1. LOCAL NATURAL GAS FOR LOCAL PEOPLE.
INSIGHT INTO NIGERIA’S LOCAL CONSUMPTION OF NATURAL GAS: PROSPECTS AND OPPORTUNITIES:
PREPARED AS A RESEARCH PAPER FOR BUSINESS PRESENTATION - 2014
BY
OLUWASEGUN IDOWU
Introduction
Natural Gas Resource in Nigeria
The extent to which a country develops is anchored around its resources; and this is evidenced
in how the revenue derived from natural resources (especially the oil and gas industries) has
influenced national development strategies.
Nigeria boasts of substantial natural gas reserve that is estimated to be even greater than her
oil reserve. It could be seen from Table 1 below that as at the end of 2012, the proved natural
gas reserve of Nigeria is estimated to be about 5. 11 trillion cubic metres; about 2.5% of the
208.4 trillion cubic metres of world proven natural gas reserves, and reserves-to-production
(R/P) ratio of more than 100 years.
In spite of the estimated gas potentials, both anecdotal and empirical evidences suggest that
the potentials from the level of resource endowment have not been maximally exploited. It
could be seen from the data presented in Table 1 that while Nigeria has the highest proved gas
reserves in Africa, it is placed a distant third in terms of gas production.
The inability to maximize our gas reserve potentials could partly be blamed on gas flaring
activity. Gas flaring, which is the combustion of associated gas produced with crude oil or from
gas fields, has been discussed extensively in existing literature. Associated gas is the raw natural
gas (usually a mixture of methane and other hydrocarbons) that emerges from oil wells.
Table 1. Nigeria’s natural gas proved reserves and produc-tion
at the end of 2011. Proved reserves
Gas
production
Trillion cubic metres Share of
total
R/P ratio Billion
cubic
metres
(bcm)
Share of
total
Algeria 4.5 2.2% 57.7 78.0 2.4%
Egypt 2.2 1.1% 35.7 61.3 1.9%
Libya 1.5 0.7% * 4.1 0.1%
Nigeria 5.1 2.5% * 39.9 1.2%
Other Africa 1.2 0.6% 63.4 19.4 0.6%
Total Africa 14.5 7.0% 71.7 202.7 6.2%
Total World 280.4 100.0% 63.6 3276.2 100%
2. In the light of the above findings, there is a need to improve on the gas production capacity of
Nigeria, while reducing the volume of gas flared to its barest minimum. Consequently, the
Federal Government of Nigeria, through its organs and agents, is advised to:
1. Construct more reservoirs suitable for gas re-injection and storage.
2. Expand local and regional gas networks, so as to facilitate improved local consumption
of gas produced.
3. Establish adequate fiscal/gas pricing policies as a way of improving/encouraging
investments in the gas sub-sector of the oil and gas market.
The Nigerian National Petroleum Corporation (NNPC) hopes to transform Nigeria into a leading
Liquefied Natural Gas (LNG) producing and utilization nation by commercializing Nigeria’s
abundant gas reserves and promoting a viable LNG industry.
The comment by Mrs Diezani Alison-Madueke (Nigeria’s Minister of Petroleum Resources), that
Nigeria intends to reduce flared gas from the current 7% to 2% by 2017 corroborates this
desire. This is a laudable vision as better exploitation of natural gas resources, especially those
under-utilized in West Africa is seen as a significant way to satisfy the world’s increasing natural
gas demand, which has been projected to grow by 1.9% annually, reaching 4700 billion cubic
metres (BCM) in 2030, and account for 24.4% of expected energy consumption.
Natural gas - proved reserves: 5.11 trillion cu m (1 January 2012 est.)
Definition: This entry is the stock of proved reserves of natural gas in cubic meters (cu m). Proved reserves are those quantities
of natural gas, which, by analysis of geological and engineering data, can be estimated with a high degree of confidence to be
commercially recoverable from a given date forward, from known reservoirs and under current economic conditions.
