By Zik Gbemre
The story told every now and then by relevant authorities for the deplorable power supply situation in Nigeria is that we do not have enough gas supply (amongst other factors) to generate the needed energy to satisfy the nation’s electricity demand. But we have often wondered, is it that we do not have enough gas supply for the nation’s Gas Powered Stations to function optimally, or that we have not done what is expediently needed to develop and utilize the abundant gas reserves in the country?
Agreed that in recent times, the little power supply, which is about 4, 000 MW plus, being generated by Gas Powered Stations in the country, has been jeopardized and reduced to mere 1, 000MW plus, due to the destruction of gas pipelines by the reawakened militant activities in the Niger Delta region. However, Nigeria, as it stands, has no excuse not to satisfy its citizens energy demand because of the abundant gas reserve we have here. With the understanding that no business can survive in an atmosphere of energy crisis, we find it appalling that Nigeria, despite its natural gas reserves, is still struggling to meet the energy/power needs of its populace, after over five decades of oil and gas exploration in the Niger Delta region. As a result of the fact that we do not have steady power supply, which would have been addressed with our abundant gas reserves; the nation’s industrial and economic sectors have become endangered.
As an environmentally friendly and efficient “energy source”, natural gas is today considered the cleanest-burning conventional fuel, producing lower levels of greenhouse gas emissions than heavier hydrocarbon fuels such as coal and crude oil. Natural gas fuels power stations for electricity supply, heats buildings and is used as a raw material in many consumer products, such as those made of traditional plastics. But despite its importance, the Nigerian Governments over the years have not been given natural gas development in the country the rightful attention it needs. With a proven reserve of more than 260 trillion cubic feet of natural gas, Nigeria’s gas reserve is triple the nation’s crude oil resources as at 2013. Unfortunately, Associated Gas encountered during the normal course of oil production has been largely ‘flared’. Nigeria is reputed to be the largest gas-flaring country in the world after Russia. And by not fully harnessing its gas resources, Nigeria loses an estimated 17.2 million U.S. dollars daily according to some reports.
With the prevailing harsh economic realities facing the Nigerian economy due to the free fall of oil price at the global market, which has practically affected every sector of the country, there is need for more attention to be diverted to the development of other energy sources to revitalize the energy industry. This is where the development of Nigeria’s abundant natural gas reserves comes into play. Unfortunately, not much has been witnessed in this direction in terms of developing it to what it should be by past and even the present administration.
Some few year ago, we saw a report that our neighbor, Ghana had received a compensation of $10million from Nigeria over the failure of the latter to meet supply of gas agreement between the two countries, and we could not help but wonder in disbelief that Nigeria, despite being blessed with abundant natural gas reserves, was, and is still finding it difficult to meet supply of gas to its neighbor as agreed. We could not believe that Nigeria is still struggling to meet up with supply demands at the international market. Not that we lacked the natural gas in question, but obviously, we have not been able to adequately develop the huge deposit of natural gas in the country to satisfy domestic and international demands.
it is funny how we claim that we do not have gas to address our energy needs in the country yet we daily flare gas in the Niger Delta region. How can we still be flaring gas in the Niger Delta region. How can we still be flaring gas, which we claim we do not have?
It is sad that, because of past failures of government to focus and explore the many other natural resources which the country possesses, the gas industry has been practically frustrated and nearly abandoned over the years. This has led to a loss of revenue in a sector where there is a likelihood of generating more revenue. The single instance of Nigeria Liquified Natural Gas (NLNG) Limited remitting huge resources to the Federal Government some weeks back, is instructive. The current reserve estimate of Nigerian gas is over 170 trillion cubic feet, with about 50/50 distribution ratio between Associated Gas (AG) and Non-Associated Gas (NAG), according to Department of Petroleum Resources (DPR). Only a small fraction of this quantity is currently being utilized. About 63 per cent of the AG produced during the production of crude oil is currently being flared. DPR said that when oil companies began production in the 1960s, the cheapest way to separate the identified product, crude oil, from the associated natural gas was to burn the gas. Let us bear in mind again that after Russia, Nigeria flares more gas than any other country in the world in terms of the total volume of gas flared.
