Need to maximise our gas potential for efficient electricity supply

In the last 25 years, Nigeria’s electricity has experienced a massive sectoral shift from dominant hydropower to gas-power source. In 2023, natural gas accounted for over 79 per cent of electricity production in the country, according to a Statista report. Nigeria’s gas production currently can only generate around 11,788MW of electricity despite huge gas reserves. […]

In the last 25 years, Nigeria’s electricity has experienced a massive sectoral shift from dominant hydropower to gas-power source. In 2023, natural gas accounted for over 79 per cent of electricity production in the country, according to a Statista report.

Nigeria’s gas production currently can only generate around 11,788MW of electricity despite huge gas reserves.

Nigeria is endowed with an estimated 203 trillion cubic feet of natural gas reserves, the largest in Africa and the ninth-largest in the world. Interestingly, the “blue gold” has not been able to rescue Nigeria from energy insecurity, particularly power insufficiency.

Nigeria’s power ministry had celebrated increased power generation of 11,000+ megawatts when the country requires a minimum of 30,000 megawatts to attain energy security, industrial revolution and energy export.

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Furthermore, when examining challenges of the power sector in Nigeria, the strategic importance of gas sector/gas source is usually underemphasised even by industry stakeholders. It must be noted that gas is the most important branch of the electricity sector value chain in Nigeria because it is the major source.

Gas has been adopted as the major power source for Nigeria and other countries for these reasons; it is cleaner and climate-friendly compared to other fossil fuels, it is easier for power generation, it is highly convertible, it has huge export potential and Nigeria has it in abundance.

Unfortunately, Nigeria has not been able to maximise its gas potential worth over $100 billion to attain energy security and electricity efficiency compared to countries like Algeria, Egypt, Morocco, Russia, Norway, Qatar, UAE, China etc. The reasons for the underutilisation of gas in Nigeria are not far-fetched. One of them is funding/capital problem.

Nigeria has an investment capital problem which has limited the expected implementations of the National Gas Policy of 2017. Nigeria is sitting on gas resources worth over $100 billion but needs a minimum of $20 billion dollars to kick-start modestly ambitious gas investments that will revolutionise power sector, agricultural sector, transportation and other domestic consumption.

The funding problem has been further complicated due to epileptic gas expansion projects and inefficient or non-existent independent state-owned gas conglomerates that can raise funds independently, attract foreign capital, lead, guide and de-risk the sector like similar state-owned gas conglomerates in Qatar, UAE, Norway and Algeria.

Gas infrastructure deficit: Nigeria has a gas infrastructure problem despite rising gas demand superseding gas supply, according to projection of NUPRC (16.6% by 2030). This deficit has hugely limited the gas-to-power initiative, considering the needed infrastructure for gas processing, gas transportation and gas firing.

The following are the latest Nigeria’s gas-to-power infrastructure; AKK gas project, OB3 gas pipeline project, Ogidigben gas revolution project by NNPC, Shell Nigeria Agbara-Ota project, Ovade-Ogharefe gas processing plant by Ocean oil. These projects are either completed or undergoing construction.

Another challenge is the insufficiency of willpower; the Nigerian government has not shown enough audacity to lead Nigeria into gas prosperity.

Importantly, Nigeria can address the challenges of the gas-to-power sector by leading the plan beyond just the policy paperwork.

The Nigerian government needs to establish SPVs, PPPs and independent state owned venture that can lead gas fund mobilisation for audacious and viable gas expansion projects ($20 billion dollars goal in five years),  the National Gas Plan should also include mandatory timelines for executions coupled with adoption of Regional Gas Corridors (RGC), meaning each geopolitical zone in Nigeria must be linked to independent Gas Processing Zone (GPZ) which will decentralise gas expansion and transportation, this will force further exploration of untapped gas basins or utilisation of the active gas basins.

It is also important for FGN to isolate domestic gas pricing from international gas pricing so as to encourage energy affordability which will check inflationary tendencies in the economy. Practically, the national gas plan should separate domestic gas plan and the international gas plan but prioritise the two.

 

Mujib Dada-Kadri, lawyer and economic policy analyst [email protected]