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Leveraging Nigeria's Natural Gas Reserves


 


Nigeria, blessed with abundant natural gas reserves, has a significant opportunity to leverage this resource for its energy needs and transition towards a net-zero carbon emissions future. Natural gas is hailed as one of the cheapest sources of energy, making it an attractive option for the country. The Nigerian government's Energy Transition Plan aims to capitalize on this commodity to achieve its ambitious sustainability goals by 2060. By enhancing the utilization of natural gas in the Nigerian Electricity Supply Industry (NESI) value chain, the federal government can upscale electricity generation, increase revenue from flared gas reinjection, and reduce greenhouse gas emissions. However, realizing these benefits requires addressing challenges in the gas-to-power value chain, including political misalignment and the need for coordination among stakeholders.



Increasing Revenue from Flared Gas Re-injection


Nigeria flared 138.7 billion standard cubic feet (SCF) in the first half of 2023, losing $485 million in unrealized income, according to the Nigeria Gas Flare Tracker (GFT). Flaring natural gas is not only an environmental concern but also represents a significant economic loss for Nigeria. According to the Nigerian Oil Spill Detection and Response Agency (NOSDRA), gas flaring cost the nation $22.9 billion between 2011 and 2021. The country has been flaring massive amounts of gas, resulting in unrealized revenue. However, by reinjecting flared gas into the electricity value chain, Nigeria can turn this waste into a valuable resource. This approach not only reduces greenhouse gas emissions but also generates additional revenue for the government. By capturing and utilizing flared gas, Nigeria can tap into a new revenue stream, boosting its economy and supporting the implementation of the Energy Transition Plan. The federal government can raise about $10 billion a year from the commercialization of gas flares, which would go towards funding the nation's $10 billion yearly budget for the Energy Transition Plan.


Strengthen Gas-Based Industries


Nigeria can capitalize on its natural gas reserves to develop and expand various gas-based industries, creating value-added products and contributing to economic diversification. Natural gas can be converted into valuable chemicals and petrochemical products, such as ethylene, propylene, and butadiene, which are essential in the production of plastics, synthetic rubber, and a wide range of chemical products. Also, Natural gas is a critical component in the production of ammonia and urea, which are primary ingredients in fertilizers. Expanding fertilizer production facilities can boost agricultural productivity and contribute to food security.


Methanol, which can be produced from natural gas, has numerous industrial applications, including as a fuel additive, solvent, and chemical feedstock. Methanol production plants can provide additional revenue streams.


While liquefied natural gas (LNG) is typically associated with gas exports, domestic LNG facilities can also be used to meet local energy demands and reduce gas wastage. By developing these gas-based industries, Nigeria can add value to its natural gas resources, create jobs, stimulate economic growth, and reduce the need to export raw gas, thereby retaining more value within the country.


Utilizing Gas-to-Liquids (GTL) Technology


Gas-to-Liquids (GTL) is a technology that converts natural gas into liquid hydrocarbons, such as synthetic diesel, jet fuel, and lubricants. This process involves several steps, including, Gas Reforming, Fischer-Tropsch Synthesis, and refining. The resulting synthetic fuels have high energy density and low sulfur content, making them suitable for various applications, including transportation and industrial use.

Utilization of GTL fuels is benefitial because it has lower emissions of pollutants compared to conventional fossil fuels, contributing to air quality improvement and reduced greenhouse gas emissions. It allows for the monetization of stranded natural gas reserves, which may not be feasible to transport over long distances.


By converting natural gas into liquid fuels, GTL provides energy security and reduces reliance on crude oil imports. Nigeria can explore GTL technology to convert its abundant natural gas reserves into valuable liquid products, reducing the need to import refined fuels, creating domestic job opportunities, and promoting environmental sustainability. GTL projects can also attract foreign investment and technology partnerships to develop this sector.


Optimizing the gas-to-power value chain


Nigeria's domestic power needs are growing rapidly, and upscaling electricity generation is crucial. Natural gas, as a cheap and abundant energy source, offers a viable solution to meet this demand. By leveraging the country's natural gas reserves, the government can enhance electricity generation and ensure a stable power supply for its citizens. This would support economic growth, improve living standards, and attract investments in various sectors.



While the potential benefits of leveraging natural gas in the NESI value chain are evident, several challenges need to be addressed. One of the significant obstacles is political misalignment within the value chain. The gas-to-power value chain involves various stakeholders, including gas exploration and production companies, generation companies, and government entities. Political involvement often leads to conflicts between public and private sector interests. For instance, the government's decision to lower gas prices to keep electricity tariffs low can have unintended consequences. This action may cause gas producers to reduce supply, ultimately resulting in electricity supply shortfalls. Another challenge relates to the need for coordination among stakeholders. The gas-to-power value chain is complex and requires a unified approach to regulate domestic gas supply. In the past, the disintegration of the gas and electricity regulatory regime has hindered progress due to stakeholders' unwillingness to consider factors beyond formal politics. Achieving synergy among political, regulatory, and commercial players is crucial to unlock the full potential of the gas-to-power value chain.


Conclusion


Nigeria's abundant natural gas reserves present a significant opportunity to meet its energy needs, increase revenue, and reduce greenhouse gas emissions. By capitalizing on natural gas in the NESI value chain, the government can upscale electricity generation, utilize flared gas, and contribute to global climate change mitigation efforts. However, challenges in the gas-to-power value chain, such as political misalignment and lack of coordination, must be overcome for successful implementation. To realize the full potential of the gas-to-power value chain, a unified approach is needed. The government, regulatory bodies, and industry stakeholders must work together to establish a robust regulatory framework that balances public interests and private sector profitability. This will create an enabling environment for investment, innovation, and competition in the gas sector. Furthermore, collaboration among gas unions, such as the Nigerian Gas Association and Nigeria Union of Petroleum and Natural Gas workers, is crucial in shaping the trajectory of the gas-to-power value chain. In conclusion, Nigeria has the resources and the opportunity to unlock the potential of its natural gas reserves. By addressing challenges and fostering coordination in the gas-to-power value chain, Nigeria can navigate its energy transition successfully, achieve its sustainability goals, and contribute to a greener and more prosperous future.


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