-By Teddy Nwanunobi
Nigeria is blessed with an abundance of mineral resources but over the years, the country has depended so much on oil. The over reliance of black gold has led to the near abandonment of the development of the other mineral resources that would have made the diversification of the nation’s economy an easy one.
The declaration of 2020 as a Year of Gas by the Federal Government meant that a sleeping giant may have realized how much its gas could be a saving grace over oil.
Considering the impact of the Coronavirus (COVID-19) pandemic on Nigeria’s economy, it was important to look at why the country’s neglected gas reserves needed to form part of the energy reforms. Then Nigeria’s oil projects were facing threats from the pandemic as international majors slashed capital spending. That put the onus on the Federal Government to raise its game in terms of competitiveness in gas, as well as oil.
Recent reports suggest that Nigeria may be making steady progress, in terms of its hope on the available gas reserves in the country. In Africa, Nigeria is known to have the most extensive gas reserves. Last year, the country made it to the top 10 on the global gas log.
The year 2020 was not the best year for businesses across the world. But it was not the case with the gas-based economies. According to the Paris-based International Energy Agency (IEA), gas-based economies were largely shielded from the impact of the pandemic in the first quarter of 2020 as prices held up.
No doubt, there is a chronic shortage of gas in Nigeria, which can be Nigeria’s saving grace, according to Ekpen Omonbude, a petroleum and mining economist.
“It is getting increasingly challenging to get risk capital for fossil fuel projects. (But) natural gas provides a cleaner and sustainable transition for big energy projects,” he said.
The Federal Government had been seeking to increase Nigeria’s gas capabilities. The Nigeria Liquefied Natural Gas (NLNG) company, a partnership between the Nigerian National Petroleum Corporation (NNPC) and international oil majors, in May 2020, closed the deal on its Train 7 gas expansion project.
The project is expected to lift the country’s LNG output by more than 30 per cent.
Omonbude also pointed to Nigeria’s gas-flare commercialisation programme as an example of the potential shift to gas.
In the first quarter, the Ministry of Petroleum Resources shortlisted 200 companies to bid for the development of 45 gas flare sites.
The Ministry also launched the Nigerian Gas Transportation Network Code (NGTNC), which aims at enhancing the availability and affordability of domestic gas.
The code seeks to create guidelines for agreements between gas sellers, transporters and buyers.
According to KPMG, the code, alone, does not constitute a coherent gas policy, “especially as Nigeria still lacks a comprehensive legal and fiscal regime for developing its natural gas”.
Nigeria’s decision
Fast forward to Monday, March 29, 2021, when President Muhammadu Buhari kicked off a gas revolution era by launching ‘The Decade of Gas in Nigeria’, with a pledge that his administration would fully utilise the enormous gas resources in the country to uplift the economy and drive industrialisation.
Buhari, who set the tone for the development of the industry in the next ten years, noted that gas has the enormous potential to diversify Nigeria’s economy, given the country’s potential of about 600 trillion cubic feet of gas.
“The rising global demand for cleaner energy sources has offered Nigeria an opportunity to exploit gas resources for the good of the country. We intend to seize this opportunity,” Buhari said at the virtual Nigeria International Petroleum Summit (NIPS) 2021 Pre-Summit Conference and official launch of ‘The Decade of Gas’.
He told participants at the event that while his administration has prioritised gas development, and recorded remarkable progress, adding that it is well known that Nigeria is a gas nation with a little oil.
He, however, regretted that Nigeria has focused more on oil over the years.
“That is the paradox that this administration decided to confront when we declared the Year 2020 as ‘The Year of Gas’ in Nigeria.
“It was a bold statement to demonstrate the resolve of this administration that gas development and utilisation should be a national priority to stimulate economic growth, further improve Nigeria’s energy mix, drive investments, and provide the much-needed jobs for our citizens in the country.
“Before the declaration of Year 2020 as The Year of Gas, this Administration had shown commitment to the development of Nigeria’s vast gas resources and strengthening of the gas value chain by reviewing and gazetting policies and regulations to enhance operations in the sector as encapsulated in the National Gas Policy of 2017.
“Our major objective for the gas sector is to transform Nigeria into an industrialised nation with gas playing a major role and we demonstrated this through enhanced accelerated gas revolution,” he said.
Nigeria is capable of being transformed into an industrialised gas-driven economy. According to the Department of Petroleum Resources (DPR), Nigeria’s proven natural gas reserves, as at January 1, 2020, had become 203.16 trillion cubic feet (tcf). DPR also stated that the nation’s proven crude oil reserve, as at the same period, was 36.89 billion barrels (bb).
With 187 tcf of proven gas reserves as of 2017, Nigeria ranked 9th in the world, and accounting for about 3 per cent of the world’s total natural gas reserves of 6,923 tcf. Then, Nigeria had proven reserves equivalent to 306.3 times its annual consumption. What it means is that Nigeria has about 306 years of gas left (at current consumption levels and excluding unproven reserves).
According to the latest estimates in BP’s 2019 Statistical Review of World Energy, Nigeria exported about 982 bcf of LNG in 2018. By this, Nigeria ranks as the world’s fifth-largest LNG exporter, behind Qatar, Australia, Malaysia, and the United States.
According to the Managing Director and Chief Executive Officer (MD/CEO) of the Nigeria LNG Limited, Engr. Anthony Attah, gas is the logical path to Nigeria’s glory.
“This is the decade of gas – another decade of sustained operations in Nigeria’s LNG, a decade of Train 7, and perhaps Trains 8, 9 and 10. (It is) a decade of the elimination of gas flaring, a decade of more domestic gas in households in Nigeria, and overall, a decade of a fully gas-powered Nigerian economy.
