Nigeria’s local gas focus opens investment opportunities

The Federal Government of Nigeria is ramping up financing for critical gas projects to encourage more use of the commodity locally, and this is opening up investment opportunities in pipeline construction, new industrial gas corridors, and power projects.

The reality of a world pushing for the energy transition to cleaner fuels amid rising output from natural gas producers in a mostly bearish global market is making it imperative for Nigeria to unlock its gas potential for domestic use. Only 9 percent of natural gas produced is used in Nigeria.

“I believe a revolution of our energy system is needed,” Timipre Sylva, minister of state for petroleum resources, said in a speech at the Nigerian Gas Association (NGA) multilogues organised virtually on February 25 and 26.

“And in that context, a key decision and renewed impact we can make right now is to persist in expanding the role and opportunities of natural gas towards economic recovery,” Sylva said.

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According to Sylva, the government’s recognition that gas will continue to play a critical role in economic development has led to the creation of programmes to “grow our gas economies through the development of industrial and transport gas markets, in juxtaposition with gas-to-power initiatives.”

Consequently, the government has mandated the Nigerian National Petroleum Corporation (NNPC) to ramp up domestic gas use from around 3 Billion Cubic Feet (BCF) to 4.5BCF and has identified some projects that would drive this outcome.

Mele Kyari, NNPC’s group managing director, in a presentation at the event, said through a representative that key projects that would unlock the 4.5BCF of gas for local use were the OB-3 pipeline, AKK pipeline, and Assa North, Brass Petrochemicals, ELP, among others.

The $3.2 billion 40-inch x 614km Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline project, a section of the Trans-Nigeria Gas Pipeline (TNGP), upon completion can move 2.2 billion cubic feet of gas per day from Kogi and traverse Abuja, Niger, Kaduna, and terminate at Kano.

Though they are few and far between, industries along this corridor will have sufficient gas to power growth. However, there is a growing risk of insecurity for the pipeline as it traverses wide ungoverned areas in Nigeria’s insecure Northern region.

Obiafu-Obrikom-Oben Gas Pipeline also called the OB3 Pipeline or the East-West Pipeline is a natural gas pipeline, running from the Obiafu-Obrikom gas plant in Delta State to the Oben node in Edo State.

The 48-inch, 127-kilometre gas pipeline has challenges, the most recent being the original construction contractor, Nestoil’s being technically unable to run the pipeline across the River Niger. A Chinese firm, China Petroleum Pipeline Engineering Corporation, is handling it and a first-quarter completion date is envisaged.

It is planned to feed the Asa North-Ohaji South, ANOH, gas project, one of the largest greenfield gas condensate development projects billed to produce 600 million standard cubic feet of gas per day, an equivalent of approximately 2.4 gigawatts of electricity for the country.

If the project succeeds, it will provide alternative links to the Nigerian Southwest whenever the crucial Escravos Lagos Pipeline system fails.

The Brass Fertilizer and Petrochemical Company Limited (BFPCL) is also another high-priority project. It will have two trains producing 5,000 tons per day (MTPD) of methanol and includes a 500-million standard cubic feet per day (MMscf/d) gas processing plant to extract condensate from the natural gas, prior to feeding the balance lean gas to the methanol plant.

It will also include gas manifolds and pipelines to connect the gas processing plant to the gas fields and an export facility.

“We are looking to establish two gas hubs, one at Oben and the other one at Brass,” said the NNPC boss.

The gas hubs, the NNPC said, “Will create a situation where announcements on gas prices will happen and industry will begin to references in Nigeria for gas pricing,” the NNPC boss stated further.

Other projects like the Assa North driven by Shell and Assa North Gas processing company, which signed off $650 million financing is another critical project.

“All projections show that 60-70 percent of the gas that forms the basis of 4.5BCF will come from power, so there is a need to fix broken transmission lines and improve the collections downstream to be able to make money from the investments made in gas,” the NNPC said.

To this end, the state oil company said it was looking to establishing 5,000mw of additional power into the network, and now engaging with stakeholders to resolve the issues so that investments made could be realised.

However, operators say gas pricing is still a contentious issue. “We have seen unaffordable gas prices for our investments, we need prices that work,” said Roger Brown, CEO of the indigenous oil firm, Seplat.

Osagie Okunbor, managing director, SPDC and country chair, Shell Companies in Nigeria (SCiN), cautioned that Nigeria’s regulatory approach to gas should not be too focused on extracting rent as it did oil, but to create a fiscal and regulatory environment that would spur investments into gas projects because they have a salutary effect on the economy.