Nigeria in frame as Europe rebalances gas supply sources

• London analysts suggest Nigeria‭ ‬drive gas pipeline to Mediterranean

When the crisis finally settles, if indeed, it does, between Russia and Ukraine, analysts say there would be a lot of rebalancing to follow, in Europe and then globally. That rebalancing is already on somewhat.

The world has been rudely awakened in just a little over a month to the realisation that it is dependent on the Russian-Ukrainian axis for so many things. Europe’s wholesome dependence on Russia for its energy needs and, overall, the huge influence both countries have on global commodities markets has led many to question why it now looks like nobody saw any potential danger in it.

Now, for the first time, Business A.M. learned from sources in London, it is beginning to emerge that, concerning gas supply, a push is on to establish more supply sources that would ensure that Western European countries do not have to go through this kind of dependency crisis again.

  For Nigeria, a country with an abundance of gas resources, some political and economic risk analysts that have been talking to Business A.M. believe that it should be leading the push from West Africa to get gas pipelines down to the Mediterranean.

The Russia-Ukraine crisis has, indeed, opened up a lot of wounds and mistakes. But it is also opening eyes to see opportunities that some gas rich countries, like Nigeria, can take advantage of.

Anthony Goldman, an independent political and economic risk analyst, told Business A.M. in London that while in 1973 the West did so much to divert a dependency on oil from the Arab world, it is shocking that no one had factored in the current Russia-Ukraine situation.

“In 1973 the US and Europe invested heavily to diversify reliance away from the Gulf for oil. It’s extraordinary they made the same mistake again,” Goldman said.

Many expect that the rebalancing that will surely take place when this is over will involve how the US and Europe diversify reliance on a whole range of things for which they have been found vulnerable and exposed.

One of the sure routes for that diversification would be in West Africa, led by Nigeria. Business A.M. has been told that the region is coming up in the hush hush talks going on, especially since the war is still on in Ukraine.

“Nigeria and West Africa should really be pushing the point for a pipeline north to the Mediterranean. Coal is not the answer. Nuclear has huge risks. And Nigeria should be making the case,” said Goldman.

He said the talks around a rebalancing of energy supply equations are growing, but that it only needs a strong voice to make the case.

Many see the window of opportunity that has opened for Nigeria and her gas resources, but it would take government action for this to be harnessed.

Sunny Nwawchukwu, an industrialist and vice chairman, finance, Onitsha Chamber of Commerce, sees the opportunity in front of Nigeria.

“The much talked about Trans Saharan Pipeline to Europe, for natural gas supplies, needs to be given focused attention, at a time like now that Russia’s energy supplies to European countries are under probability. From a business angle such could pose an opportunity for gas supplies to Europe, to replace the vacuum that might have arisen from Russian gas disengagement,” Nwachukwu said.

Nigeria alone holds 206 trillion cubic feet in proven gas reserves; and one estimate said that if it gets serious it could build its reserves to 600 trillion cubic feet.

There are two major projects which could easily achieve the push for a gas pipeline from West Africa to the mediterranean. One is the Trans Saharan Gas project pipeline. Starting in Nigeria, it has a length of 4,400 km and the cost estimate at the time of take off was $13 billion.

Second is the Atlantic Nigerian-Moroccan pipeline with a length of 5,660 km and an estimated cost of $25 billion.

Both involve huge costs which the economies of the major drivers are not in a position to shoulder right now. Perhaps, this is where some cushioning can come from those seeking to diversify their energy supply sources.

Not too long ago, the European Union and the African Union held a summit where there were plenty of long talks about cooperation. Could this offer a window to ramp things up?

“Good question! At the EU/AU meeting in Brussels last month, Europe insisted it would only supply credits for green energy and renewables,” Goldman recalls, but he adds, “That has to change – the economics of major pipeline through no man’s land are greatly simplified by strategic support from major agencies and institutions,” he said.

But beyond the funding needs, there is the time factor to. To build a pipeline from West Africa will take years. But the alternative, advised Goldman, is “in the meantime, ramp up a bit of LNG.”

Oga Adejo-Ogiri, a gas expert and the executive secretary, Association of Local Distributors of Gas (ALDG), Nigeria, agrees with ramping up LNG. He suggests that Nigeria can quickly expand NLNG to Trains 8 – 12 and then sanction new LNG projects, given that pipelines don’t take shorter time to build.

Adejo-Ogiri is particularly bullish on expanding LNG to take advantage of the opportunity this season presents.

According to him, “we can expand our LNG production capacity to supply more gas to Europe. It mustn’t be a pipeline only. LNG gives us flexibility to supply to other regions – we can target Asia market, which pays higher as well. [This is] an opportunity! And we should position for it.”

Adejo-Ogiri, however, said he has concerns about how Nigeria can deliver on this by taking advantage of the current situation. His concerns include:

The time it takes to bring a project of such magnitude to  commencement;

The quantum of funds required (EU willing to finance?)

The whole energy transition bug and if the EU are willing to commit to long term supply required to make such projects bankable

He is also worried that there might not be the political will, especially in a pre-election year, to take action.

“But my worry is  not really the time to get to FID but the time from FID to commissioning. These are typically 5yr+ projects. It took 4 – 5 years to build the Power of Siberia – the gas pipeline connecting Russia to China,” said Adejo-Ogiri

He advised that in order to take advantage of this window, Nigeria needs to fast track its usually long opportunity development and contracting processes, and create some special incentives to attract investors (like what Nigeria did for the initial NLNG trains). Tax incentives, e.g. NLNG has a 10 year tax holiday. Others include capital repatriation, etc.