Source: CIA World Factbook
3. FACTS AND FIGURES: By U.S. Energy Information Administration (EIA)
Nigeria is the largest oil producer in Africa and was the world's fourth leading exporter of LNG
in 2012. Despite the relatively large volumes it produces, while the natural gas sector is
restricted by the lack of infrastructure to monetize gas that is currently flared (burned off).
For the past decade, the United States imported between 9% to 11% of its crude oil from
Nigeria. However, this share fell to an average of 5% in 2012 and 4% from January to August
2013. As a result, Nigeria has fallen from being the fifth largest foreign oil supplier to the United
States in 2011 to eighth in 2013.
Nigeria is the largest holder of natural gas proven reserves in Africa and the ninth largest holder
in the world. Nigeria produced 1.2 Tcf of dry natural gas in 2012, ranking it as the world's 25th
largest natural gas producer. Natural gas production is restricted by the lack of infrastructure to
monetize natural gas that is currently being flared.
Nigeria flares the second largest amount of natural gas in the world, following Russia. Natural
gas flared in Nigeria accounts for 10% of the total amount flared globally. Gas flaring in Nigeria
has decreased in recent years, from 575 Bcf in 2007 to 515 Bcf in 2011. There are a number of
recently developed and upcoming natural gas projects that are focused on monetizing natural
gas that is flared.
Nigeria exported 19.8 MMtpa (950 Bcf) of LNG in 2012, accounting for more than 8% of globally
traded LNG and making Nigeria the world's fourth largest LNG exporter. Japan is the largest
importer of Nigerian LNG, receiving 24% of the total in 2012. The United States did not import
any natural gas from Nigeria in 2012 for the first time in more than 10 years.
Nigeria has one of the lowest net electricity generation per capita rates in the world. Electricity
generation falls short of demand, resulting in load shedding, blackouts, and a reliance on
private generators. Nigeria is in the process of privatizing the state-owned Power Holding
Company of Nigeria (PHCN) in hopes that it will lead to greater investment and increased power
generation.
4. USES OF NATURAL GAS: A CASE STUDY OF UNITED STATE OF AMERICA
Natural Gas: A Fuel and a Raw Material
Natural gas is used in an amazing number of ways. Although it is widely seen as a cooking and
heating fuel in most US households, natural gas has many other energy and raw material uses
that are a surprise to most people who learn about them.
In the United States, most natural gas is burned as a fuel. In 2011 about 25% of the energy
consumed across the nation was obtained from natural gas . It was used to generate electricity,
heat buildings, fuel vehicles, heat water, bake foods, power industrial furnaces, and even run
air conditioners!
22 Trillion Cubic Feet
During 2009 the United States consumed about 22.8 trillion cubic feet of natural gas. That's
enough gas to fill a room with a footprint the size of Pennsylvania and about 18 feet high. Most
of that gas was delivered to nearly 70 million homes and places of business through more than
a million miles of natural gas pipelines.
Uses of Natural Gas in US Homes
Over one-half of the homes in the United States are supplied with natural gas. About 19% of the
natural gas consumed in the United States during 2011 went to homes . This gas is delivered to
homes through pipelines or in tanks as CNG (compressed natural gas). Most of the natural gas
consumed in homes is used for space heating and water heating. It is also used in stoves, ovens,
clothes dryers, lighting fixtures and other appliances.
Residential and commercial demand for natural gas is highest in the winter when people burn
gas to heat their homes and businesses. Since few people cool their home or business in
summer with natural gas air conditioners the summer demand is much lower.
Uses of Natural Gas in Commercial Buildings
In 2009 about 14% of the natural gas consumed in the United States went to commercial
buildings. The use of natural gas in commercial buildings is similar to its use in residences. It is
used mainly for space heating, water heating and sometimes for air conditioning.
5. Electric Power Generation
The electric power industry was the largest consumer of natural gas in the United States during
2009. About 30% of natural gas consumption was used to make electricity. Of the three fossil
fuels used for electric power generation (coal, oil, natural gas), natural gas emits the least
carbon dioxide per unit of energy produced. It emits 30% less carbon dioxide than burning oil
and 45% less carbon dioxide than burning coal. Burning natural gas also releases lower amounts
of nitrogen oxides, sulfur dioxide, particulates and mercury when compared to coal and oil.