In fact, Nigeria’s gas flaring re-emphasizes the aphorism that “we are rich in energy resources but poor in energy supply.” The Associated Gas Re-Injection Act was made as an Act to compel every company producing oil and gas in Nigeria to submit preliminary programmes for gas re-injection and detailed plans for implementation of gas re-injection. It made it illegal after January 1, 1984 to flare gas without the permission of the Minister of Petroleum. The targets to stop gas flares have since then moved from 1984 to 2008 and 2011. But gas is still being flared up to date. Quoting Mr. Emeka Okwuosa, Group Managing Director Oilserv Ltd, Nigeria flares about 1.2 billion cubic feet of gas a day (bcf/d), which could fuel about 7000MW of efficient thermal electric power, over 1,400 agro-processing facilities, 350 textile plants, 70 fertilizer plants with opportunities for creating over one million jobs. This amount of gas flare represents 12.5 per cent of all globally flared gas.
We might be wondering what are the cost implications of gas flaring to the Nigeria economy. Available data show that oil and gas companies operating in Nigeria burn over $3.5 to $5 billion yearly from the over 257 flow stations in the Niger Delta. Specifically, the country flared about 17.15 per cent of the 95,471 metric tonnes of gas produced in June 2015 alone, according to data from Nigerian National Petroleum Corporation (NNPC). Organisation of Petroleum Exporting Countries (OPEC) stated in its 2015 Statistical Report that Nigeria produced 86,325.2 million standard cubic meters of gas and flared 10,736.8 million standard cubic meters in 2014. Also, NNPC disclosed that Nigeria lost up to $868.8 million, about N173.76 billion to gas flaring in 2014. NNPC, in its Annual Statistical Bulletin (ASB) for 2014, stated that oil and gas firms in the country flared 289.6 billion standard cubic feet (SCF) of gas, representing 11.47 per cent of the total gas produced in the country last year. Using the Nigerian Gas Company’s (NGC) price of $3 per 1,000 SCF of gas at the current exchange rate realities, the flaring of 289.6 billion SCF of gas translated to a loss of $868.8 million, an equivalent of N173.76 billion. Specifically, the oil and gas companies produced 2.524 trillion SCF of gas, utilized 2.235 trillion SCF and flared 289.6 billion SCF.
Seriously, these figures and estimates of what Nigeria is losing as a result of the gas being flared daily and not utilized, is more than enough to make any purpose-driven government to promptly take proactive steps to reverse and address the situation in the interest of the Nigerian economy and the common citizenry.
Though, Nigeria is the second largest producer of Liquefied Petroleum Gas (LPG) in Africa, and the sixth largest producer in the world with over 3million metric tones annually. However, current per capita consumption of the gas in Nigeria is about 0.8kg/annum. This is the lowest in Sub-Saharan Africa; lower than those of Nigeria’s West Africa neighbours who do not produce the product. Annual LPG consumption in Nigeria for 2010, was put at 120,000MT, whereas, in Lagos alone, there is a potential market for 1,000,000MT annually. Yet, stakeholders in the industry are daily crying shortage of gas supply for domestic, industrial and power generation usage. How can we be crying shortage of what the country has in abundance in reserve? The problem squarely lies with the country not giving gas development and utilization the rightful attention it needs.
The truth is that there is “no sincerity of purpose to develop our gas potentials” in Nigeria by our Governments, both past and present. There is more than enough natural gas deposits underground everywhere in the Niger delta region. But the Federal Government has refused to massively and sincerely embark on Gas Development in the country that would transform the nation’s economy. The gas being flared today in Nigeria is more than enough to address the nation’s power supply needs as well as for export purposes.
