Power in Nigeria:

The Decade of Gas

Oghosa Erhahon

Hon. Timipre Sylva, Nigeria’s Minister of State for Petroleum

Resources, declared this decade “The Decade of Gas Development for
Nigeria” at the Seventh (Virtual) Joint International Energy
Forum and International Gas Union (IEF-IGU) Ministerial Gas
Forum. Is Nigeria prepared?

THE PROBLEM

Introduction
The world’s population is estimated to reach 10 billion in 2060, and this increase
is expected to be accompanied by a commensurate increase in energy demand.
This situation calls for aggressive exploration of alternative non-traditional
energy sources. Nigeria is not left out of this unfolding dilemma as its energy
need in this same period is projected to increase. Currently, Nigeria’s electricity
energy supply is so poor that only 51% of its population have access to
electricity, and a subgroup of this can boast of 12 hours of electricity supply
a day. According to the Nigerian Society of Engineers, just 7 percent of the
estimated 70,000MW generated is received from the National grid. The other
93 percent? It is primarily generated from diesel or petrol power generating
systems, for example, petroleum fuel oil generators.

While Nigeria is rich in energy sources, it ranks low on the reliable electricity
access index. The drive for renewable energies in Nigeria has surfaced on the
power scene; however, as many argue, it will take more than solar panels to
electrify and power Nigeria. It will require much more for Nigeria’s industries to
meet the increasing energy demand vis-a-vis the population.

Nextier Insights Vol. 2, Issue 1: November 12-18, 2020

 Nigeria’s power generation CONTEXT OF THE PROBLEM
is predominantly thermal
(gas-powered). However, in recent History of gas in Nigeria
years there has been hardly any talk
or speculation around the Nigerian Since 1990, gas production has
Gas Sector. The majority of Nigeria’s steadily increased, with daily
gas is sourced as associated gas production rising above 8.2 bscf/d
from oil-well exploration. However, (Billions of standard cubic feet
non-associated gas reserves are of gas per day) going as far back
abundant in the inland basin and as early 2015. In April 2019, of

While Nigeria is rich in energy sources, it ranks low on the

reliable electricity access index. The drive for renewable en-
ergies in Nigeria has surfaced on the power scene; however,
as many argue, it will take more than solar panels to electrify
and power Nigeria.
Niger Delta basin. Nigeria gas the 1.2bn ft3/d of gas produced
reserves, now at 203.16 Trillion locally, approximately 41 percent
Cubic Feet, are the ninth-largest1 was exported, and only 48 percent
in the world. This current reserve used domestically; meanwhile, the
can last 92 years and dramatically remaining was flared2.
increase economic growth through
an upsurge in power generation Nigeria’s gas reserves occur as
for Nigeria’s electricity customers. Non-Associated Gas (NAG) and
Presently, while prominent in Associated Gas (AG), natural gas,
Nigeria’s consumed energy, and as a by-product of crude oil
gas-powered electricity does not cut (which is either dissolved or above
a fraction of used energy. the in-well oil) respectively. Oil wells
across Nigeria have predominately
The logical next justification is to been known to contain AG. A
follow Nigeria’s plans to expand its significant trade-off from AG is the
industrial and electricity generation flaring of the undesirable by-product
while intuitively creating a market to produce flared gas. This trade-
for Autogas to reduce reliance on off is primarily frowned upon
crude. All plans have remained following global commitment to
futile in recent years. Despite this, reduce emissions, of which Nigeria
the Nigerian government is fixed is a signatory3. Regulations have
on changing the narrative through been introduced to the sector to
deliberate interventions with the commercialize and reduce the waste
Central Bank of Nigeria, private from flared tips4.
investments, and even changing fuel
for automobiles. Nigeria, the largest user of oil-fired
back-up generators on the

Nigeria gas reserves, now at 203.16 Trillion Cubic Feet, are

the ninth-largest in the world. This current reserve can
last 92 years and dramatically increase economic growth
through an upsurge in power generation for Nigeria’s
customers.
Nigeria’s readiness to integrate its continent5, could benefit from flared
abundance of gas would largely gas, currently enough to generate
depend on investment, enabling 2.5 gigawatts of electricity to the
environment, and policies. The national grid, which would rid the
delving question therein: Is Nigeria country from its reliance on diesel
ready for gas? generators. The Domestic Gas Supply

