Nigeria’s huge gas finds with an estimated market value of $462.5 billion have been left trapped and unproductive for decades, on account of lethargy by a government that is unable to create the policy environment to turn this huge resource into prosperity dividend for the country and its people.
The discovered gas resources, located in the South-South geopolitical region of the country, have become mere assets on paper, and they continue to be in the firm control of government bureaucrats whom analysts say are without a clue on how to unlock them to energise the economy.
According to Nigeria National Petroleum Corporation (NNPC), Nigeria has around 202 trillion cubic feet (Tcf) of proven gas reserves, a number that was increased from around 187 Tcf late last year, plus about 600 Tcf of unproven gas reserves.
But despite having the largest gas reserves in Africa, only about 25 percent of those reserves are being produced or are under development, according to Shell.
The proven gas reserves of 202 Tcf would be worth about $462.5 billion, based on Friday’s prices of $3.56 per thousand cubic feet, according to BusinessDay calculations.
“It’s a sad story and a combination of several factors which cut across the value chain,” Luqmon Agboola, head of energy and infrastructure at Sofidam Capital, said.
Agboola explained that the solutions are in a combination of factors such as consistent regulatory laws, more foreign investment, broader technical capacity and incentives to attract private funds.
Stakeholders say poor fiscal terms, the low government-dictated gas prices and lack of infrastructure, are the major impediments to investments that would unleash gas into Nigeria’s domestic economy, helping to boost industry, jobs and growth rates.
“The government has to hands off major gas assets which are currently lying fallow and allow qualifying private investors to run such projects,” Charles Akinbobola, energy analyst at a Lagos-based energy firm, said.
For every $1 billion improvement in earnings from gas, the exchange rate should appreciate about 1 percent, the Bank of Israel has estimated.
That country (Israel), unlike Nigeria, has in less than four years moved to monetise huge gas resources discovered in the offshore Mediterranean Sea.
Also, proven natural gas reserves in Nigeria could rise to 203 Tcf after the recent new discovery made by Eni, Italian oil major.
The well can deliver more than 100 million standard cubic feet/day of gas and 3,000 barrels/day of associated condensates, and will be immediately put on-stream to increase Nigerian Agip Oil Company’s gas production.
“If you take a holistic view of Nigeria’s economy and what it needs for industrialisation, gas is a bigger enabler of that than oil,” Bolaji Ogundare, CEO of NewCross Exploration and Production Limited, said.
Nigeria has never been short of big ideas and projects when it comes to gas. Nigerian Liquefied Natural Gas (NLNG) Trains 7 and 8, Brass LNG, and Olokola LNG have been awaiting final investment decisions for years. The $12 billion Trans-Saharan Gas Pipeline Project (TSGP), expected to help Nigeria achieve zero gas flaring by 2020, remains an illusion 17 years after it was conceived.
While NNPC and the Federal Government delay in unlocking the long-term projects, some trickle of new gas supplies, especially from International Oil Companies (IOCs) and indigenous players, is underway.
In the fourth quarter of 2018, Shell Petroleum Development Company of Nigeria Limited (SPDC) made the Final Investment Decision (FID) on the Assa North Gas Development Project in Imo State. The project is expected to produce 300 million standard cubic feet of gas per day and will be treated at SPDC JV’s gas processing facility and distributed through the Obiafu-Obrikom-Oben pipeline network.
Also, French oil major, Total, made a Final Investment Decision on Ikike Project in the OML 99 licence offshore Nigeria on Jan 29, 2019. The field is expected to commence production Q2 2021 and will deliver 70 Mboe to a maximum daily production of 32,000 barrels per day of oil.
ExxonMobil and Qua Iboe Power Plant Limited (QIPP) have initiated plans to invest a combined $1.6 billion in the development of gas and power projects in Akwa Ibom State. The initiative would see QIPP invest $1.1 billion in the building of a gas power plant with ExxonMobil investing $500 million in a gas project in the area.
Also some smaller independents have managed to keep their eye on gas development despite challenges.
Seplat Petroleum is also working on the Oben and Sapele Liquefied Petroleum Gas projects scheduled to come on board in 2020 while Uquo gas project owned by Seven Energy and Frontier Oil readily comes to mind as well.
Pan Ocean Oil Corporation (Nigeria) Limited has also completed three key gas projects, such as Amukpe-Escravos Pipeline Project, 200mscfd Ovade-Ogharefe Gas Processing Plant Phases I and II and OML 147 Early Production Facility at Owa-Alidinma which is expected to process 11,000 barrels of crude oil and 90 million standard cubic feet of gas daily when fully operational, according to a statement from Pan Ocean.
“Significant opportunities exist in the gas value chain either in upstream, midstream and downstream with incentive already codify into law,” KPMG, a multinational professional services network and one of the Big Four accounting firms, along with Deloitte, Ernst & Young (EY), said in its Nigeria oil and gas outlook content.
With well over 187 Tcf of gas reserves, Nigeria is believed to have more potential in gas than in oil, especially if diversity in global energy consumption is considered. The nation’s gas reserves estimated as the largest on the African continent have been assessed at three times the value of its crude oil reserves.
“The Nigerian government has been in the process of implementing the Petroleum Industry Bill (PIB) since 2006 and it has been estimated that uncertainty around it has cost the country $50 billion in capital projects,” consulting firm PricewaterhouseCoopers (PwC) said in its Africa oil and gas report.
DIPO OLADEHINDE
