BusinessDay
NigeriaDecides2023

Nigeria ‘carrying last’, as gas prices soar

Nigeria, Africa’s second-largest oil producer with a proven gas reserve of 209.5 trillion cubic feet (tcf), is losing out in exploiting its resource amid the global surge in gas prices.

For weeks, gas prices have been recording volatile movement in the market on the back of Russia’s invasion of Ukraine.

On Thursday, natural gas stood at $5.79 per British thermal unit (btu).

Experts said infrastructural deficit, underinvestment, and mismanagement among other things are the source of Nigeria’s inefficiency.

Oreoluwa Owolabi, corporate intelligence Lead, GAS360 said, “We do not have the infrastructure to meet the demand. Nigeria, the ninth country with the largest gas reserve in the world, is not utilising it.

He said, “Underinvestment in Nigeria is affecting our export capacity for gas. We are also not producing to full capacity.

“The LNG Train-7 project that recently kicked off that is expected to be online by 2024 is meant to increase our gas export capacity to about 30 percent. It should have come earlier but was delayed by the coronavirus (COVID-19), which detained the construction process.”

The potential increase in the volume of gas export to the EU is a huge opportunity that Nigeria should tap into, according to Uchenna Ibe, a UK-based clean energy specialist.

“The demand is already there, and Nigeria has more than enough reserves to match that demand.

“To unlock this opportunity, a huge upstream investment will be needed in the sector. Unfortunately, demand alone might not be enough to convince investors who are mostly already sceptical about the future of gas in the global energy system.”

He further said: “To make the best of it and attract the right level of investment, Nigeria should arm itself with a robust and future-proof energy strategy that incorporates clean energy technologies such as carbon capture and blue hydrogen, both of which would synergise with natural gas to offer a more sustainable energy system.

“That way, investors would not only be assured of alignment with the emerging trends but also the long-term security of investment,” Ibe said.

Oyinkepreye Orodu, the Head of Department, Petroleum engineering at Covenant University, said, “It has always been said that Nigeria is a gas province, but the benefit(s) of the war for Nigeria in terms of the IEA Director’s comment may not be a short-term benefit.

Fatih Birol had earlier said Russia may cut off gas to Europe entirely as it seeks to strengthen its political leverage amid the Ukraine crisis. “Europe should prepare now,” the IEA director said.

However, Orodu said the short-term benefit may come in the form of a temporary reversal of policy or/and inflow of investment for known gas regions of the world, especially Africa.

He said: “We must be prepared; the talk of the “decade of gas” must be actualized based on the “Gas Master Plan.”

“Nigeria Liquefied Natural Gas (NLNG) Train -7 is on the pipeline; good one; it’s time to revive the other LNG that stakeholders pulled out from, Brass LNG, Bayelsa State, and Olokola LNG, Ogun State, thereby increasing our gas export.

According to Orodu, we can also export to Europe through Niger and Algeria by pipeline, and the Ajaokuta-Kaduna-Kano AKK project is a plus to this; Algeria is another gas hub.

The AKK pipeline is a 614km-long pipeline developed by Nigerian National Petroleum Corporation (NNPC) to transport natural gas from southern Nigeria to central Nigeria.

Meanwhile, Theophilus Sanjo, corporate commercial lawyer, Seplat Energy, said, “Nigeria should benefit from the decline in Russian gas export, but the challenge is that apart from Nigeria Liquefied Natural Gas (NLNG) that exports LNG out of Nigeria, the remaining gas producers, to the best of my knowledge have local off-takers as mandated by law.

“Gas is still in short supply in Nigeria, which can be seen in lower electric power supply. Until we reach gas sufficiency in Nigeria, I don’t see how we can begin to export to the international market.”

He said: “Ease the legal bottleneck in the oil and gas industry. The government should demonstrate its commitment to transparency, competency, and accountability in its oil and joint ventures with other industry players.

Read also: Nigeria can leverage technology to curb crude oil loses – Expert

“In addition, withholding of consent to oil and gas acquisition should stop,” he said. “It is frustrating and serves as a disincentive to foreign investors to come to invest in the industry.”

The corporate commercial lawyer further said poverty needs to be alleviated and insecurity confronted.

“Many oil platforms and wells have been shut down because of evacuation challenges.

“However, associated gas production cannot be possible without crude oil evacuation. If security improves, more oil will be produced and, consequently, gas

Orodu, on the other hand, said the big question is the timeline scale for net-zero; the clock is ticking, and this urgency demands appropriate and timely action by the government.

“In addition, the COP-27 Scheduled for Egypt this year may see a significant shift in the established net-zero timeline for countries borne out of the Ukraine-Russia war. It may well be a defining point.”

On the other hand, the International Energy Agency (IEA), in its latest Gas Market Report said global natural gas demand will decline for the next three years as Russia’s war in Ukraine raises prices and fuels fears of further supply disruptions.

According to IEA, today’s record-high gas prices are depressing demand and causing some gas users to switch to coal and oil, while recent sharp cuts in Russian gas flows to Europe are raising alarms about supplies ahead of the winter.

“The turmoil is damaging natural gas’ reputation as a reliable and affordable energy source, casting doubts about the role it was expected to play in helping developing economies meet rising energy demand and transition away from more carbon-intensive fuels.”

The report said this raises the risk of prolonged tight market conditions. While there has been a recent surge in LNG investment decisions, the resulting infrastructure will not be operational until after 2025.

“Recent developments have led to a considerable downward revision of gas’ growth prospects. Global gas demand is set to rise by a total of 140 billion cubic metres (bcm) between 2021 and 2025, according to the report – less than half the amount forecast previously and smaller than the 170 bcm increase seen in 2021 alone.

“Russia’s unprovoked war in Ukraine is seriously disrupting gas markets that were already showing signs of tightness,” Keisuke Sadamori, Director of Energy Markets and Security said.

“We are now seeing inevitable price spikes as countries around the world compete for LNG shipments, but the most sustainable response to today’s global energy crisis is stronger efforts and policies to use energy more efficiently and to accelerate clean energy transitions.”

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