For instance, there are a lot of gas reserves in the Utorogu areas of OML 34 in Delta State but our Nigerian Federal Government, its Oil and Gas Company the Nigerian Petroleum Development Company (NPDC), and their Joint Venture partners; have refused to drill more Non-Associated Gas (NAG) Wells and build more gas facilities/Plants in the said Utorogu areas. We consider it necessary to reiterate the fact that in the interest of Nigeria not to be left out in the current global surge in the development of gas as a reliable efficient source of energy, there is expedient need for the Federal Government to massively fund Nigeria’s Gas development Project by directing the NNPC/NPDC and the Joint Venture (JV) Partners to drill more non associated gas Wells in Utorogu Gas Plant Cluster Well Areas in OML 34, amongst other things like constructing another Gas Plant, New Utorogu Gas Plant Phase 3(Utorogu NAG 3) in the same area.
It is really sad to observe that all the Shell (SPDC) Gas Projects in the Western Swamp areas in Delta State have been stalled due to lack of funding. The NNPC/NPDC and their JV partners know exactly what to do to address these issues but yet they have refused to give it the needed attention. Our Political leaders and public officials in relevant Government Institutions prefers to be playing ‘politics’ with Nigeria’s gas development aspirations to satisfy their selfish interests and biased reasons.
Though, there were some major efforts by IOCs like Shell (SPDC) to reduce gas flaring in the country to the barest minimum, as you cannot really eliminate gas flaring completely. Some of these options for Associated Gas utilization as planned by Shell (SPDC) for instance include the Re-Injection into reservoirs, fuel for industries, fuel for power generation, Compressed Natural Gas (CNG) for vehicular and other uses, Extraction and bottling of LPG constituents for commercial consumption, Feedstock for Industry, Liquefied Natural Gas for export, etc. In fact, part of the concrete efforts made by Shell (SPDC) in this regard was to initiate the present Utorogu Gas Plant Phase 2 (aka Utorogu NAG 2) Project in OML 34, Delta State, which is meant to gather AG from the surrounding oil fields to address the gas being flared around the said areas. But that gas Project, which is near completion and has been taken over by NPDC/NNPC after Shell Divestment in Delta State, is today being neglected and suffering due to lack of funding by the Federal Government and other JV partners. One would have thought that such a sensitive gas project like the Utorogu NAG 2 Project would be made a priority by the relevant stakeholders as part of efforts to address this problem. But that remains to be seen.
Recently, there were reports that the Shell Petroleum Development Company (SPDC) may be groaning under insufficient fund to float some of its gas projects that are positioned to further reduce gas flaring in the county. The Oil multinational, in its 2016 Facts Sheets, said “the planned start-up dates for two major gas gathering projects – Forcados Yokri Integrated Project (FYIP) and Southern Swamp Associated Gas Gathering (SSAG) Solutions have been delayed due to a lack of adequate joint-venture funding”. Despite these challenges, Shell (SPDC) said gas flare reduction from its operations continued in 2015 with a 28 per cent decrease compared to 2014 and a flaring intensity reduction of 15 per cent from the previous year. It stated that: “Progress was made on several gas gathering projects, which are now at advanced stages of completion. For example, we have installed a gas-gathering plant at the Olama Station that is ready for final commissioning. The Adibawa, Escravos and Otumara Gas Gathering Projects are also at advanced stages of completion.”
According to the Managing Director SPDC and Country Chair, Shell Companies in Nigeria, Osagie Okunbor, he said Shell Companies in Nigeria are also actively involved in the development and utilisation of natural gas, pioneering its production and delivery to domestic consumers and export markets. Although, the SPDC JV’s market share of domestic gas has reduced through a series of divestments since 2010, which enables Nigerian companies to play a more strategic role, Shell companies still remain a crucial part of the national gas energy mix. For example, our Afam VI power plant alone contributed 14 per cent of Nigeria’s grid-connected electricity in 2015, consolidating its achievements since first power in August 2008. Another entity, Shell Nigeria Gas (SNG), supplies natural gas to 87 industrial customers.”
