By Gideon Osaka
For decades, Nigeria has been ramping up efforts to deepen gas investments to meet domestic gas needs and exports. Lack of attention on gas development for years meant that the gas sector was treated as a byproduct of oil extraction, with associated gas frequently flared rather than captured for commercial use.
Despite being the top oil producer with the largest gas reserves in Africa, weak legal and regulatory frameworks, inadequate gas infrastructure, non-cost-reflective pricing and host community problems made the domestic gas sector uncompetitive and unattractive to investors. Reforms by successive governments through the 2008 Gas Master Plan (GMP), the 2017 National Gas Policy (NGP) and other instruments have proven slow. Some of these issues that plagued the gas subsector heightened calls by operators for the government to improve fiscal terms for gas which, according to them, were designed for an era when Nigeria considered gas as something you found while searching for oil.
In recognition of these challenges and following the passage of the Petroleum Industry Act (PIA) 2021 which strengthened the legal, fiscal and regulatory framework of the gas sector, the current administration under President Bola Ahmed Tinubu decided to free gas administration from petroleum with the creation of a dedicated ministry and minister to enhance the management and utilization of the nation’s gas resources.
With this creation, Valuechain has sought to raise some vital questions: has the decision to carve out a separate Ministry of State for Petroleum Resources (Gas) from the broader Ministry of Petroleum Resources signalled a renewed focus on harnessing Nigeria’s vast gas reserves? Since this separation, what notable stride has the gas sector made and what are the current challenges?
In August 2024, the Ministry and the pioneer Minister of State for Petroleum Resources (Gas), Rt. Hon. Ekperikpe Ekpo clocked one year being in charge of the ministry. After over one year of being on the saddle, he has recorded some remarkable milestone achievements in propelling the development of the gas sector in the country even though challenges persist.
A new foundation
Since its separation, the Ministry of State for Petroleum Resources (Gas), has pushed forward several key initiatives that underscore the government’s commitment to gas as a critical asset, starting with the Decade of Gas initiative gaining renewed momentum. Launched in 2021, to transform Nigeria into a gas-powered economy by 2030, the ambitious plan was intended to implement all previous ambitions in the Gas Master Plan (GMP) and Nigerian Gas Policy (NGP), including the construction of the Nigeria-Morocco gas export pipeline, expansion of the Nigerian Liquefied Natural Gas (NLNG) facility, and revival of the Nigerian Gas Flare Commercialization Programme (NGFCP). The government also intended that the policy would settle debts to gas producers and initiate discussions on 10 key gas projects aimed at unlocking a greater volume of gas, for domestic use and export purposes.
Gas infrastructure development and domestic utilization
One of the key priorities of the ministry has been to fast-track the development of gas infrastructure. The multi-billion dollar Obrikom, Obiafo, Oben (OB3) gas pipeline and Ajaokuta-Kaduna-Kano (AKK) gas pipeline have been perhaps the most high-profile example. The two critical infrastructures were designed to boost gas supply for use by Nigerians and industries located across the corridors traversed by the pipelines. The ministry has aggressively promoted this project, seeing it as central to boosting Nigeria’s gas transmission network, supplying power plants, and encouraging the establishment of industries along the pipeline route. From the 40 and 20 per cent progress work met on the ground, respectively, the ministry under the influence of the minister has ensured that these two important projects advanced to 80 and 50 per cent respectively. The OB3 project will be completed within the fourth quarter (Q4) of 2024, while AKK will be completed before the end of the first quarter (Q1) of 2025.
Upon assumption of office, the minister has been driving bilateral discussions on the Nigeria-Morocco project. The $25 billion pipeline project was designed to traverse the Republic of Benin, Togo, Ghana, Cote d’Ivoire, Liberia, Sierra Leone, Guinea, Guinea-Bissau, The Gambia, Senegal, Mauritania and terminate in Morocco, with a spur to Spain for onward sale of gas to Europe. Other projects, such as gas processing plants and liquefied natural gas (LNG) facilities, have also received renewed attention. Nigeria’s LNG train 7 expansion remains a significant priority attention. The recent commissioning of three critical gas infrastructure projects executed by NNPC Limited and its partners in Ohaji-Egbema, in Imo State and Kwale, in Delta States, in May this year reiterates the ministry’s determination to utilize Nigeria’s abundant gas resources towards revamping the nation’s industrial growth and kick starting its economic prosperity. The project partners include Sterling Oil Exploration & Energy Production Company Limited (SEEPCO) and Seplat Energy. The three projects commissioned include the expansion of the AHL Gas Processing Plant, the ANOH Gas Processing Plant and the 23.3km ANOH to Obiafu-Obrikom-Oben (OB3) Custody Transfer Metering Station Gas Pipeline Project. Valuechain reports that with the completion of the projects, approximately, 500M metric tonnes standard cubic feet per day (MMscfd) of gas in aggregate would be supplied to the domestic market which represents over 25% incremental growth in gas supply. In practical terms, this translates into more gas to the Power Sector, Gas-Based Industries and other critical segments of the economy.
