Gradual Shift To Natural Gas For Local Consumption In Nigeria
Gas is one of the hydrocarbons Nigeria has in abundance, yet under-utilised. With the need for increased energy generation, industrial production and household consumption, the country is beginning to explore measures to take advantage of stranded investment in the natural gas space.
Global demand for natural gas is set to keep growing over the next five years, driven by strong consumption in fast-growing Asian economies and supported by the continued development of the international gas trade, IEA’s latest yearly market report, Gas 2019 has shown.Indeed, demand for natural gas grew 4.6% in 2018, its fastest annual pace since 2010, as gas accounted for almost half the increase in primary energy consumption worldwide.
The IEA stated that demand is expected to rise by more than 10% over the next five years, reaching more than 4.3 trillion cubic metres (tcm) in 2024.“Natural gas helped to reduce air pollution and limit the rise in energy-related CO2 emissions by displacing coal and oil in power generation, heating and industrial uses,” said Dr Fatih Birol, the IEA’s Executive Director. “Natural gas can contribute to a cleaner global energy system. But it faces its own challenges, including remaining price competitive in emerging markets and reducing methane emissions along the natural gas supply chain.”
For Nigeria, the Federal Government stated that convergence of factors such as Government intervention, commissioning of OB3, NNPC’s 7Critical Gas Projects and other Upstream Gas investment should lead to the lowering of domestic gas price in-country.Besides, the federal government has projected an increase in the demand for gas supply in nation’s domestic market by 393.33 per cent within the next eight years.
With the convergence, the FG noted that greater power generation and improved sector efficiency would lead to a more dominant Power Sector and reduction in “Commercial Customers” on the gas value chain.According to the Nigerian National Petroleum Corporation (NNPC), demands for natural gas by the country’s domestic market which currently comprise mostly of power and industries, would rise from 1.5 billion standard feet per day ( bscfd ) to 7.4bscfd in 2027.
But the corporation said it was making plans to plug this expected rise in demand with seven natural gas projects it christened the ‘Seven Critical Gas Development Projects (7CGDP)’ which would bring in about 3.5bscfd of gas in 2021.Stakeholders in the gas sector noted that gas-fired power generation represents the most economically viable and immediate means to fuel Nigeria’s energy needs, considering the amount of stranded gas that can be utilised for domestic consumption.
Nigeria’s gas reserves have increased by 7.3 per cent from 187 trillion cubic feet to 200.79 tcf, according to the Director of Department of Petroleum Resources.For instance, Shell Petroleum Development Company (SPDC) last month said that it would be expending about $15 billion across 24 oil and gas projects in Nigeria in the next five years.
Already, the oil major has stated that its ongoing Assa North/Ohaji South gas development in Imo state will produce 600 million standard cubic feet of gas per day, energy equivalent of about 2400 Mega Watts of electricity enough to provide uninterrupted power to 2.4 million homes.
For Seplat Petroleum Development Company Plc, Final Investment Decision (FID) for the large scale ANOH gas and condensate project was announced in March and initial equity investment of US$100 million from government received.
The project will comprise a Phase One 300 MMscfd midstream gas processing development with first gas targeted for Q1 2021.The IEA noted that supplies to meet growing global demand for natural gas will come from both new domestic production in fast-growing economies but also increasingly from major exporting countries, led by the development of abundant shale gas resources in the United States.
The strong growth in LNG export capacity will enable international trade to play a growing role in the development of natural gas markets as they move towards greater globalisation.Investment in LNG projects have rebounded in 2018 after several years of decline, and the large number of projects due to take final investment decision in 2019 is likely to further support trade and market expansion. However, more investment will be needed in the future.
In the LPG space, Vice President, Prof. Yemi Osinbajo, explained that for household cooking, the present administration is targeting a 40 percent adoption rate (i.e. 13.8m households) in five years, and 73 percent adoption in 10 years (33.3m households). “We believe that the sub-sector can create up to 2 million new direct and indirect jobs in Nigeria. Our determination to prioritise the LPG sector development culminated in the Federal Executive Council’s approval of the National Gas policy in 2017, with dedicated input for the enhancement of the LPG sub-sector. Our driving vision has been to transform the sub-sector from a commodity sector based on export, to a value creation sector based on domestic utilisation and industrialisation,” he said.
Osinbajo at the formal commissioning of Techno oil LPG cylinder manufacturing plant said the federal government has also demonstrated its commitment to the sub sector by establishing an Inter-Ministerial Committee and a multi-stakeholder national coordinating body – the National LPG Expansion Programme.
According to the Vice President, “We correctly identified that it was necessary to emphasize coordination and collaboration, as previous attempts in enhancing LPG utilisation failed because of a fragmented approach within the Federal Government.”He said since the present administration took charge in 2015, one of the issues identified was the abysmally low domestic utilisation of Liquefied Petroleum Gas (LPG) in Nigeria, a 9 per cent penetration rate nationwide, despite Nigeria’s domestic LPG production of 3 million metric tonnes (MT) per annum.
“For far too long our dominant fuel options have remained biomass fuels (firewood) or traditional fuels (petrol and diesel). I am honoured to commission the Techno Oil, LPG Cylinder manufacturing plant today. This commissioning is a landmark moment for Nigeria’s mid-downstream gas sub-sector, and a reminder that we must regard our abundant domestic gas resource as an important component of economic growth and national prosperity,” he stressed.
Globally, China is expected to account for more than 40% of global gas demand growth to 2024, propelled by the government’s goal of improving air quality by shifting away from coal. Chinese natural gas consumption grew 18% in 2018 but is expected to slow to an average annual rate of 8% to 2024 as a result of slower economic growth.
The IEA also sees strong growth in gas consumption in other Asian countries, particularly in South Asia. In Bangladesh, India and Pakistan, the industrial sector is the main contributor to growth, especially for fertilisers to meet the needs of growing populations.
Industrial use of natural gas, both as a fuel and a feedstock, is set to expand at an average annual rate of 3% and account for almost half of the rise in global consumption to 2024. Power generation remains the largest consumer of natural gas, in spite of slower growth due to strong competition from renewables and coal.
Gas 2019 also focuses on the role of liquefied natural gas (LNG) at sea, which is set to emerge as a fast-growing alternative fuel because of stricter rules on sulphur content that take effect in January 2020.
While natural gas releases roughly half the CO2 profile as coal when burned, the problem of methane emissions continues to dog the industry. High rates of gas flaring, venting and leaks negate much of the climate benefit that gas claims to hold. Even leaving aside those problems, gas may face increase scrutiny as the climate crisis worsens. Ultimately, gas is still a fossil fuel.
“Gas breaks the carbon budget,” Oil Change International wrote in a new report. “There is no room for new fossil fuel development – gas included – within the Paris Agreement goals. Even if global coal use were phased out overnight, developed reserves of oil and gas would push the world above 1.5°C of warming.”
