Despite Nigeria’s vast natural gas reserves, the country continues to grapple with chronic energy shortages, highlighting a striking paradox in the West African nation even as it celebrates 64 years of independence.
With an estimated 209 trillion standard cubic feet of proven natural gas reserves, Nigeria holds Africa’s largest gas reserves and is ranked eighth globally.
But the country faces frequent power outages, feedstock shortages, high electricity costs, and an unreliable energy supply, stalling economic growth and frustrating millions of residents.
“Nigeria’s gas challenges are historical,” said Ayodele Oni, partner at Bloomfield Law Practice. “Before the enactment of the Petroleum Industry Act (PIA), the old Act said nothing about natural gas but its definition.”
Years after years, administrations, past and present, from military regimes to democratic leadership, have made efforts to unlock the gas reserves potential, but it had little or no effect.
For example, Nigeria has moved two points down to eighth position in Liquefied Natural Gas (LNG) exportation globally, according to the latest International Gas Union report. It continues to flare gas that could power millions of households and has failed to meet up with bringing various pipeline projects on stream, missing multiple deadlines while at it.
Recent initiatives, including the ‘Decade of Gas’ programme, aim to expand gas-to-power projects and improve the domestic energy supply. However, these measures have been slow to materialise, with infrastructural gaps and regulatory bottlenecks still hampering progress.
“There was no law, there was no legal basis (pre-PIA), particularly statutory ones, supporting natural gas,” said Oni. “With time, there were pieces of guidelines and regulations around natural gas. But for so long, there wasn’t any law, and if gas projects have long lead times, and it takes a while, you need substantial investments, even more than crude oil.”
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Decade of Gas Initiative
Launched in 2021, the Decade of Gas initiative is aimed to make natural gas the backbone of Nigeria’s energy sector by 2030. However, despite its $20 billion focus on domestic gas use, execution challenges have raised doubts about its impact.
Experts cite a lack of transparent regulation and ineffective gas distribution management as major obstacles.
Kelvin Emmanuel, an economist, criticised the focus on non-associated gas incentives as insufficient.
Emmanuel addressed the lack of concrete plans, saying, “In 2024, the government’s strategy for corporate Nigeria focuses on incentives for non-associated gas, but it’s just a series of vague presentations. Critical issues like pricing models, funding for greenfield projects, flare commercialisation, and domestic gas delivery obligations remain unaddressed.
“The sector’s progress is hindered by lack of clarity, with NLNG’s capacity utilisation dropping from 99 percent to 65 percent. This is why the sector has attracted less than $1 billion in the past year, despite the ‘Decade of Gas’ initiative declared in 2017 set to end in three years,” he added
Gas-to-power
Natural gas is by far the most common source of electricity production in Nigeria. In 2023, roughly 79.5 percent of the country’s electricity generation was derived from this source. Hydroelectric power ranked second, accounting for about 20.4 percent of Nigeria’s power production.
However, more than 85 million Nigerians lack access to electricity, even as the nation has mobilised about $4.5 million for on-grid and off-grid power in the country, the US Agency for International Development (USAID) revealed.
The amount of gas flared in the first six months (H1) of 2024 can provide electricity to more than three million homes, BusinessDay’s findings have shown.
An estimated 148.7 million standard cubic feet of gas were flared in H1 of 2024, according to the National Oil Spill Detection and Response Agency (NOSDRA).
Recent data from the National Oil Spill Detection and Response Agency (NOSDRA) showed the country’s flared gas that held a power generation potential of 3,401.83 megawatts (MW).
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CNG deployment
Compressed Natural Gas (CNG), touted as a cleaner, cheaper, and more sustainable alternative to petrol and diesel, has been presented as a solution to ease the pressure on Nigeria’s strained transportation sector.
However, the country’s efforts to implement a widespread CNG policy have faced numerous roadblocks. Although there is a growing infrastructure in place, such as filling stations dedicated to CNG, the adoption rate remains slow.
A recent visit by BusinessDay to several conversion centres listed on the PCNGI website revealed that though these centers are operational, the major obstacle to the wider adoption of CNG conversion lies in the high cost, which has deterred many vehicle owners from making the switch.
Ifeoluwa Darius, a Lagos-based bank worker, shared her experience with the CNG conversion process, expressing concern over the hefty upfront cost.
“I converted my SUV to CNG late last year, and I ended up spending almost N1 million. While the cost of CNG is significantly cheaper and lasts longer than petrol, the problem is that not many people can afford such a large sum upfront for conversion,” Darius said.
Her frustration reflects the broader issue. Although CNG offers long-term savings, the initial financial burden is discouraging widespread adoption.
Findings revealed that depending on the car and engine, it costs between N750, 000 and N2.5 million to convert petrol-powered vehicles to CNG-compatible ones.
Gains in the sector
The Nigerian government has churned out reforms to help attract investments in the gas industry. Even though results have been slow, some positives have been recorded.
To attract investments, the federal government has approved various policies such as the Gas Pricing & Domestic Demand Regulations (2023), the Natural Gas Pipeline Tariff Regulations (2023), the Nigerian Gas Transportation Network Code, the National Nigerian Gas Masterplan, the National Gas Policy (2017) and the Petroleum Industry Act (PIA) 2021.
“These policies and laws provide a conducive environment for private sector investment in domestic gas development,” said Ekperipe Ekpo, minister of state, Petroleum Resources (Gas).
The PIA, he said, also established the Midstream and Downstream Gas Infrastructure Fund (MDGIF) to support more private sector investment in gas infrastructure development.
He said that any private entity interested in investing in the gas midstream and downstream sectors is free to do so, “with government incentives available to encourage investments that contribute to national economic growth and development.”
Talking about the slow gains in the sector, David Ige, a former group executive director, Gas & Power, at the Nigerian National Petroleum Company (NNPC) Limited, at an event earlier in Abuja, said Nigeria has grown at about 3 percent in the last seven years as a country.
“And the three percent growth is evident also in the challenges of the pipeline. The pipeline is barely operating at a steady state, which is very symptomatic of a lack of supply basically to the system.”
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