The ministry has inaugurated a 3.1million metric tonnes standard cubic feet per day (MMscfd) Compressed Natural Gas (CNG) plant undertaken by Tetracore Energy Group in Ogun State and unveiled the 5.2MMscfd CNG/autogas facility at Ilasamaja, Lagos State. Other projects that have witnessed groundbreaking include the NesGas 50,000 metric tonnes Liquefied Petroleum Gas (LPG) Terminal at Onne, Rivers State; the Optimera Energy’s natural gas facility in Lekki Free Trade Zone, Lagos; and Windek Energy Limited 20,000 metric tonnes LPG depot in Atabrikang Aquaha, Ibeno LGA, Akwa Ibom State.
Aside the Presidential Compressed Natural Gas (CNG) Initiative, which is aimed at moving Nigerians away from petrol and diesel as vehicular combustion fuel, significant progress has also been recorded in incentivizing gas development through Presidential Executive Orders.
With the advent of the gas ministry, progress has been witnessed in the effort to enhance domestic gas utilization through incentivization of the use of gas for power generation, industrial development, and residential consumption. The National Gas Expansion Programme (NGEP), launched to encourage the use of compressed natural gas (CNG) and liquefied petroleum gas (LPG) in vehicles and homes, is one of the flagships of this effort. Additionally, the NGFCP has gained renewed traction since the ministry’s establishment. This initiative seeks to reduce gas flaring by commercializing the gas that would otherwise be burned off.
Attracting Investment
The PIA 2021 provisions for gas sector reforms have been actively implemented under the new ministry’s watch. The law offers incentives for gas development projects, particularly in marginal fields, and establishes frameworks for the midstream and downstream gas sectors to thrive.
The separation of gas from the petroleum ministry has been praised by industry stakeholders as the ministry has fostered partnerships between the government, international oil companies (IOCs), and local stakeholders to attract investment into Nigeria’s gas sector. The ministry has worked to provide a more transparent and business-friendly environment by addressing policy gaps that previously discouraged investments in gas processing and infrastructure seeking to position Nigeria as a preferred destination for gas investments, especially in liquefied natural gas (LNG) projects. The government has also commenced discussing with investors towards bringing back two Liquefied Natural Gas (LNG) projects, Brass and Olokola LNG projects.
Brass LNG and OK LNG are two LNG projects with the potential of manifold economic benefits for the country which include job creation, power generation, revenue generation and economic diversification. The multi-billion dollar projects were, however, stalled due to unfavourable market dynamics and slow decision-making by the political class in the past.
On the market side of the gas sector, separating the petroleum ministry from gas has provided the requisite focus in resolving issues relating to the execution of the Gas Sales Purchase Agreement (GSPA) for the Brass Methanol Project to unlock $3 billion in investments in the gas industry. He has also resolved the lingering 13-year debt arrears between gas producers and power generation companies (Gencos) in the country through a structured repayment mechanism. This sole act has ensured continued investment in the gas upstream space to support the delivery of natural gas to Gencos.
Challenges remain
Despite these successes, the gas sector’s growth under the separate ministry has not been without hurdles. Pipeline vandalism, theft, and community unrest have led to disruptions in gas production and transmission; affecting the stability of gas supply to both domestic and international markets.
Additionally, the global transition to renewable energy poses a challenge to the long-term prospects of gas as a dominant energy source in the country. While gas is seen as a cleaner alternative to oil and coal, it is still a fossil fuel, and the international community’s increasing focus on renewable energy may limit Nigeria’s market for gas exports in the future.
Another area of concern has been the slow pace of some critical projects. For instance, while the AKK pipeline has made progress, it has faced delays, particularly regarding financing and security. Ensuring that these large-scale infrastructure projects reach completion within their timelines will be essential to maintaining investor confidence.
Looking ahead, the performance of the gas sector under a separate ministry going forward will likely be defined by how well it consolidates its early gains and addresses lingering challenges. The ministry’s success will hinge on its ability to ramp up infrastructure development, attract sustained investment, and ensure the domestic gas market continues to grow.
Nigeria’s gas sector has the potential to be a linchpin in the country’s broader economic diversification strategy. By reducing the country’s reliance on oil and increasing the role of gas in power generation, transportation, and industry, the ministry can contribute to a more sustainable and diversified energy landscape.
The creation of the Ministry dedicated to gas has ushered in a new era for Nigeria’s gas sector, with early signs of progress evident in infrastructure development, domestic utilization, and investment attraction. While challenges remain, the sector’s performance so far demonstrates that with sustained focus, Nigeria’s gas reserves can be harnessed as a central pillar for economic growth and energy transition in the coming decades.