Gas is fast becoming transition fuel of the future and with large reserves of this energy resource, Nigeria is well-positioned to cultivate an economy based on clean, cheap, acceptable and readily available energy.
Nigeria has the ninth largest gas reserves in the world, proven 203 trillion cubic feet (Tcf) and unproven 600 Tcf. With strong linkages to the electric power, industrial, transportation, and agricultural sectors gas is vital to Nigeria’s economic development. This has spillover effects for the economic development of West Africa.
Evidence that Nigeria is underutilising its huge gas resources abound. The challenge has been how Africa’s most populous country can handle these gas resources going forward, to shape the future.
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Gas production in Nigeria has grown from 0 Tcf in 1958 to 2.90Tcf in 2018. Between 2001 and 2018, Nigeria’s gas production has grown by 1Tcf. Gas utilisation within the same seven years grew by 40 percent, from 49 percent in 2001 to 89 percent in 2018. A significant amount of this is reinjected for crude oil production. Gas flaring decreased from 51 percent to 11 percent in the same period. Sixteen percent of gas was exported to the international market in 2001 as against 41 percent in 2018.
Domestic gas utilisation has grown by 7 percent between 2001 and 2018, from 7 percent to 14 percent, respectively. This points to a vast opportunity in the domestic gas market. Domestic gas infrastructure deficits have impaired local gas distribution, between supply sources and markets. Several towns and cities in Nigeria are underserved and without access to gas.
“When you look at Nigeria’s gas infrastructure map, what strikes you is that there is more planned than actual infrastructure. A strong infrastructure base is extremely necessary for us to harness our gas resources,” Jumoke Fajemirokun, partner, Advisory Legal Consultants specialised law firm providing services to the oil and gas sector said at BusinessDay Energy Series 2020. “The good news is that the Nigerian National Petroleum Corporation is committed to implementing the gas infrastructure blueprint as laid out int the Gas Master Plan of 2008.”
Some of the major challenges in the sector include the dearth of major gas infrastructure projects in the last 20 years. Many projects have been unable to attain a final investment decision (FID). Divestments by international oil companies (IOCs) from onshore assets to focus deep water. Gas projects require huge capital outlays. There is no new entry in the sector by any global player.
Nigeria’s gas regulation is not working. Despite the domestic gas supply obligation (DGSO), many potential gas suppliers have been unable to secure gas from the Gas Aggregating Company of Nigeria (GACN),” Fajemirokun said.
These challenges have been brought about by the existence in the sector of legal and regulatory framework meant for oil. Gas requires an independent regulation and regulator. Significant competency and capacity gaps exist within the current regulatory institutions. Price regulations have hindered investments inflows into the sector. The fiscal regime disincentivises non-exploration and production companies (E&P) companies from investing in gas infrastructure. Market risks also exist because the domestic market is not deep enough. The electric power sector being the largest domestic off-taker is largely unable to pay for the gas it consumes.
Nevertheless, there some recent interventions by the government to rectify resolve these challenges. The National Gas Expansion Programme (NGEP), the Central Bank of Nigeria’s N250 billion intervention to support the NGEP, the National Gas Flare Commercialisation Programme, and service-reflective tariffs in the power sector. Then the going live of the National Gas Transportation Network Code is also a step in the right direction. It is also expected that the Petroleum Industry Bill would provide clarity on various issues in the commercial, regulatory, legal and institutional frameworks of the oil and gas industry.
