Nigeria’s prodigious natural gas reserves are beyond dispute. According to the Nigeria Liquefied Petroleum Gas Association (NLPGA), the nation boasts a staggering 209.5 trillion cubic feet of gas reserves.
This puts Nigeria in the global top ten of gas producers and solidifies its position as Africa’s natural gas linchpin.
Further insights from the African Energy Chamber’s August 2023 State of African Energy report elucidate that Nigeria, along with Algeria and Egypt, are anticipated to be the primary contributors to Africa’s natural gas supply.
Combined, these three countries are projected to account for approximately 80% of the continent’s total natural gas production.
However, the report brings attention to a more disquieting fact: the short-term output for each of these nations is expected to plateau.
- It states, “Algeria’s output is projected to grow modestly from 10 billion cubic feet per day (Bcf/d) in 2023 to 11 Bcf/d by 2027. Meanwhile, Egypt’s production is set to remain stable at 6.25 Bcf/d. Nigeria’s output is slated to see minor fluctuations between 4.5 Bcf/d and 5.5 Bcf/d.”
The report grimly unveils Nigeria’s ‘Decade of Gas’ policy as a failure, achieving a mere 5% of the set targets, glaringly falling short of the 85% benchmark set by the federal government.
This distressing revelation by the African Energy Chamber sheds light on a pressing issue eroding Nigeria’s natural gas sector: the dire challenge of supply.
Ed Ubong, former President of the Nigerian Gas Association (NGA), has recently raised the alarm regarding a critical gas supply deficit in the nation, emphasizing the urgent nature of the problem and cautioning that failure to act could result in severe national risks.
Nigeria, for years, has nurtured ambitious plans to leverage its vast natural gas reserves. However, these plans have consistently been thwarted by supply bottlenecks.
The Energy Outlook Advisors Newsletter, dated October 1, 2023, recently highlighted a troubling decline in Nigeria’s natural gas production.
After reaching a peak output of 49.4 billion cubic meters (bcm) in 2020, production plummeted to 40.3 bcm by 2022.
Dan D. Kunle, a prominent natural gas analyst, echoed similar concerns in a discussion with Nairametrics.
He emphasized that for Nigeria to achieve its ambitious goals for the “Decade of Gas,” two crucial prerequisites must be met: ensuring the availability of natural gas from wellheads and implementing proper gas processing.
Merely discussing these aspirations in public forums is inadequate; the nation must squarely address and overcome its supply challenges to meet its strategic objectives.
Dwindling Fortunes in LNG Exports: A Call to Action for Nigeria
Mr. Kunle highlights Nigeria’s precarious financial position in the gas export sector, primarily due to the Nigerian Liquefied Natural Gas (NLNG) Limited falling short of its target production capacity of 22 million tons per annum.
Despite Nigeria’s abundant natural gas reserves, NLNG grapples with significant supply challenges resulting from gas unavailability.
Mr. Kunle pinpoints a major cause: a notable lack of investment in non-associated gas (NAG) exploration and production. This shortfall undermines Nigeria’s capacity to meet gas export goals, urging urgent reversal of this trend.
Persisting on this declining path risks squandering Nigeria’s vast gas potential, a worrisome pattern reminiscent of past missed opportunities.
Notably, Nigeria lost its competitive advantage in crude oil exploration when the U.S. discovered substantial shale oil reserves, entering global competition.
Mr. Kunle warns that Nigeria must confront an uncomfortable reality: as time passes, new oil and gas markets will emerge.
Continued grappling with issues like crude oil theft, vandalism, operational inefficiencies, and a lack of political will to enact investment-attracting policies will increasingly marginalize the country.
Nigeria has also relinquished a significant market share in India to Russian crude oil exports.
Now more than ever, Nigeria urgently requires a comprehensive, data-driven policy framework to navigate the intricate global energy market.
Relying solely on vast natural gas reserves is inadequate; proactive efforts are needed to address supply chain bottlenecks and upgrade infrastructure.
Gas Pricing Challenges in Nigeria
Nigeria’s downstream gas sector grapples with delays and pricing issues that discourage domestic supply focus, as noted by natural gas analyst Etulan Adu in a recent discussion with Nairametrics.
Despite ample gas resources, effective utilization in key sectors like power, transportation, and industry is lacking, casting doubt on Nigeria’s credibility as a major global player holding the ninth-largest gas reserves, nearly 3% of the world’s total.
Adu advocates for calibrated pricing to incentivize suppliers and protect consumer interests, proposing guarantee-backed payment contracts to address the pricing dilemma and spur sector growth.
This pricing focus aligns with a backdrop of declining gas production in Nigeria due to rising domestic and international demand.
In contrast to optimistic projections at the September 2023 Gastech conference by Nigeria’s Minister of State for Gas, Ekperikpe Ekpo, official data shows an 11% drop in gas production in 2022, totalling 40.4 billion cubic meters (bcm), significantly lower than the annual production of over 49 bcm in both 2019 and 2020.
This production reality versus potential disparity underscores the urgent need for effective strategies to bridge the gap and maximize Nigeria’s abundant gas resources.
Closing Infrastructure Gaps in Nigeria’s Gas Sector
Stakeholders in the industry emphasize the urgent need to address infrastructure shortcomings in Nigeria’s gas sector, along with security issues affecting production.
The Gas Infrastructure Development Programme (GIDP) aims to build vital gas infrastructure like pipelines and processing units.
A significant issue is the Nigerian Gas Company’s (NGC) lack of compression capabilities, affecting efficient gas distribution. Also, security concerns need urgent attention to boost production levels.
Etulan Adu, a natural gas analyst, pointed to the country’s ample but underutilized offshore gas reserves. To tap these resources, proactive steps beyond current regulations are necessary, particularly for dry gas in offshore sectors.
Adu argued for creating an investment-friendly environment across the gas value chain, focusing on Compressed Natural Gas (CNG) as a petrol alternative. He stressed the need for compensation mechanisms for suppliers.
Additional Context on CNG
Nairametrics reported that the government has allocated N100 billion for high-capacity CNG buses to mitigate the impact of removing petrol subsidies. Kelvin Emmanuel, Non-Executive Director at OA Markets Nigeria, highlighted the lack of infrastructure as a significant roadblock for CNG deployment.
He noted the absence of critical high-pressure transmission pipes, especially in South-East Nigeria. Emmanuel argued for comprehensive investment in infrastructure ranging from gas-gathering pipelines to treatment facilities to make CNG a viable alternative.
