in urban areas.

The country is gradually building out the gas refuelling infrastructure to deepen gas use in the transport sector. There are currently 17 CNG plants, 4 LNG producers, 533 LPG retail stations built along petrol stations (basically to supply cooking gas), which the NNPC says has potential for autogas.

According to Yusuf Usman, chief operating officer of NNPC Gas & Power, in a presentation at the Centre for Petroleum Information (CPI) webinar on energy transition held last Friday, Nigeria is driving auto-gas deployment in three phases: deployment of CNG buses to labour unions across states, deployment of autogas vehicles nationally, and deepen national integration through completion of key infrastructure and encourage in-country production.

Usman acknowledges that the challenges facing the plan are lack of investments, uncertainty surrounding the Petroleum Industry Bill, inappropriate gas pricing and poor infrastructure.

Discerning investors can seize the opportunities energy transition provides rather than rue the coming end of fossil fuels.

The Nigerian plan to counteract the impact of energy transition also provides opportunities and industry operators are taking positions already.

“Energy transition does not give us sleepless nights because we plan to grow our gas production, and gas will still be relevant for a long time to come,” notes Eberechukwu Orji, CEO of ND Western, a local oil firm.

A study by BloombergNEF’s (BNEF) New Energy found that the world will need to invest $173 trillion in energy transition systems to achieve net-zero carbon emissions by 2050.

Some sectors that will benefit from increased investments include renewable energy and electrification, which are the backbone of energy transition.

Hydrogen, carbon capture and new modular nuclear plants are emerging tools being developed and their deployment will hasten the pace of energy transition.

As the world comes to terms with the role of greenhouse gas emissions in climate change, consensus has shifted on the role of natural gas as a substitute for petroleum, the Citi report notes.

Instead, renewable energy, “green” energy sources, such as hydrogen and biofuel, and energy storage are being championed as low-carbon alternatives.

“But these technologies still need time to ramp up in scale and cannot provide the full amount of energy necessary to run the global economy today,” the report states.

While these alternative energy technologies mature, natural gas can be used as a lower-emitting “transition” fuel to bridge to a net-zero world, particularly a substitute fuel or feedstock in hard-to-abate sectors, it says.