Power in Nigeria: The Decade of Gas

The NGEP was introduced in 2020 to harness Nigeria’s gas
resources and the outlook potential for Nigeria. Across
Nigeria’s extractive sector, poor private investments have
resulted in low domestic, commercial, and gas utilization
viability.
Obligation signed into in 2017 and remarked ‘slow momentum.’
the Petroleum Act of 1969 mandates
that all gas producers reserve a
percentage of their gas production SOLUTION
for domestic national projects like the
National Grid. In Nigeria, the National Proposed solution
Grid is served by 28 Generation
Companies (GENCOs). NATIONAL GAS EXPANSION
PROGRAMME (NGEP)
Also, the on-grid electricity The NGEP was introduced in 2020
generation remains almost at an to harness Nigeria’s gas resources
all-time low. GENCOs, on average, and the outlook potential for
dispatch 4,000mw of its installed Nigeria. Across Nigeria’s extractive
capacity leaving the market in severe sector, poor private investments
debt. Worse still, global demand for have resulted in low domestic,
AG is expected to decline by over commercial, and gas utilization
4% following the disruptive oil clash. viability. The minimal production
Oil wells are also planned to close of Compressed Natural Gas (CNG)
off before a proposed gas future is and Liquefied Petroleum Gas
prudent. Nigeria gas to power sector, (LPG) for transportation fuel and
relying on AG, will indefinitely have domestic cooking have engendered
to equate the several bottlenecks6 economic growth in Nigeria’s gas
along the gas supply value chain for industry. The mandate of NGEP is
domestic projects or match up with to create a framework for Nigeria
the exploration of NAG. That would that recognizes CNG and LPG as
define the futuristic limits or, in fact, an alternative fuel, a low carbon
the decade of gas. emission source of energy. This
framework includes the adoption of
Recent and critical domestic projects Autogas for automobiles.
like the East-West gas pipeline, the
Abuja-Kaduna-Kao pipeline, and Under the NGEP, the Central Bank
NLNG Train 7 have proven to improve of Nigeria, in collaboration with the
Nigeria’s gas evacuation within Ministry of Petroleum Resources
the coming decade. The Federal (MPR), introduced a N250 billion
Government primarily funds the intervention facility7 with an interest
existing projects, but observers have rate of 5.0 percent per annum and 9

Nextier Insights Vol. 2, Issue 1: November 12-18, 2020

 percent per annum up to February infrastructure and the optimization of
and March 2021, respectively. This domestic gas resources for economic
initiative was introduced as a way development. This inevitably includes
to curb the investment gap in the adopting LPG as an alternative
sector. fuel for transportation and power

Through the NGEP, the Central Bank provides a package to

improve access to finance for private investment in the gas
value chain, which in the long–term, aids gas infrastructure
and the optimization of domestic gas resources for
economic development.
generation. With daily production
It is anticipated that besides the above 8.2 bscf/d, through aggressive
Central Bank’s facilitation, the investments into the gas sector, the
Ministry of Petroleum Resources Federal Government anticipates the
(MPR) shall ensure independent due output from gas to increase by 30
diligence is undertaken to ascertain percent in the next two years.
the economic impact and commercial
viability of proposed projects. On The flagship project among others
the other hand, participating banks of 2020 is the Ajaokuta – Kaduna
are expected to monitor financed – Kano (AKK), a 614km long gas
projects and render periodic returns pipeline project scheduled for
accordingly. Through this partnership, completion in 2023 and developed
the Central Bank and participating by Nigerian National Petroleum
bank, alongside the MPR, will Corporation (NNPC). The AKK
promote frameworks8 for gas pipeline is expected to transport
investments in this decade. about 2.2 bscf and provide an
additional 3,600MW to the National
Gas should meet Nigeria’s growing electricity grid. With ongoing
share of energy demand following a investments from relevant PPIs, it will
swift implementation of the Federal meet to solve the bottlenecks that
Government’s Gas Master Plan. It is the gas supply chain currently faces.
unclear how much influence credit Prior to that, an additional 1,500MW
facilities like this CBN intervention is expected from Azura-Edo IPP to
facility will have towards enticing upset the current 461MW Open Cycle
investors to play in the value chain. Gas turbine power station9.
Still, the deliberate intervention and
transparency might form a better On the other end, the NLNG Train
reputation for investors alongside the 7 project had a Final Investment
Petroleum Industry Bill taking shape. Decision in late 2019. LNG production

Electricity tariffs doubled from an average of N30/ kWh

to N62/kWh. Prices for PMS have also reached N160/litre,
from N145/litre since 2016 and in the earlier months of 2020.
These prices following deregulation are expected to rise
further.

is expected to commence in 2024.