The Federal Government has not been sincere in addressing this problem of gas flaring and the development of gas in the country because of politics and vested interests, which has made the continuous existence of the Nigerian Gas Company (NGC) as a complete bottleneck in addressing these problems. How can the country continue to have a gas company that does not produce gas but is only good at Piping and Metering the gas produced by others? It simply does not make sense.
We have repeatedly advised that the Federal Government needs to direct NPDC/NNPC and their JV Partners to drill more gas wells in the said Utorogu Gas Plant Cluster Wells Area and Eruemukohwarien Area and construct the new Utorogu Gas Plant Phase 3 in the already acquired land area in Iwhrekan Community, Ughelli South LGA, Delta State, in order to get the required volume of gas to generate the needed Power Supply to attain the Federal Government’s objective to improve on Power Supply and domestic industries consumption. There is need for the Federal Government and the NNPC Group and JV Partners to focus more oil and gas operations in the Land Areas since the Swamp Areas are evidently ‘hot’ at the moment with reawaked militants’ activities.
Like we said, the Utorogu Gas Plant Wells Cluster land area has already been acquired by Shell (SPDC) before their exit from OML 34. All that is required is for the Federal Government through the NPDC/NNPC/JV Partners to continue from where Shell (SPDC) stopped in developing Nigeria’s gas reserves. The Utorogu Gas Plant Wells Cluster area and the Eruemukohwarien Area have a lot of gas deposits/reservoirs to feed the nation’s gas powered stations and domestic industries. So while completing the Utorogu Gas Plant Phase 2, there is need for the Government to drill more gas wells in the Utorogu Gas plant Well Cluster area and Eruemukohwarien Area in OML 34. The needed Non Associated Gas deposits/reservoirs are there in abundance. In fact, the Utorogu Gas Plant land area for instance, was planned by Shell as the “gas hub in Africa”. The Federal Government needs to drill the needed gas Wells and construct gas infrastructure to feed Utorogu Gas Plant Phase 3 (Utorogu NAG 3) in the said acquired land from Iwhrekan community in OML 34, Ughelli South LGA, Delta State.
The International Energy Agency predicts that the demand for natural gas will grow by approximately 44 percent through 2035. Perhaps, this explains why International Oil Companies (IOCs) like Shell (SPDC) are investing more in natural gas as they are divesting from their crude oil assets in Nigeria and other countries. This also explains Shell’s huge gas investments in Russia, for example the Shell Sakhalin Natural Gas Plant in Russia is one of the world leading gas projects. Shell also has the largest Gas-To-Liquids Plant in the world in RasLaffan Industrial City, 80km North of Doha, Qatar. Apart from producing diesel, petrol, and kerosene, the Plant produces base oils for top-tier lubricants, which is a chemical feedstock called naphtha used in making plastics and normal paraffin; also used in making detergents.
The Federal Government cannot be talking of improving power supply without adequate practical plans on ground to produce the needed gas to improve the required power generation, satisfy domestic industries gas demands and export demands. Gas is key to Industrial Development and gas is needed to generate power. In fact, the whole world is focusing towards on gas as an efficient and more reliable source of energy to develop their economies. The gas reserves/reservoirs and the land area are available in Utorogu Gas Plant Wells Cluster area for this project. “Plans on paper without Execution” is bad. There is need for adequate funding by the Federal Government on Gas Development and the needed gas facilities and infrastructure for Nigeria to be out of the woods in energy supply. Adequate funding is needed to increase gas supply as an energy source; for gas-powered Stations, domestic industries consumption and for export purposes, like the West African Gas Pipeline Project (WAGPP). The Federal Government of Nigeria can for instance, replicate all of this and even more in the country if strategic natural gas development projects like the new Utorogu Gas Plant (aka Utorogu NAG 2 Project) in Ughelli South LGA, Delta State, as well as the Proposed Utorogu NAG-3 Project, are given the needed attention.
