Funding, infrastructure woes threaten Nigeria’s gas supply to global market

Nigeria’s goal of becoming a global supplier of gas is becoming bleak on the back of the huge infrastructure deficit in the industry, lack of adequate and necessary funding as well as its slow transition and optimisation of gas.

This was the submission made by industry stakeholders during the decade of gas action plan dialogue held in Abuja on Monday who also noted that these constraints will also drag the implementation of the Decade of Gas initiative.

According to the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Nigeria’s gas reserves grew to 209.5 trillion cubic (tcf) in 2022 which ranks as the ninth largest in the world, but harnesses only about 8 billion standard cubic feet per day (bscf).

Aaron Sayne, lead, of the domestic energy transition, Natural Resource Governance Institute (NGRI) in his presentation said Nigeria requires over $1 trillion to build a new energy system and move from the use of fossil fuel, of which the source of such funds is currently unknown.

He added that foreign investments could have significantly covered the gap but the Nigerian domestic gas market as it is now is not a foreign investor’s dream in terms of policies and enabling environment.

“The IOCs have developed Nigeria’s gas when it suited their interests and wishes; as the IOC is moving away, the local indigenous of Nigerian oil and gas companies are looking to take their place but how many of those companies have the capacity and the access to finance needed to pay for gas projects; banks have less capital to spend and a lot of them have bad experiences lending for domestic gas projects previously,” he said.

Read also: Nigeria’s petrol import from Europe drops 48% since subsidy removal

This is worsened with the fact that companies are investing less in new gas projects because on the average, they do not make the predictable long term returns that oil exports do and hence see it as a less lucrative business.

He expressed concerns about Nigeria being left behind, stating that following the Russia-Ukraine crises, many EU countries are looking to Africa countries for supply and signing long terms agreements, however Nigeria stands the risk of losing its current market because countries like Spain, Portugal are speeding up their transition away from gas while other markets like Australia are being supplied at lower prices.

In his remarks, Orji Ogbonnaya Orji is the Executive Secretary, Nigeria Extractive Industries Transparency Initiative (NEITI) said there is need to review the country’s gas utilization policy to align with its energy transition plan

Making reference to the agency’s policy advisory document on the way forward in the oil and gas industry, he said for gas utilization policy to work, there is a need to prioritise investments in infrastructure such as specific coactivity across upstream facilities to processing power plants among other key things.

“To a large extent, achieving the desired gas expansion will require an estimated $20 billion annually to bridge Nigeria’s infrastructure gap, given the shrinking fossil fuel investment landscape, clarity is required of the infrastructure to be prioritized,” he said.

He added that there is need to review and implement the gas infrastructure blueprint designed to provide the backbone gas pipeline and processing network originally at the heart of the Gas Master Plan.

“The Federal Government should develop and publish a detailed, realistic, costed, and comprehensive Gas Policy with clear roles for the state, non-state actors, and investors with timelines to track periodic progress; develop an industry-specific linkage between the integrated gas policy with Nigeria’s energy transition policies with a supporting action plan built on a robust monitoring and evaluation framework to track implementation,” he said.

Louis Ogbeifun, Executive Director, African Initiative for Transparency, Accountability and Responsible Leadership (AFRITAL), speaking on funding said Nigeria’s focus on using gas as a sustainable energy alternative is capital-intensive, with speculation that it would need over $1 trillion to achieve the 2060 zero-emission targets.

He said there concerns as to how this project will be funded seeing that international funding support is dwindling while foreign interests from some parts of the continent is being dismissed which is spreading to other countries in the sub-region.

“With the myriads of challenges facing the Federal government, especially with funding regimes and the bullish behaviour of the USD against the Naira, what alternative right-sizing plans do the government have to ensure that the decade of gas action plan is not in jeopardy? We should also be worried and begin to ask how the government shall deal with the burning of our gas, also popularly known as gas flare,” he said.

He added that many countries are abandoning fossil fuels as a significant energy source and for Nigeria to make fulfil its promise to join the train, it would have to increase its crude oil production in the short run beyond the current level to have money to diversify and invest in other alternative sources.