The rationale of the NNPC owns 49 percent of the
solution NLNG’s Train 7 project, consisting of
one LNG train construction with an
Through the NGEP, the Central Bank additional liquefication unit and an
provides a package to improve increased output of approximately
access to finance for private 7.6mnt/yr (million tonnes/year).
investment in the gas value chain, It is estimated to place Nigeria
which in the long–term, aids gas as a leading LNG exporter once

Power in Nigeria: The Decade of Gas

 completed. occurring market development.

COVID IMPACT Electricity tariffs doubled from an

It is unavoidable that the 2020 Covid- average of N30/ kWh to N62/kWh.
19 pandemic will affect the energy Prices for PMS have also reached
sector. For gas in Nigeria, following N160/litre, from N145/litre since 2016
the economic slowdown caused by and in the earlier months of 2020.
the pandemic, Nigeria’s portfolio for These prices, following deregulation,
natural resources dipped. As a large are expected to rise further.
amount of the gas engaged remained An increase in PMS could mean more
AG, a reduction in oil production Nigerians becoming interested in
demand meant fewer oil wells were reaching for gas-based alternatives,
flared, and less gas was produced. a win for gas generators? The
This resulted in a 60% drop in petroleum Minister believes, through
Nigeria’s earnings. deregulation, Nigeria will begin to use
gas in automobiles as seen in western
Alongside the 2020 Pandemic, the nations and African countries such as
government announced it could no South Africa.
longer keep up with costly billing
on petroleum products’ subsidies. In GAS, AS FUEL FOR AUTOMOBILES?
September, through the Petroleum In December 2020, President
Products Pricing Regulatory Agency Muhammadu Buhari launched
(PPPRA), the government announced Nigeria’s Autogas scheme to increase
that marketers would set the automated activities powered by
retail price, as no fixed price band gas gradually. Autogas is commonly
for Premium motor spirit (PMS)/ known as a ‘Green’ fuel as it reduces
gasoline would exist. A market-based CO2 exhaust emissions by about 15
pricing regime for gasoline would percent compared to PMS. Across
allow PPPRA to monitor market the world, Autogas has become the
trends and advise NNPC and oil third most popular automotive fuel –
marketing companies on the monthly with the largest markets in Australia,
guiding market price. PPPRA America, Turkey, South Korea, and
confirmed responses to fuel price the European Union. In countries
modulation would be matched with where gas is a comfortable option for

Graph 1

Nextier Insights Vol. 2, Issue 1: November 12-18, 2020

 automobiles, the transition did not clean cooking and domestic use of
happen overnight. For the Autogas LNG – several challenges must be
sector, as it would be too soon to considered
describe as a market - Nigeria must
understand the cost and implications Gas for Vehicles. With every
of filling your car with LPG. household owning at least two
vehicles across the nation, the
In September, the petroleum Minister conversion kit distribution will have

Across the world, Autogas has become the third most pop-
ular automotive fuel – with the largest markets in Australia,
America, Turkey, South Korea, and the European Union.
expressed that at least 1 million to supply at a prolific rate. It is
Autogas conversion kits were already also crucial that standardization is
available for Nigerians automobile highly controlled, through SON etc.,
users to migrate to gas. Nigeria is witnessing how extremely hazardous
heavily dependent on imported fuels are.
cars, thereby limiting the availability
of automobiles ready for gas. Even Safety, Infrastructure, and Storage.
with Autogas conversion kits, speed Although LNG has no odorants,
and efficiency might be challenging natural gas vapours are flammable
to meet. It seems capacity building but less hazardous than PMS, diesel,
in the conversion process is yet to or other liquid fuels. Natural Gas is
be developed or implemented. As usually stored underground, storing
optimistic as gas might seem for the gas in its liquefied state as LNG takes
environment and economy, several up less space than gaseous natural
motorists in Autogas countries still gas. The recently commissioned
face difficulties as, in remote areas, Integrated Gas Handling Facility in
gas supply and demand are limited. Edo state11 alongside bulk storage
LPG depots, for example, serves
storage. As the country transits into
CHALLENGES clearer energy, aggressive steps will
have to be in place to avoid gas leaks
If 2020 has done one thing for from transportation, production, and
economies, especially Nigeria’s oil distribution.
economy, it highlighted how fragile
the market is for the oil-producing Security. The security of energy
countries. Several oil wars have infrastructure is of paramount
brewed following the massive necessity, especially with the

Nigeria is heavily dependent on imported cars, thereby

limiting the availability of automobiles ready for gas. Even
with Autogas conversion kits, speed and efficiency might
be challenging to meet.