The importance of Gas development cannot be overemphasized. As environmentally friendly and efficient energy source, natural gas is lighter than air, colorless, odorless and tasteless. For this reason, odorant is added to the gas to make it noticeable and objectionable for safety reasons. Natural gas can be compressed and, therefore, transmitted in large quantities through relatively small pipe diameters when under high pressure. Nigeria cannot afford to continue flaring gas and complain about inadequate gas supply; whereas the country is blessed with abundant gas reserves deposits that are begging to be developed and utilized, hence, the need for the Federal Government and industry investors to adequately fund the operations of the NPDC and its gas development activities in Utorogu areas of OML 34.
Aside export purposes, Natural Gas can also be used to satisfy the following in Nigeria: Domestic Gas demands since natural gas dispensed from a simple stove top can generate heat in excess of 2000°F (1093°C) making it a powerful domestic cooking and heating fuel; produce Hydrogen, which is a primary feedstock for the chemical industry and an important commodity (hydrogen agent) for oil refineries, and the fuel source in hydrogen vehicles; natural gas can be used for transportation, including Aviation fuel, as compressed natural gas is a cleaner alternative to other automobile fuels such as petrol and diesel; Natural gas is a major feedstock for the production of ammonia, via the Haber process, for use in fertilizer production; and most importantly, Natural gas is a major source of electricity generation through the use of gas turbines and steam turbines. Most grid peaking Power Plants and some off-grid engine-generators use natural gas. Natural gas burns more cleanly than other Hydrocarbon fuels, such as oil and coal, and produces less carbon dioxide per unit of energy released. Natural gas is also used in the manufacture of fabrics, glass, steel, plastics, paint, and other products. We can imagine the enormous employment opportunities available in this sector if given the proper attention.
Like us, stakeholders in the industry believe that it is expedient for the Federal Government and policy-makers in the oil industry to make every effort to appreciably reduce the quantum of gases being flared in Nigeria and encourage the development of gas infrastructure. While speaking on the issue recently at Nigerian Association of Petroleum Explorationists (NAPE) conference on gas flaring, its former President, Adedoja Ojelabi, said that in spite of several gas flares-out regulations and policy, the country continues to flare its natural resources.
In her words: “The goal post has shifted a few more times, 2001 to 2004, and then National Energy Policy that declared January 1, 2008 then December 31, 2008 as the deadline for gas flares-out in Nigeria. Some reports have named 2015 as the next deadline”, she added. Ojelabi identified key issues hampering the effective reduction in gas flaring in the Niger Delta to include legal issues regarding gas flaring regulatory framework, Nigerian government’s commitment/capacity to create enabling environment, fiscal and contractual framework for associated gas, lack of infrastructure and huge upfront cost to develop it, access to transmission and markets and energy pricing. She added that “there has been a downside, with the negative impact on the environment, sustainable development, erosion of revenue from gas as a commodity, wealth creation from gas investment opportunities, loss of value for power generation where the country is highly deficient. Recent studies have shown the extent of economic loss to the country could range from $2.5 – $17 billion yearly.”
With all of this at the back of our mind, we can therefore understand the need for the Federal Government and Policy-makers to focus more attention towards gas development in the country. As a matter of fact, with appropriate funding, the above stated gas projects in Utorogu OML 34 and others across the country can ‘energize’ the whole of Nigeria if given the needed attention. Utorogu can become Nigeria’s “energy source centre” that can provide all the nation’s gas supply demands and for export purposes.
In all of this, one is then forced to ask what the Nigerian Gas Company (NGC) is doing as a subsidiary of the Nigerian National Petroleum Corporation (NNPC), in the development of natural gas in the country. We can see that the NGC, as a subsidiary of the NNPC, obviously constitutes as a bottleneck to the nation’s aspirations of utilizing its abundant gas resources for the Power sector and industrialization sector. Despite their inactiveness in gas development and transportation, the same crops of leaders in the NGC-NNPC are still allowed to remain for several decades now. We have reiterated in the past on the need to scrap the NGC, since they are just existing and wasting government’s funds. We have advised that it is either the NGC is completely scrapped or the government should sell it off to private companies in the industry that do what is expected of “a national gas company”, because, it is obvious that the NGC does not have what it takes to cater for our domestic and export gas needs. All that the NGC is good at is to lay gas pipelines and monitor gas transportation. The gas in question is not produced by the NGC but by the International Oil Companies (IOCs) like Shell (SPDC). In other words, the NGC is just there as a ‘middleman’ (CommissionedAgent) waiting for gas produced by others to distribute. This makes the NGC’s existence in the industry ‘irrelevant and needless’, hence, the NGC should be done away with.
