Industrialisation and Nigeria’s Decade of Gas

Nigeria

Ed Ubong, president of the Nigerian Gas Association (NGA), talks to The Energy Year about the mission of Nigeria’s Decade of Gas initiative and its link to industrialisation, as well as the recent improvements to the country’s autogas programme. The NGA is the professional body responsible for the promotion and protection of the interests of the gas industry in Nigeria.

How would you describe the mission mandated by the Decade of Gas initiative?
The declaration of the Decade of Gas was a pivotal milestone for the country. Nigeria now must prioritise determining how to unlock the significant potential of its reserves.
Nigeria has enough resources for both domestic and export consumption. Today we have an unevenness between exports and imports, with most of the gas being directed to the export market. On a good day, we produce about 7.8 bcf [221 mcm] of gas: 44% is exported, 33% is reinjected to keep production volumes up and only 23% is consumed in the domestic market. If you then strip off flaring and reinjection, what you will see is that around 70% of the gas produced in Nigeria is exported, while only 30% stays within the country.
We now need to boost the domestic penetration and consumption of gas (Gas to Power & thermal plants, Gas to industries) while supporting the already viable export market. A successful balance in 10 years would be to grow the total gas production to circa 15 bcf per day while ensuring that circa 60% of the gas volumes is moving within the domestic market and 40% remains for exports.

What is the importance of the recently launched Nigerian Gas Transportation Network Code (NGTNC)?
The NGTNC is important because it will ensure transparency for both suppliers and offtakers in the domestic market, fostering confidence in the sector. Value chain players will be able to see and verify what goes into and out of the system, which is the basis of every developed gas market globally.
The code provides the groundwork to build a gas trading market because one can see where shortages are present. The offtakers can declare a shortage in one area of the market and a need for additional volumes, and the supplier will be notified immediately and potentially open up any available well to bring additional volumes of gas into the system. In the well-developed gas market, this system is already up and running.

What improvements have been made regarding the autogas programme and the penetration of cooking gas?
Nigeria has clear challenges when it comes to fuel subsidies, which led us to understand that we need to switch from petrol to gas to drive the auto sector. Everyone needs to move from place to place. We have to deliberately switch the public transport sector (for example, cars) to run on CNG and LPG. This programme is extremely important for Nigeria as a country.
We have also focused on deepening the cooking gas market. To meet our Paris Agreement obligations, we need to reduce the amount of wood used for cooking. In 2021, for the first time Nigeria reached 1 million tonnes per annum of LPG consumption, mainly for cooking. By assessing the demand, we can quickly jump from 1 million to 10 million in the near future. Today, the largest LPG-receiving facility/terminal is in Rivers State. The cooking gas cylinder-manufacturing sector needs to be accelerated. Thanks to the National Gas Expansion Programme, we have started to see a proliferation of LPG value chain players which will develop our markets even more.

How is the Decade of Gas linked to the industrialisation of Nigeria?
We have an installed capacity of over 12 GW, but we deliver only 3-5 GW on a good day, due to several infrastructure and commercial challenges. A key focus of the Decade of Gas is to close that gap in the short term because it will give everybody confidence that we are on the right path. A big contribution will come from the Presidential Power Initiative signed with Siemens, which will install 25 GW through three phases while improving power distribution in the country.
Another key challenge is the legacy debts (circa USD 900 million) owed to gas producers. During the Decade of Gas, a framework (bonds, cost oil and more) must be put in place to liquidate these debts over the next 12 months in order to improve investor confidence in the sector.

Which prerogatives should be in focus regarding infrastructure developments?
A successful gas market is based on an efficient distribution system. The critical piece of Nigerian gas infrastructure is the Escravos-Lagos pipeline. Its capacity is 2.2 bcf [62.3 mcm] in sections following excellent looping work that has been completed, and it transits into the West African Gas Pipeline system for regional exports. The NGTNC will provide transparency to the pipeline’s users, which is crucial because it is the main system through which gas is moved in the country.
The south-eastern and delta regions of Nigeria hold the highest volume of untapped reserves of gas, and therefore it is very important that the interconnectivity between the east and the west is established. If there is a high demand in the west – from the Dangote Refinery, for example – volumes can flow from the east to meet any supply imbalances. The OB–OB pipeline system has this target to achieve but is still under development. An additional goal is to create a pipeline system that not only flows from the west to the east but also flows to the northern regions. The AKK pipeline will serve as a channel going north that will allow gas to move across the country. By 2023, we must ensure that pipeline gas gets at least as far north as Abuja because these early segment successes assure the international community that we are making progress in the commitments that we have made.

How should Nigeria foster virtual pipeline systems?
Pipeline infrastructure will always serve as the main distribution systems for gas, but for industrial users, it is also clear that at least 20% of Nigeria’s domestic gas consumption must be delivered via virtual solutions. These solutions would provide the stability, reliability and backup that we need.
The industry must push for more CNG and mini-LNG developers and ensure they have access to gas molecules at a competitive price similar to export supplies. We would need almost 200 mcf [4.25 mcm] a day of virtual gas being channelled into the domestic system. It will enable early gas conversion for industries who are not already on pipeline gas while providing confidence for people who build last-mile infrastructure to make investment decisions to grow the domestic infrastructure and market.

What legal and financial mechanisms could be implemented to fully benefit from the gas revolution?
We should implement a willing-buyer, willing-seller framework to achieve a minimum cost reflective pricing, meaning that investors at least recover their costs, plus make a reasonable rate of return. The sector should be deregulated because gas transactions need to be as efficient as the ones occurring in the global oil and gas markets.
The recently announced PIA [Petroleum Industry Act] provides investors with a clear framework in which the nation’s gas plans and priorities are well defined. The two new regulatory bodies that emerged with the PIA – NUPRC [Nigerian Upstream Petroleum Regulatory Commission] and the NMDPRA [Nigerian Midstream and Downstream Petroleum Regulatory Authority] – now have clear delineations when it comes to which sectors to look after. The NMDPRA will regulate the gas market, and this is a huge step forward. These agencies will work together with the industry to transform Nigeria’s gas sector.

What is the role of local content development in the Nigerian gas transition?
If we are going to succeed in the Decade of Gas, there must be a deliberate effort to build local capacity around gas. Nigeria has historically been a country driven mainly by oil, but we are changing the narrative now. Institutions such as the NCDMB [Nigerian Content Development and Monitoring Board] and the Petroleum Technology Development Fund should build capacity by breeding the next generation of gas professionals and technicians. The NGA, as the industry umbrella gas association, is ready to partner with these agencies to build the relevant industry skills for the sector.

What are the main challenges that the Nigerian upstream space is facing regarding gas production?
Nigeria is having serious security issues in its upstream segment due to pipeline vandalism and crude theft. Production has dropped from 1.8 million bopd to about 1 million bopd. There have been serious parallel shocks in the gas market as well because, in Nigeria, the gas that we produce in the domestic sector is mainly associated gas. There are risks associated with this system because if you need to shut down oil operations due to theft, you will be forced to shut down gas production accordingly. We must foster the development of non-associated gas wells to stimulate independent gas production that is less prone to external shocks.

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