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Three ways to achieve boom in Nigeria’s domestic gas industry

Nigeria’s domestic oil and gas industry has stagnated due to many reasons but these three things when addressed will stimulate growth in the sector and improve the country’s overall economic wellbeing.

The Ajaokuta-Kaduna-Kano gas pipeline

The Federal Government of Nigeria (FGN) has prioritised exploitation of the country’s vast gas resources to increase domestic and industrial power supply, raise living standards and support sustainable economic growth and diversification.

READ ALSO:  FG to commence construction of Ajaokuta-Kaduna-Kano gas pipeline

The Nigerian National Petroleum Corporation (NNPC) estimates that Nigeria has around 202 trillion cubic feet (Tcf) of proven gas reserves plus about 600 TCF unproven gas reserves. Despite having the largest gas reserves in Africa, only about 25 percent of those reserves are being produced or are under development today.

A challenge that has slowed down gas development and utilisation in Nigeria is the lack of pieces of infrastructure such as gas pipelines to move natural gas from the point where it is produced to the marketplace and end-users. This is why the Ajaokuta-Kaduna-Kano gas pipeline is a critical factor and can spark a new wave of boom in the gas industry.

The Ajaokuta-Kaduna-Kano (AKK) pipeline is a 614 kilometre-long natural gas pipeline currently being developed by the Nigerian National Petroleum Corporation (NNPC). It is set to be laid between Ajaokuta and Kano in Nigeria and forms phase one of the Trans-Nigeria Gas Pipeline (TNGP) project.

The pipeline project is being implemented via a build and transfer (BT) public-private partnership (PPP) model, which involves the contractor providing 100 percent of the funding. The pipeline will cost an estimated $2.8bn and is currently scheduled for commissioning in 2020. Nigeria will close a $2.5bn financing agreement with Chinese lenders by the start of the second quarter of 2020 to fund the single biggest gas pipeline project in the country’s history.

On completion of the 614km Ajaokuta-Kaduna-Kano (AKK) natural gas pipeline, new gas-to-power plants will push power generation capacity to more than 10,000 megawatts (MW), in a country of nearly 200 million people that have faced perennial electricity shortages for decades.

Nigeria Gas Transport Network Code (NGTNC)

The Department of Petroleum Resources (DPR) has for at least five years been working on plans to release the Nigeria Gas Transport Network Code, a set of rules that are supposed to guide the use of the gas transportation system in the industry. The aim is to stimulate private sector participation in building pipelines.

The network code provides for non-discriminatory open access to gas transport infrastructure and is usually developed by the Transport System Operator (TSO) in consultation with stakeholders and approved by the regulator.

The Code is patterned after the United Kingdom’s Uniform Code (UNC). This is expected to promote investments in the gas sector; entrench specialisation and professionalism in gas business; develop the gas industry, and boost revenue generation for the country.

However, the DPR is yet to release the Network Code and this slows down a potential domestic gas boom in Nigeria.

Gas flare commercialisation

Oil companies in Nigeria produce over 4 billion standard cubic feet of gas per day. But nearly 80 percent of the associated gas produced is utilised or redirected into the earth crust.

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The remaining,  approximately 700 million standard cubic feet of gas is burnt in the open daily at 178 sites, causing tons of carbon to be emitted into the atmosphere.

Two hundred and twenty-six (226) companies have submitted bids to participate in National Gas Flare Commercialisation Programme, which was launched. Successful companies, called off-takers, are to emerge from the on-going process that requires the submission of proposals for “financially and technically sustainable utilisation projects.” This flared commercialisation programme is capable of developing new value chains and industries.

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