There is need for the Federal Government to liberalize our gas policy by first scrapping the Nigerian Gas Company (NGC). The NGC is a bottle neck and obstacle to Gas Development in Nigeria. The NGC does not play any significant role in the gas business of Nigeria. The Federal Government and the NNPC should just allow the oil and gas producing companies to market the produced gas instead of passing through NGC to get to the buyers. This will greatly improve the Gas Development in Nigeria.
Nigeria cannot be boasting as African’s giant in gas reserves and 7th in the world, when most of its citizens are still using kerosene, firewood and charcoal for cooking, not to mention the unreliable power supply situation that is crippling various sectors of the economy due to lack of gas supply to our Gas Power Stations. Some of the key gas export projects of the Nigerian government include the West African Gas Pipeline (WAGP) Project and the Trans-Sahara Gas Pipeline Project (TSGPP). The WAGP, which is designed to supply gas from the Utorogu area of the Niger Delta to feed generating plants in Ghana, Benin Republic, and Togo, reflects a previous gas policy which laid greater emphasis on the export of gas than on production for local consumption. The need to take advantage of the numerous opportunities in Nigeria’s growing gas sector has led to the US$13 billion Trans-Saharan Gas Pipeline Project. The project involves the construction of a 4,128 kilometre pipeline from Nigeria across the Sahara to Europe with a condition that the domestic needs must be met before exportation begins. Hence, investment in the connecting pipelines to primary gas storage with nodes on the TSGPP is required.
Like we said above, we believe it is expedient for the Federal Government to “liberalize the natural gas sector” just the same way it has done with the crude oil sector. In other words, apart from the already existing Joint Venture (JV) partners the Federal Government has with IOCs like Shell (SPDC), Chevron-Texaco, Mobil, Agipetc, they they should ‘open up’ the gas sector with investor-friendly policies agreements and conducive environment for interested private investors in the Organized Private Sector to come in to harness, develop and distribute gas for the country’s domestic demands and for export purposes. Foreign and indigenous private companies should be given ‘free hand’ and necessary operating license under required Production Sharing Contracts (PSC) signed with the Federal Government for the development and proper utilization of the country’s abundant natural gas resource. This should be done the same way the Federal Government has a PSC signed agreement with the Shell Nigeria Exploration and Production Company (SNEPCO) in the crude oil sector. So that the investors in the gas sector, will have the leverage to harness, develop and distribute gas without passing through the Nigerian Gas Company (NGC) for both Power utilization and industries in terms that will benefit them and all-and-sundry.
It is high time the Federal Government under President Muhammadu Buhari should take concrete steps in the gas sector that would promote gas development and utilization in Nigeria as a cheaper, more reliable and cleaner fuel alternative and feedstock. The Federal Government should liberalize the Nigerian Gas Policy and completely scrap the Nigerian Gas Company (NGC) to allow Private Companies to come and invest on gas projects without passing through the Nigerian Gas Company NGC. This is what the Government needs to do to achieve its vision where natural gas will overtake liquid fuel as the fuel of “first choice” for Nigeria’s Power utilization and industries. There is need for the President Buhari administration to take the bull by the horn and make things happen for the benefit of all as regards the country’s abundant gas reserves. We ask that the right things should be done.
Zik Gbemre, JP.
National Coordinator
Niger Delta Peace Coalition (NDPC)
No.28, Opi Street, Ugboroke Layout, Effurun-Warri,
P.O. Box 2254, Warri, Delta State, Nigeria.
Tel: +2348026428271
+2348052106013
Website: www.ndpc-zik.org
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