By Yange Ikyaa
An indigenous company, NIGUS International, has entered into an agreement with a Chinese firm to fund and develop solutions to the menace of gas flaring in Nigeria.
The agreement with the Chinese partner, Beijing Zhogmin Xinjunlong New Energy Technology Company, has already culminated into the signing of a deal worth $1 billion.
It is expected that this partnership between the two companies from the biggest markets and most populous nations in both Africa and Asia will help to end gas flaring and introduce Nigeria into the world of green sustainable energy production.
Speaking at the agreement signing, Chief Executive Officer and Chairman of NIGUS, HRH Malik Ado Ibrahim, said the partnership with the Chinese company was aimed at imbibing its new state-of-the-art technology profile to convert flared gas for commercial use.
According to him, the new technology from China will create Gas-to-Liquid (GTL), as well as synthetic diesel to galvanize Nigeria’s energy mix. GTL technology is a process that converts natural gas, the cleanest burning fossil fuel, to high-quality liquid fuels such as gasoline, jet fuel and diesel.
Ibrahim further stated that Liquefied Natural Gas (LNG) will also be processed using the GTL technology for export, while Liquefied Petroleum Gas, or cooking gas, among other products, will also be produced for in-country consumption.
His words: “The joint venture is about NIGUS, as a renewable energy company, joining forces with the technology that allows us to bring a clean climate economy to Nigeria and create value from what we are wasting at the moment to generate lower pricing energy. We seem not to be contributing to the carbon footprint, we flare a lot of our gas, and 90 per cent of what we produce in Nigeria is being flared, not utilizing the gas.”
Nigeria’s huge natural gas reserves hold potential for its energy sector, with policies in place to ramp up LPG and CNG production. In March 2021, the country declared the 2020s as the ‘decade of gas,’ signaling the government’s renewed focus on gas as the fuel of choice for powering Nigeria’s industrial ambitions.
The West African nation has the tenth largest gas reserves globally, with about 208 trillion cubic feet (tcf) of untapped proven gas reserves, according to official figures. Despite this huge potential, gas production remains relatively low, as Nigeria produced 1.62 tcf of gas in the year 2021, coming behind Algeria (3.56 tcf) and Egypt (2.4 tcf), despite commanding larger reserves.
The majority of gas in Nigeria is produced as a byproduct of oil exploration in the form of associated gas, while a huge portion of the gas produced is exported. In 2021, 50.7 per cent of the total gas produced in Nigeria was exported as liquefied natural gas (LNG).
While natural gas now plays a small role in the country’s economy, it could potentially play a larger role in Nigeria’s energy market. Yet, significant challenges remain, as developing a holistic solution to help ensure energy access and security will require improving investor confidence in the sector.
This is because the development of a reliable local gas market will require stakeholders and consumers to be confident that gas flows would not be compromised arbitrarily, and this underscores the importance of the new partnership between NIGUS and Beijing Zhogmin Xinjunlong New Energy Technology Company to bolster sustainable gas resource development in Nigeria.
In Nigeria, several policies aimed at increasing the domestic utilization of Liquefied Petroleum Gas (LPG) Compressed Natural Gas (CNG), as well as gas-to-power have been evolved and implemented before. While some of these policies and programmes have focused on reducing and commercializing gas flaring and developing industrial gas markets, the country further considers gas as a key transition fuel that will help meet its energy aspirations in the short, mid and long terms.
The Nigerian National Petroleum Company (NNPC) Limited began developing its most ambitious gas transportation project, the Ajaokuta-Kaduna-Kano pipeline, in the year 2020. The 614-kilometer pipeline is a massive $2.5 billion project that will be used for evacuating gas from production hubs in the southern part of Nigeria to industrial clusters and production centers in the north. It is also expected to eventually serve as an export facility to deliver gas to foreign markets in North Africa and Europe.
This pipeline will also provide gas for three planned thermal power stations in Abuja (1,350MW), Kaduna (900MW), and Kano (1,350MW), as well as deliver feedstock for industrial production of petrochemicals and fertilizers. The project was slated for completion in the first quarter of 2023, but the timeline has been shifted due to what the Nigerian government described as “security and terrain challenges.”
The Nigerian government is promoting CNG as the key fuel for transport. In 2022, NNPC announced a plan to convert about 500,000 petrol and diesel vehicles into CNG-powered models and to also deploy 580 gas-filling stations over an 18-month period. This plan also extends to replacing small diesel and petrol-powered generators, the main energy source for off-grid and underserved customers, with gas-powered alternatives.
There are still many other key projects that are being built, including the second Escravos to Lagos Pipeline System, which will double the capacity of the current transport network, while improving supply to about 9 power plants located along its corridor. The Obiafu-Obrikom-Oben (OB3) gas line is also being developed and will improve supply to petrochemical industries, even as the main target of NNPC is to achieve domestic gas utilization of 5 billion standard cubic feet (bscf) daily in Nigeria.
About 87 per cent (about 14GW) of Nigeria’s total installed power generation capacity comes from gas-fired power plants, but these plants constantly face the challenge of gas shortages. One of the major factors to blame for this is inadequate liquidity in the power sector, even as some investors consider the market to be overregulated by the government.
As a result of this, when power generation companies are unable to pay and the domestic gas pricing is unattractive, gas suppliers prioritize international buyers that can pay. A related problem is that some investors still complain that there are no enough incentives for them to invest in infrastructure for more domestic gas production and supply.
On account of this, most gas investments in Nigeria have been concentrated along off-shore basins that are located close to export terminals. This is because activated and enforced gas sale and purchase contracts are necessary to make gas projects bankable and spur private-sector investment, and these factors are respected by big multinationals.
Yet, another serious challenge that inhibits gas supply in Nigeria is the issue of sabotage of pipelines by vandals. Although instances of vandalism have decreased from its height in the 2010s, it remains a huge issue that affects the country, both in terms of product loss and infrastructure repairs.
In 2014, the UK-based Stakeholder Democracy Network (SDN) reported that pipeline vandalism in Nigeria costs oil companies $14 billion annually. Then, in the year 2022, the Nigeria Liquefied Natural Gas (NLNG) declared a force majeure, citing the unavailability of major liquids evacuation pipelines due to sabotage and vandalism.
And while the new partnership between China and Nigeria for gas development in the country remains a much welcome development, a holistic security solution to natural gas production and supply in Nigeria will also be paramount in order to further ensure investor confidence in the country’s energy sector.