production cuts10 . The Minister of expectation of private sector

Petroleum Resources for Nigeria investments. The oil and gas saga
might genuinely be up to something (with the Niger Delta Militants) gave
by encouraging Nigeria’s abundant a real eye-opener to the adverse
gas reserves both inland and off effects of refined gas supply across
the Niger Delta basins. The Minister the station. Although gas is a lot
established the National Gas less tangible than crude, the Federal
Expansion Programme Committee Government ought to keep security a
to steer optimal performance and priority.
utilization in the Gas Sector. However,
while 2020 might seem like the International prohibition on funding
right time to kick off a decade for for gas-fuelled power for climate
gas to replace PMS and amplify mitigation: Several countries like

Power in Nigeria: The Decade of Gas

 the United Kingdom are placing experts see the driving growth in
a prohibition on powering Africa natural gas post- 2020; however,
through gas, the reasoning being the fruits might not be ready to
that although a cleaner energy reap any while soon. This holdback
source – gas will increase CO2 might be due to weak structure, lack

As the country transits into clearer energy, aggressive steps

will have to be in place to avoid gas leaks from transporta-
tion, production, and distribution.

emissions. However, in 2018 gas of collaboration amongst relevant

had a remarkable year with a 4.6 facilities and sensitization (especially
percent12 increase in consumption with gas for vehicle customers). This
following its economic diversification is despite CBN’s plans to accelerate
from oil. However, The Energy for investments in the gas value chain.
Growth reports show that if every
Sub-Saharan African country tripled NATURAL GAS AND CLIMATE
its electricity consumption overnight CHANGE
with just natural gas, the world’s Nigeria, according to the IEA Energy
total global emissions would only be Outlook, is expected to end gas
affected by 1 percent13 (see graph 1). flaring by 2030. The double-edged
On the side, it is essential to observe sword for decarbonization and gas
that climate resilience requires more supply chains must consider Nigeria
energy, not less. For the determined obliges international commitments
gas investment to be successful, like the Paris Agreement to reduce
the Nigerian government needs carbon footprints. As of 2018,
to create feasible projections that Nigeria produced 0.565 tCO214 of
accommodate more local investors the world’s comparative Green
over FDI with the likely event of House Gas emissions. This transition
prohibitions transcending the gas from diesel to cleaner gas-powered
awakening in Nigeria. energy would enable Nigeria to
meet its commitment if done right.
Working around the Flare Gas (Prevention of Waste and
challenges Pollution) Regulation, 2018 aims to
create a regulation that allows for
The Minister of State for Petroleum competitive bids for gas off-takers to
Resources is not far off from taking utilize gas captured while reducing
Nigeria on its Gas revolutionization environmental impact.
by presenting Nigeria’s need to
move towards gas as this allows Through gas re-injection, the
Nigeria to explore another one of Nigerian government elaborated in
its rich resources. Expanding on the the National Gas Policy15, that this
current pipeline infrastructure will new position sets out to encourage
mean an increase in gas to power the utilization of associated gas
for electricity. It is leading to more into markets rather than flared. It is
households and industries closing thereby maximizing the utilization of
the impending energy access gap. associated gas for power production
With more projects like the AKK gas and industrial use. Within this
pipeline and expanded domestic Policy, the Federal Government also
markets that allow for increased introduced flaring penalties.
exports, Nigeria can prepare for the
stabilization of the dollar with the CONCLUSION
influx of hard currency. As gas is
a dollarized commodity, its export Realistically, plans to increase gas
value is clear as revenue from its production and consumption will
sales might close financial debt left adversely compete with other
exposed by OPEC sanctions and the energy sources’ dynamics. Natural
pandemic slow down. Gas embodies the attributes to
match serial challenges such as
The National Gas Policy introduced carbon emissions, energy access,
in 2017 is slowly gaining traction. and creating a bigger market for
Several industry spectators and gas export for Nigeria. As the ninth
Nextier Insights Vol. 2, Issue 1: November 12-18, 2020
country with the largest gas reserve, nigeria-energy-outlook
it is about time the Gas sector 6
The Gas Aggregation Company of
stopped playing safe; there is enough Nigeria and Nigerian Gas Company
explore and utilize. The only fixture stimulate the liquidity issues along
limitation is infrastructure. Much the supply chain: the existing
like any other sector, to develop a payment issues in gas supply and
structure vast enough to contain lack of active action plan to improve
and match the demand and supply gas supply infrastructure and
for gas in this decade and beyond, dispatch coordination.
the Federal Government must create
a robust and regulated enabling
environment through policies and 7
The largest gas sector fund to
regulations. stimulate private sector investment in
the gas value chain.
When the Federal Executive Council
approved the National Gas Policy in 6
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developed by competent third-party which exist in several states.

investors. These investors who will be
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and transparent bid process. https:// petroleumindustrybill.com/wp-content/

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Power in Nigeria: The Decade of Gas