//The Nigerian gas-power sector

The Nigerian gas-power sector

With proven reserves of 187 tcf, Nigeria ranks ninth among gas-bearing nations with a daily production of about 8.24 bcf. The country’s gas reserves-to-production ratio is estimated to be about 120 years. Oil’s ratio is only 35 years, so Nigeria is increasingly considered a gas province.

Reserves are split nearly evenly between associated and nonassociated gas. However, exploitation so far has been concentrated on associated gas, which accounts for 70% of total gas production. Only 35% of the associated gas produced is gainfully used. The other 65% is flared in the oil fields.

Nigeria’s primary source of energy comes from traditional biomass and waste, which
accounts for about 80% of the total primary production, the rest being fossil fuels and
hydropower. Nigeria generates power in two major ways: hydro-electric and thermal or fossil fuel generation (coal and gas-fired plants). The gas-fired plants dominate the mix generating about 83% of total power production.

The power plants are classified, based on ownership, as either:
1-Fully owned by the Federal Government of Nigeria (FGN). There is a plan to privatize these power plants.
2-Owned by the Niger Delta Power Holding Company (NDPHC). The NDPHC is owned by the three tiers of government in Nigeria (Federal, State and Local). These power plants are referred   to as being part of the actionable Integrated Power Project (NIPP).
3-Wholly owned by state governments and/or private companies/individuals.Such a power plant is referred to   as being an Independent Power Producer(IPP).

There are about 23 of these plants strategically located across Nigeria.
Nigeria currently has around seven gigawatts (GW) of installed electricity capacity. If these plant where to work at maximum efficiency, total capacity should be amount to about twelve gigawatts. OPTS states that Nigeria generates the equivalent power of just one 40-watt light bulb per person – one of the lowest power generation levels per person in the world, e.g. in South Africa, the UK and the USA it is 20, 33 and 80 light bulbs per person respectively

The supply of power is also epileptic in nature. This due to constant cases of gas shortages. Transmission is also a major challenge as this is still handled by the Transmission Company of Nigeria which remains a government owned entity lacking proper management, modern facilities, among a host of other challenges.

The low cost of natural gas means that it is cheaper to flare gas than to process, store and transport it. Secondly, in order to produce electricity with 80% feedstock of natural gas Nigeria needs 10 times more gas pipeline networks than exist currently.
However, without investments in creating this gas-to-power pipeline network
attaining constant electricity may just remain a dream, because of the gaps in the supply of gas. It would therefore follow that the government should be investing in creating this gas-to-power network, however exorbitant the cost

The government recently announced the existence of 178 gas flare sites in the country as it lamented “the burning of money that would have been used to generate wealth, create employment and also generate electricity for the people”.

Daily in Nigeria around 755 million standard cubic feet is flared per day. You can imagine how much loss. Imagine how much electricity can be generated from this alone. The gas wasted by flaring can produce 25,000,000 Megawatts of electricity. To put that in perspective gas flared till date can provide electricity to run Nigeria 5,000 over and is 5 times what China, the world’s largest electricity producer produced.

The effect of the Nigeria’s power problems has not left the economy unscathed. Nigeria is a middle-income, mixed economy with expanding manufacturing, financial, service, communications, technology and entertainment sectors. It is ranked as the 21st-largest economy in the world in terms of nominal GDP and 20th-largest in terms of purchasing power parity. It is the largest economy in Africa. The largest contributors to the country’s GDP are the service, agriculture, and industrial sectors.

Many companies across the different sectors have revealed that one of the main reasons for relieving workers of their jobs, as the number of such cases is on the increase, is the problem of poor power supply. The National Bureau of Statistics, NBS, has revealed that in 2017 no fewer than 8,663 banks’ employees lost their jobs, 969 in telecommunications, over 3000 in the oil industry and the list is endless.
Okun’s law states that a one-point increase in the cyclical unemployment rate is associated with two percentage points of negative growth in real GDP. This relates how much effect improving the efficiency of the power sector can have on the economy. The poor power-unemployment-GDP tie-up is one that if more effort were redirected towards, could go a long way in making Nigeria’s economy one of the best in the world.
SMEs are the predominant form of enterprise, accounting for approximately 89% of all firms. They are the backbone of employment in Nigeria, accounting for about 70% of jobs on the average, and are major contributors to value creation, generating between 50% and 60% of value added on average. Taking survey on the reasons why more people do not really own SMEs, more than 50% stated reasons related to lack of power, unreliable power supply, increasing cost of power etc. Meaning if the country could boast of adequate and constant power supply the number of SMEs will be on the increasing end. In addition, increasing the number SMEs can contribute to economic diversification and resilience. With increasing focus on sustainable development worldwide, the importance of restructuring the Nigerian gas-power sector cannot be
overemphasized. 

 

Author: Ogechuku Chibogu

References:
Maximizing the use of natural gas in Nigeria-Dr Chijioke Nwaozuzu,
Substitution of natural gas for coal by Donald J. Wuebbles,
Nigeria the political economy of oil by Kahn SA,
current status and future projections of LNG demand and supply by Satish Kumar,
The fuel of the future by Chuck Kowalski,
Energy and sustainable development in Nigeria by Sunday Olayinka,
Nigeria’s oil and gas stategy in the next five by Diezani Allison-Madueke,
NNPC Oil and Gas Statistics 2017,
BP statistical review of energy 2017,
IEA Market Report Series Gas 2017