Geopolitics of Germany’s natural gas demand – Lessons for Nigeria

Germany, Europe’s biggest economy thirsts for more natural gas from Russia because its energy transition policy is set to miss targets and Nigeria, Africa’s largest economy has some lessons to learn to become a regional hub for natural gas.

To meet its growing natural gas needs, Germany is willing to go ahead with construction of the Nord Stream 2 gas pipeline. This generated controversies at the North Atlantic Treaty Organisation’s (NATO) July Summit in Brussels, Belgium. Donald Trump is the most outspoken critique against the $11 billion Nord Stream 2 pipeline for geopolitical reasons. The Ukrainian president has misgivings about the planned gas pipeline too.

“This is not a commercial project – it is not economical or profitable – it is absolutely a political project. There is no point, from the economic point of view, creating this project. This is absolutely a geopolitical project”, Petro Poroshenko, the Ukrainian president said in the week ending July 20.

Unlike Germany, a net importer of natural gas, Nigeria is a net exporter of the energy commodity and has opportunity to be for West Africa, what Russia has become for the European natural gas market – a major supplier of the much needed energy source to fire power plants and sustain transportation networks.

The planned gas route under the Baltic Sea will more directly link Russia and Germany. Along with some European nations, both former Presidents G. W Bush and Obama were against the project, knowing that it riskily ups Europe’s dependence even more on Russia and poses national security threats to the Western allies.

Yet, others claim the pipeline is critical to more freely bringing gas into the continent. Germany imports more than 80 percent of its gas and Russia provides about half of the imports.

In West Africa, a similar gas infrastructure exists – the West African Gas Pipeline. Nord Stream 2 Pipeline and the West African Gas Pipeline are not here compared in terms of size and scope but the function they were both designed for. But West Africa’s has been riddled by challenges.

In the spirit of Economic Community of West African States (ECOWAS), four West African countries, Benin, Ghana, Nigeria and Togo in February 2000, signed an Inter-Governmental Agreement to build a gas pipeline, which will supply Nigerian gas on West African markets.

Nigeria is leaving the West African gas market to Russia’s Gazprom. Ghana has signed a 12-year deal with Russia’s Gazprom for liquefied natural gas (LNG) supply. Privatisation will lead to energy efficiencies in the West African sub-region one of the experts suggested.

“The gas that will come from Russia to Ghana’s regasification plant will cost $12 per standard cubic feet (SCF). I can put gas at $3 per SCF into the West African Gas Pipeline if it were efficiently managed and with an extra cost of $2 per SCF for transportation cost I can deliver gas to Ghana at $5 per Scf less than half of what the Russian gas will cost” Austin Avuru, CEO of Seplat, a Nigerian oil and gas exploration and production company said at the roundtable of oil and gas experts.

In July 2016, Walt Perez, managing director of West African Pipeline Company Limited (WAPCo) stated that the company faced significant risks because of its financial health engendered by low gas volumes, huge indebtedness totalling about $179 million and dwindling cash flows.

Privatisation is clearly not a silver bullet that fixes all inefficiencies; however, it is worth considering whether it will help improve energy efficiencies along the West African Gas Pipeline.

STEPHEN ONYEKWELU