• Tuesday, July 16, 2024
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Corruption stalls mega gasfields in energy starved Nigeria

In energy starved Nigeria, corruption and negative government interference in the oil industry has stalled the development of several mega gas fields, even as local industries collapse from lack of a cheap and reliable power source.

Exxon Mobil, Shell and other oil explorer’s active in Nigeria since the 1960’s have discovered about 182 trillion cubic feet (tcf) proven reserves of mostly associated gas, according to Nigerian National Petroleum Corporation (NNPC) data.

Most of those gas finds are however lying fallow like Exxon Mobil’s Erha field which was discovered some 15 years ago.

“Exxon runs an LNG plant in Papua New Guinea, however there is less gas there than in what was discovered at Ehra,” said one oil industry source, speaking to BusinessDay anonymously.

BusinessDay learnt that there have been disagreements between Exxon and NNPC on how to proceed with the development of the project, with the latter insisting on being a majority operator of the field.

Sources also say most Nigerian oil ministers for the past 15 years had just been looking to squeeze Exxon, or to get something out of it for themselves and their cronies, instead of developing a workable template to produce and process the gas.

Other gas finds worth billions of dollars which remain undeveloped by the Nigerian government and some international oil companies (IOCs) who own the assets, include Bosi which is reported to contain as much as 5-7 tcf of gas; the Nnwa/Doro structure, reportedly carrying 6-9 tcf of gas; the Ngolo trap (OPL 219) and Assa-North.

The Government/ NNPC claims of being majority owners of gas discovered by IOCs also mean they are often unable to pay their share to develop the assets.

“Lack of adequate joint venture funding is limiting growth in gas development and production,” said Elisabeth Proust, managing director, Total Exploration and Production Nigeria Limited, at the 2014 Society of Petroleum Engineering, Conference and Exhibition held in Lagos.

“Resolving JV funding could increase gas production by 2.8 billion cubic feet per day by 2020.”

In the meantime, Nigeria continues to generate as much electricity to power a small European city, with half the population or 81 million people not connected to the grid at all.

The country’s peak power generation averaged a little fewer than 4,000 megawatts on Friday, as gas shortages continue to hit output.

Total demand may be close to 20,000 megawatts, according to the Power Ministry.

Meeting that demand means raising gas supply to the domestic market to 6 billion scf a day from about 1.5 billion scf today.

There is currently a shortfall of 750,000 Mcf/d of gas supply to the power sector, according to NNPC data released in October, 2014.

The gas shortage is also hitting industrial users and making it impossible to set up industrial parks which could help lure some light manufacturing jobs from Asia and China.

“Disruption to gas supplies constrained production and market growth,” said Dangote Cement, Nigeria’s largest company by market value in its Q3 2014 results statement.

“Fuel disruption has continued to challenge the business,” the firm said.

While Dangote Cement may be large enough to withstand the challenges, smaller Nigerian firms are reeling from the cost of running backup generators, even as the recent naira devaluation meant the price of diesel rose as oil prices fell.

Gas is critical for Nigeria’s move to grow cluster industries,  manufacturing  jobs and productivity, because it is an abundant and cheap energy source in the country.

The head scratching contradiction of Africa’s top oil producer and largest natural gas reserves holder, battling with gas shortages is purely a self inflicted wound due to corruption in the NNPC, which Nigerian leaders have failed to correct, other sources say.

“Gas has to be let go by the government (NNPC/NAPIMS). There is no gas available for power plants because there are no terms on which gas will be developed,” said another oil industry source.