BY OGA ADEJO-OGIRI
Oga Adejo-Ogiri is the Executive Secretary of the Association of Local Distributors of Gas (ALDG) and, also, Principal Consultant at Vappax Advisory, an Energy Consulting firm based in Abuja, Nigeria.
Introduction
Nigeria’s gas sector plays a crucial role in the nation’s economy, serving as a vital source of revenue and energy supply. Under President Muhammadu Buhari, the sector witnessed significant developments marked by the passing of the historic Petroleum Industry Act (PIA), the declaration of the ‘Decade of Gas’ and the National Gas Expansion Programme amongst other initiatives.
The PIA introduced crucial reforms aimed at restructuring and revitalising the Nigerian oil and gas industry. These reforms include commercialising the Nigerian National Petroleum Corporation (NNPC) and establishing distinct regulatory agencies to oversee different aspects of the sector.
Under the PIA, the NNPC was transformed into a limited liability company, NNPC Limited, to enhance efficiency, transparency, and profitability. This move aims to attract private sector participation, stimulate investments, and improve the overall performance of the national oil & gas company.
Furthermore, the PIA established several regulatory agencies to oversee specific aspects of the oil and gas sector. Notable among these are the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) responsible for the regulation and supervision of upstream petroleum operations, including exploration, production, and development of oil and gas resources. The PIA also established the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) tasked with regulating and overseeing midstream and downstream oil and gas activities, including refining, transportation, storage, and marketing of petroleum products.
Nigeria has abundant gas resources with proven reserves of over 200 Tcf which places it as the 8th largest gas reserve in the world and the largest in Africa. Experts estimate that this figure could potentially be 600 Tcf because of the huge probable reserves, yet to be classified as proved reserves as there has been no dedicated exploration for gas. The need to diversify Nigeria’s dependence on crude oil which is the major export commodity and the primary contributor to our foreign exchange earnings makes a developed gas sector a priority. Effective development of the sector can drive the social and economic development of the country through gas-to-power and gas-based industrialisation.
Following the inauguration of Nigeria’s 16th President, Bola Ahmed Tinubu, we outline five pressing issues the new administration must confront to drive the growth and development of Nigeria’s gas sector.
1. Enhancing infrastructure development
One of the top priorities for the incoming administration is to address the inadequate infrastructure in the gas sector. Investments in pipeline networks, storage facilities, and gas processing plants are essential to optimising production, reducing flaring, and enabling efficient distribution of gas resources across the country. This infrastructure expansion will boost domestic consumption, increase power generation, and support industrial growth.
The Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline currently approaching completion is an example of a gas infrastructure project that signals ambition and concern for the sector. The project is designed to transport natural gas from the southern part of Nigeria to the northern regions. The pipeline spans approximately 614 kilometres and has a capacity of 2.2 billion cubic feet per day (bcf/d), almost equivalent to the capacity of the existing Escravos Lagos Pipeline System (ELPS) which supplies most of the gas volumes to the domestic market today. Overall, Nigeria’s gas sector requires substantial infrastructure development to fully harness its gas resources and drive economic growth.
2. Promoting gas utilisation and diversification
While significant strides have been made in gas utilisation, there is still a need for further diversification and expansion of its applications. The new administration should prioritise initiatives that encourage the use of natural gas as a cleaner and more affordable energy source in various sectors, such as power generation, manufacturing, transportation, and residential consumption. Promoting investment in gas-based industries, such as petrochemicals and fertiliser production, will unlock immense economic potential.
As a nation, our aim should be to significantly increase our gas production and maximise income from our gas resources given the energy transition window and the declining role of crude oil. We should aspire to be amongst the top five gas-producing nations globally, a position that is commensurate with our enormous reserves and also ensure that our gas resources are being exploited ahead of a time when they could become stranded. On the demand side, Nigeria has a huge power deficit estimated at between 20–50GW and which can be met by relatively cheaper gas-fired generation.
There is also a huge potential to be explored in using autogas as a widespread alternative to petrol and diesel in the transportation sector. With autogas offering up to 50 percent cost savings and significant environmental benefits, mainstream adoption will reduce reliance on dirty fuels and drive domestic utilisation of gas. Statistics show that there are over 11 million registered vehicles in the country. A plan to have about 20 percent of the country’s entire car fleet running on autogas (3 million cars) will translate to rapid investment in the infrastructure to support the conversion of cars for autogas use and the uninterrupted availability of autogas around the country.
The President Tinubu administration will need to significantly support the Nigerian Gas Expansion Programme (NGEP) and the Autogas Policy to promote the use of autogas in transportation. These initiatives aim to make autogas more accessible and affordable through subsidies and tax incentives, further enhancing the potential cost savings for users.
3. Strengthening gas pricing mechanisms
It is crucial to establish transparent and market-oriented gas pricing mechanisms to attract investments and stimulate growth in the gas sector. The new administration must focus on removing existing price distortions, ensuring fair competition, and providing a predictable pricing environment that encourages investors to participate in exploration, production, and distribution activities. A well-regulated pricing framework will bolster investor confidence and promote long-term sustainability.
4. Addressing security challenges
The security of gas infrastructure, including pipelines and facilities, remains a significant concern in Nigeria. Recently, the country has experienced gas supply shortages majorly attributed to oil pipeline vandalism which constrains associated gas supply, a considerable gas supply source to the domestic and export market. The Tinubu administration should prioritise efforts to safeguard these critical assets by implementing robust security measures, collaborating with security agencies, and engaging local communities. Effective security strategies will not only protect investments but also ensure uninterrupted supply, attract foreign investments, and foster a conducive business environment.
5. Encourage international collaboration and investments
The new administration must actively engage with international partners, multinational companies, and investors to attract capital, technology, and expertise into the Nigerian gas sector. Promoting favourable policies, offering attractive incentives, and showcasing the sector’s potential will encourage foreign direct investment and strategic partnerships. Collaboration with international entities can facilitate knowledge transfer, enhance technological capabilities, and foster best practices, ultimately driving the growth and competitiveness of Nigeria’s gas industry.
Conclusion
As Nigeria’s gas sector enters a new phase, building upon the policies implemented during President Buhari’s tenure, the incoming administration faces critical challenges and opportunities.
With careful planning, effective implementation, and stakeholder engagement, the new administration can drive sustainable growth, create employment opportunities, and unlock economic growth with gas as the driving force.