“As I stated at the beginning, this will require solid collaborative efforts and the active participation of all stakeholders, including the National Assembly currently working on the Petroleum Industry Bill (PIB). The PIB, I dare say, unilaterally holds the ace to be one of the biggest opportunities for our gas future as a nation. And we should not miss this opportunity for any reason.
“Gas is the fastest growing fuel. Gas is the logical (path to) Nigeria’s glory,” Attah said.
He stated that it was time to unleash Nigeria’s gas potentials, as he challenged Nigeria to rise and unleash her enormous gas potentials for the benefits of Nigeria and Nigerians.
“Gas is power and energy. Gas is transport, as in auto gas. Gas is petrochemical, as per feed stock. Gas is manufacturing and industries. Gas is food from fertiliser. Gas is jobs and employment. As a matter of fact, gas is everything for Nigeria.
“We must use what we have to get what we want. Saudi Arabia and Dubai use oil to move their economies to becoming one of the best in the world. Qatar has used only gas to transform from a fishing economy to becoming a global gas giant. Nigeria, on the other hand, has both oil and gas.
“However, Nigeria has, thus far, ridden on the back of oil for over 50 years. But now, the time has come for Nigeria to fly on the wings of gas. That is why at the Nigerian LNG, we believe it’s time to unleash Nigeria’s gas potential through this ‘Decade of Gas’ initiative, and that is partly why we also say, ‘It is time for gas’,” he added.
He, therefore, advised the Federal Government not to miss the opportunity of grabbing what its gas reserves hold for the country in future.
Attah declared that the Petroleum Industry Bill (PIB) “unilaterally holds the ace to be one of the biggest opportunities for our gas future as a nation”.
Oil Price, competition
The short-term picture on oil prices has since improved a little. As at March, Nigeria’s average cost of production per barrel was between $20 and $30, depending on the terrain. However, the cost per barrel in Saudi Arabia is $7. As at the time of filing in this report, Brent crude traded at $63.31.
The partial price recovery also provides some comfort for the Federal Government.
But slightly healthier prices do not hide the need for greater competitiveness.
For more than a decade, Nigeria has been considering the passage of a PIB to liberalise the sector and improve transparency.
The aim now is to pass the legislation by the end of 2020, but few will be surprised, if the timetable slips yet again.
An oil and gas advocacy group within the Lagos Chamber of Commerce and Industry has warned that the government’s move to increase the deep-water royalties will worsen Nigeria’s competitiveness and could cost the country more $15 billion in planned investments in the sector.
The law prescribes a flat rate of 10 per cent royalty on all projects over 200 meters deep and another 7.5 per cent royalty on frontier and inland basins.
Only countries that can offer the most competitive terms are likely to be seen as viable once the worst of COVID-19 is over.
“Nigeria would have to get more competitive in order to secure investment in field development,” Omonbude said.
Government’s efforts
The current administration has put in place a few things to energise the gas sector.
Buhari stated that the development of gas infrastructure has commenced along with the domestic utilisation of LPG and CNG, as well as the process of commercialising gas flares, development of industrial and transport gas markets, and increasing gas to power.
“We also kick-started other policies and projects like the National Gas Expansion Programme, Autogas Policy and the construction of the 614km Ajaokuta-Kaduna-Kano gas pipeline.
“After a thorough review of these laudable achievements and successes in the gas space, we acknowledge that Nigeria still has more work to do in the gas space.
“This has led the Federal Government to begin a more proactive push towards gas development. This initiative will ensure further optimal exploitation and utilisation of the country’s vast gas resources,” he added.
Buhari pointed out that the NLNG, which contributes about one per cent to the Gross Domestic Product (GDP), has generated $114 billion in revenues over the years, $9 billion in taxes, $18 billion in dividends to the Federal Government and $15 billion in Feed Gas Purchase.
Buhari noted that these achievements were accomplished with 100 per cent Nigerian management, and 95 per cent Nigerian workforce, and also applauded the NLNG for winning the award for outstanding business strategy in 2020, for going ahead with the Train 7 during the global pandemic.
“The Ministry of Petroleum Resources and NNPC are, in various regards, setting the pace.
“I would like to charge all other relevant MDAs (ministries, departments and agencies) on the need to partner with the international oil companies, the indigenous oil companies and financial institutions to actualise the dream of fully utilising our gas resources to uplift our economy,” he said.
Game-changing projects
Interestingly, the Federal Government’s efforts are being complimented by what the private sector is doing to boost the gas sector.
The Assa North Gas Development Project (ANGP) is one of such in this regard.
When completed, the ANGP will produce 600 million standard cubic feet of gas per day (mscf/d) from its upstream facilities. It will process 300mscf/d from the SPDC gas facility under construction to boost domestic gas supply for power generation and general industrialisation.
According to the Shell Petroleum Development Company’s (SPDC), External Relations Manager, Projects and Opportunities, Dr. Banji Adekoya, Assa is a major game-changer in Nigeria’s quest for energy sufficiency and economic growth.
Adekoya, who emphasised that Shell’s commitment to Nigeria both now and in the future was unshaken, said that SPDC is committed to supporting projects that increase the capacity of communities to deliver credible projects.
“The gas development project in Imo State is one of the priority projects of the Federal Government of Nigeria because its development will help the government deliver on its ambition to provide enough gas for domestic consumption, power generation and gas-based ammonia and urea fertilizers for farmers.
“The Assa North Gas Development Project will be a major game-changer in our country’s quest for energy sufficiency and economic growth and, once again, it emphasises Shell’s unshaken commitment to Nigeria both now and in the future. The project has the potential to be one of the largest domestic gas projects in the country when completed,” Adekoya said.