Nigeria’s gas revolution

Nigeria, with one-third of Africa’s proven gas reserves (187 trillion cubic feet), is a long way from a gas-driven industrial transformation. Improvement of the sector, through reform, has been spurred by the present administration’s aspiration to accelerate GDP growth to 10 percent. Nigeria’s ‘Gas Revolution’ is expected to turn the country into a “regional hub for gas-based industries”. Inertia, it seems, has replaced the initial momentum, further compounded by difficulties, local and international. 

Local challenges delaying investment include absence of a domestic backbone infrastructure for the power sector and issues related to fiscal terms, financing, pricing, and regulating the sector. While the sale of the generating companies and NIPPs is progressing, insufficient gas for thermal plants may throttle vaunted claims of generating thousands of megawatts of electricity.

Internationally, the export market is being flooded as other African countries discover gas (Mozambique, for instance, in recent years discovered large quantities of gas in excess of 20tcf), plus the unconventional bonanza of shale gas. To be sure, proliferation of global gas supplies is not an immediate threat to Nigeria. Because it is costly to transport, gas needs long-term off-take agreements, i.e., ready buyers.

This window of opportunity may not be available when Nigeria’s contract with buyers is due for renewal. By then the world’s energy map may have been redrawn with new trade routes, and contracts. Nigeria may find itself unevenly matched against intense global players. With no new investments in plants, to liquefy gas, and ships, to transport it to buyers abroad, Nigeria risks being shut out of the export market.

Another export market potential threatened by lack of pipeline infrastructure is the West African Gas Pipeline Project (WAGP). The WAGP, part of the plan to integrate pipelines across the country for power generation, also involves the extension of the Escravos Lagos Pipeline to Benin, Togo, Ghana and Cote d’Ivoire. Ghana, which was perceived as the largest market, has since discovered oil and gas.

Nigeria can avoid a negative scenario if the Federal Government, especially the Ministry of Petroleum Resources, works with private sector stakeholders in the oil and gas sector to explore ways of making the sector investor-friendly. 

Both government and private sector stakeholders need to, according to the communiqué issued at the end of the 8th International Gas Conference by Nigerian Gas Association, “engage in a comprehensive, inclusive dialogue and negotiations of the contents, direction, and intention of the PIB”.

Furthermore, government must begin to reduce its commercial participation in the sector, assuming the role of a supervisor and regulator that assures an investment-friendly environment along the value chain; focus on instituting fiscal terms to stimulate growth and catalyse development; “review the implementation of DSO to ensure availability of gas for local industries”; fast-track the construction of pipelines to deliver gas across Nigeria; and expedite “action on Final Investment Decisions (FIDs) on gas export projects” in order to enhance Nigeria’s gas export business and domestic gas utilisation.