As the United States becomes more concerned about climate change, carbon dioxide emissions,
and air quality, the use of natural gas for electricity generation is expected to increase. Demand
for natural gas by the electric power industry in the United States peaks in the summer when
homes and businesses are using air conditioning. Since very few homes and businesses have
natural gas air conditioners the demand goes to electricity.
Industrial Uses of Natural Gas
Natural gas is used in a wide variety of manufacturing processes. About 27% of the 2009
consumption of natural gas in the United States was by industry. Natural gas is used as both a
raw material and as a source of heat.
Natural gas is an ingredient used to make fertilizer, antifreeze, plastics, pharmaceuticals and
fabrics. It is also used to manufacture a wide range of chemicals such as ammonia, methanol,
butane, ethane, propane and acetic acid.
Many manufacturing processes require heat to melt, dry, bake or glaze a product. Natural gas is
used as a heat source in making glass, steel, cement, bricks, ceramics, tile, paper, food products
and many other commodities. Natural gas is also used at many industrial facilities for
incineration.
Oil & Gas and Pipeline Industry Use
Companies that produce and transport natural gas are also consumers. Transporting natural gas
through pipelines requires compression stations to keep the gas pressurized and flowing
through the pipeline. Many of these compression stations use natural gas as a fuel. Many oil
refineries use natural gas for heating and power generation.
Natural Gas as a Vehicle Fuel
Natural gas has an enormous potential for increased use as a vehicle fuel. The main barriers to
this have been the short range of the vehicles, limited refueling options, and slow refueling
times. However, over the past few years refueling station prices have dropped to just a few
6. hundred dollars and these can be placed in residences where the vehicles can be refueled
overnight or between trips.
Since about half of all residences in the United States are supplied with natural gas the
potential to increase the number of natural gas vehicles on the road is very high. In addition,
the discovery of natural gas in shale deposits around the country has increased the availability
of gas and decreased the price.
Natural gas has significant advantages over gasoline and diesel fuel. Natural gas vehicles emit
60-90% less smog-producing pollutants and 30-40% less greenhouse gas emissions. It also costs
less per mile to operate a natural gas vehicle compared to a gasoline or diesel vehicle. And,
natural gas is produced locally instead of imported.
LOCAL CONSUMPTION OF NATURAL GAS IN NIGERIA
The Nigerian Gas Company Limited (NGC) was established in 1988 as one of the 11 subsidiaries
of the Nigerian National Petroleum Corporation (NNPC). It is charged with the development of
an efficient gas industry to fully serve Nigeria's energy and industrial feedstock needs through
an integrated gas pipeline network and also to export natural gas and its derivatives to the
West African Sub-region.
The NGC currently operates eight (8) supply systems namely: the Sapele gas supply systems,
which supplies gas to NEPA Power Station at Ogorode, Sapele, the AladIa system, which
supplies the Delta Steel Company, Aladja and the Sapele-Oben-Ajaokuta Steel Company and will
form the back-bone of a future Northern Pipeline System and the Imo River-Aba system for gas
supply to the International Glass industry Limited PZ, Aba Textile Mills and Aba Equitable
Industry.
The other systems are Obigbo North-Afam system which caters for NEPA Power Station at
Afam, the Alakiri to Onne Gas pipeline system for supply of gas to the National Fertiliser
Company (NAFCON) for fertiliser production; the Alakiri-Afam-lkot Abasi system for gas supply
to the Aluminium Smelting Plant (ALSCON) and the Escravos-Lagos Pipeline (ELP), which
supplies gas to NEPA's Egbin Power Plant near Lagos.
Subsequent spur lines from the ELP supply the West African Portland Cement (WAPCO) Plants
at Sagamu and Ewekoro, PZ Industries at lkorodu, City Gate in lkeja Lagos, NEPA Delta IV at
Ughelli, and Warn Refining and Petrochemical Company at Warn.
