Bringing it Home: The Emerging Role of Nigerian Gas for Domestic Use

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When it comes to raw gas-to-power potential, Nigeria represents a major global player. The West African nation holds over 200 trillion cubic feet of recoverable reserves – the largest on the continent – and produces 1.2 billion cubic feet per day, according to the Department of Petroleum Resources. Nearly half of its production is exported, and Nigeria ranks as the fifth largest liquefied natural gas (LNG) exporter globally. Moreover, Nigeria’s gas exports have remained relatively stable during COVID-19, with approximately 11 billion cubic meters exported in the first five months of 2020.

Success in the global LNG market has signaled that investing gas production and the development of gas-to-power infrastructure not only has the ability to generate export revenue, but also to offset Nigeria’s limited power generation, transmission and distribution capacities.

As a result, the Federal Government has sought to position the country as a regional gas hub – through its Nigerian Gas Master Plan, Nigerian Gas Flare Commercialization Program, Nigerian Gas Transportation Network Code and National Gas Expansion Program, among other initiatives – while prioritizing gas self- sufficiency for domestic consumption, power generation and gas-based industrial and agricultural derivatives. While large-scale projects continue to push forward despite a capitally constricted climate, some hurdles remain in translating raw gas potential into a reliable, cost-effective electricity stream for consumers.

Bankable Gas Projects

Despite a drop in gas prices, Nigeria’s major gas developments have largely demonstrated resilience to external market forces. Notably, the Nigeria Liquified Natural Gas (NLNG) plant – led by a consortium among Nigerian National Petroleum Corporation (NNPC), Eni, Total and Royal Dutch Shell – has surged forward in its expansion of a seventh LNG train. In May 2020, the contract for the construction of the train was awarded, after signing FID in late-2019. The expansion will contribute up to eight million tons per year of LNG capacity, increasing LNG output by 30%.

Other key developments include Seplat Petroleum and NNPC’s joint Assa North-Ohaji South gas project, which will require $700 million in financing from the two companies. With a capacity of 300 million cubic feet per day due to come online in 2021, the plant will process wet gas from Blocks 21 and 53 located in the Niger Delta. Shell Petroleum Development Company also signed FID in April 2019 to produce an additional 300 million cubic feet per day from the field.

The Assa North-Ohaji South project represents one of seven projects fast-tracked by the government in 2018, which aim to collectively generate 3.4 billion cubic feet of gas per day and provide feedgas for 15 GW of power generation. In total, 55 new thermal plants are expected to come online between 2018 and 2037, generating additional power of 19,000 MW and requiring gas volumes of approximately five billion standard cubic feet per day (Bscfd).

Gas for Domestic Use

Of Nigeria’s 1.2 billion cubic feet of gas produced per day, 41% is exported and 48% is used domestically, leaving significant room for domestic utilization, of which the country is in substantial need. According to the Independent System Operator, electricity in demand in Nigeria is currently estimated at 25,770MW, of which 80% is already produced by gas-fired thermal power.

Meanwhile, installed generation capacity stands at just 12,954MW. However, due to non-availability of installed capacity and frequent technical and non-technical issues afflicting the power supply chain, only 3,500 to 5,000MW find its way to the end user. Similarly, the country’s transmission wheeling capacity is 8,100MW, yet transportation of grid-connected power to an electrical load outside of the grid cannot exceed 6,000MW, as power distribution companies do not have capacity over 5,000MW and an overload may lead to system collapse.

Historically, the primary inhibitors to expanding gas-to-power development have been inadequate infrastructure to transport it, coupled with financing constraints for the development of upstream gas supply sources and lack of sufficient power transmission capacity from power generating plants.

To enable the productive use of stranded capacity, the Nigeria Electricity Regulatory Commission has sought to relieve technical constraints among distribution companies, as well as reducing the high incidence of tripping at 132/133 kV substations. These efforts have been met with some success, as Nigeria set a new record in electricity transmission in August 2020, distributing 5,377MW to grid-connected users.

Moreover, Shell Nigeria Gas reported in June 2020 that it had increased its gas distribution capacity by over 150% following the completion of its second train, the Agbara-Ota Capacity Increase Project in Ogun state, with planned expansion projects across the country set to produce 1 GW of additional power to industrial parks and companies.

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Charné Hollands

Charné Hollands

Charné Hollands is the Deputy Editor at Energy Capital & Power. She holds a Higher Certificate in Professional Photography and Masters in Media Studies from the University of Cape Town. Charné writes content for ECP's website and events as well as co-authored African Energy Chamber: Road to Recovery.

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