All these facilities comprise 1,100 kilometres of pipelines ranging from 4" to 36" in diameter
with an over all design capacity of more than 2 billion standard cubic feet of gas per day
7. (bscf/d), 14 compressor stations and 13 metering stations. The facilities represent a current
asset base of more than 12 billion naira for the NGC.
PROPECTS:
Trans Nigeria Pipeline
NGC plans to integrate all gas transmission systems in the country. It is also planned that
extensions of the systems would be made to the far northern states of Borno and Sokoto as
well as to the central industrial state of Kano. The resulting highly interconnected system would
provide full flexibility and better management of adjustment of supply and demand throughout
the country.
In the domestic market investment options exist for investors who may wish to do so in gas
transmission and distribution joint ventures with NGC for specific projects such as gas-based
Independent Power Plants (IPP) and such energy intensive sectors as cement, glass and paper
industries.
Third parties could also purchase gas from NGC at city gates and distribute to industrial and
other users. The company has already signed agreements with Unipetrol Plc / Gaslink and Shell
Nigeria Gas in this regard for gas distribution to two major industrial areas in Lagos and Ogun
States of Nigeria.
Compressed Natural Gas as Automotive Fuel
In transportation, Compressed Natural Gas (CNG) as an alternative vehicle fuel has a great
future in Nigeria especially in view of the need to export more crude oil or refined products for
additional foreign revenue.
Other business lines being considered by NGC, in line with government's natural gas
utilizatioin/monitization objectives are the establishment of gas-based fertiliser plans, natural
gas liquids extraction and domestic use of natural gas.
Natural Gas Demand
Local Outlook
Natural gas is believed by many to be the most important energy source for the future. The
abundance of natural gas coupled with its environmental soundness and multiple applications
across all sectors, means that natural gas will continue to play an increasingly important role in
meeting demand for energy in Nigeria. Experts in the oil and gas industry believe that Nigeria’s
8. domestic market demand is growing at a projected annual rate of 25 per cent, which is one of
the fastest demand growths in the world. An engineer with the Nigerian Liquefied Natural Gas,
NLNG’s Corporate Planning and Strategy Department, Mr. Ezekiel Adesina, said gas
consumption in Nigeria will increase by seven fold at the end of 2015.
“The domestic demand for gas is growing due to the power sector reform and the government
funded Gas Power Plant developments of over 10GW is driving domestic demand.
“Power sector demand growth is most aggressive. Over 20 plants are under construction or
evaluation with potential to generate 16GW by 2015.
“The gas reserves requirement of this sector is also most significant relative to other sectors.
The disproportionate demand has a significant impact on the overall commerciality of supply –
as the price of gas to power significantly impacts on the total revenue of the gas suppliers.
Pic 1
10. Pic 4
Currently, Nigeria’s gas agenda can be regarded as robust, because it does not just put gas-to-
power at the core, but also envisions an aggressive gas-based industrial growth. The National
Gas Company (NGC) supplies gas for power generation, as source of fuel or as feedstock to
cement plants, fertilizer plants, glass manufacturing industries, food & beverage manufacturing
industries and the demand is increasing. To ensure significant reduction in the wastage of the
gas resources, the NGC says it is poised to put in place infrastructure that would further support
and promote the use of gas.
One of such steps is the total support and commitment it recently demonstrated towards the
realization of coming into being of Compressed Natural Gas (CNG) as auto-fuel to push gas
consumption in a bid to effectively harness the abundant gas resources in the country. The
commitment, it emphasized largely accounted for the floating of the Joint Venture (JV)
Companies, Green Gas Ltd and NIPCO Plc.
The power sector demand growth can be regarded as the most aggressive.
11. With the current plans to expand its generation, transmission and distribution systems, due to
the coming on-stream of the National Integrated Power Projects (NIPPs), gas no doubt appears
to be the game changer. Over 20 plants are under construction or at the commissioning stage
with potential to generate 16 giga watts (GW), in the near future.
The gas reserves requirement of this sector is also significant relative to other sectors. About
three billion standard cubic feet per day (bcf/d) of gas is targeted for the power sector alone
with existing Power Holding Company of Nigeria (PHCN) and NIPPs plants being cardinal
consumers of the gas.
