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    Home»Comments»Lessons from 2022 for Nigeria’s gas sector in 2023
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    Lessons from 2022 for Nigeria’s gas sector in 2023

    Chris IkosaBy Chris IkosaJanuary 9, 2023No Comments8 Mins Read
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    BY OGA ADEJO-OGIRI

    Oga Adejo-Ogiri is the Executive Secretary of the Association of Local Distributors of Gas (ALDG) and, also, Principal Consultant at Vappax Advisory, an Energy Consulting firm based in Abuja, Nigeria

     

    The year 2022 was very eventful for Nigeria’s gas sector with landmark partnerships, private sector deals and regulatory improvements signalling growth as the Decade of Gas continues to make measured progress. I reflect on the year focusing on critical learnings and events that should continue in 2023 to drive the desired sector growth.

    Public-private sector engagement on regulations

    2022 witnessed active engagement between regulators and key private sector players. Notably, the Nigerian Midstream Downstream Petroleum Regulatory Authority hosted several stakeholders’ consultations on regulations to get important feedback and input from industry stakeholders.

    This is a progressive step that I look forward to other regulatory agencies embracing. Rather than the counterproductive process of releasing regulations that generate criticism, a collaborative approach to drafting industry-wide regulations is a best practice I am eager to see continue.

    Gas flaring commercialisation

    In 2022, the federal government announced a relaunch of its gas flare commercialisation programme. The programme was initially launched in 2016 as a key initiative to make productive use of associated gas flared as a byproduct of oil production. It was also targeted at helping Nigeria attain zero routine gas flaring by 2035 and net zero emissions by 2060.

    However, the programme was suspended at the onset of the COVID-19 pandemic in 2020. With the relaunch, the government is set to award contracts from the over 200 bids submitted before its suspension.

    I look forward to seeing the economic impact of the relaunched gas flare commercialisation programme in 2023 with the awarding of contracts and the relevant groundwork to follow.

    Bilateral treaties

    A key highlight of 2022 was the signing of bilateral treaties between Nigeria and other countries. What held my interest was how critical gas infrastructure and utilisation of resources were key elements of these treaties.

    Nigeria and Poland strengthened their 60-year-old bilateral relations in 2022 signing agreements on gas and agriculture. Under the agreement, Nigeria will ensure a steady supply of Liquified Natural Gas (LNG) to Poland.

    Nigeria also signed an agreement with Iran to collaborate across oil and gas projects. Iran will share its expertise in making compressed natural gas (CNG) mainstream for transportation purposes. Iran will also offer construction and maintenance services for refineries in Nigeria.

    Lastly, Nigeria signed a deal to supply gas from Nigerian offshore fields to the Equatorial Guinea gas processing facility at Punta Europa. All these deals and collaborations across borders signal Nigeria’s ambitions to expand its presence in the global market. I am optimistic that we will see more partnerships and treaties signed in 2023 across infrastructure, gas supply and technical expertise.

    Industrial growth

    One of the key ways to facilitate economic growth is ensuring that major industries switch over to gas which is a more cost-effective and cleaner energy source. One of the landmark deals in providing gas for industrial use was Falcon Corporation, ND Western & FHN Consortium signing a Gas Infrastructure Development Agreement with Lagos Free Zone. The agreement will see the three companies (through a consortium called Optimera Energy) delivering gas to industrial facilities at the Lagos Free Zone (Tolaram).

    Similarly, NIPCO Gas Ltd signed an agreement with the NNPC Gas Marketing Ltd. (NGML) and Lekki Free Zone Development Company (LFZDC) to build a gas pipeline network. The gas pipeline expected to be complete in 2023 will supply gas to the Lekki Free Zone to feed a 24 Megawatts (MW) power plant and other industries in the zone.

    Another exciting trend is the rise in public-private partnerships to create critical gas infrastructure. A standout partnership in 2022 was the Oyo State government and Shell Nigeria Gas Limited collaborating to build gas distribution infrastructure in the state. When completed, the project has the potential to supply around 50 million standard cubic feet (scf) of gas per day to industrial, manufacturing and commercial concerns in the state.

    I am excited about the possibilities that these projects present. They will serve to widen the gas distribution network from Niger Delta to growing industrial hubs across the country.

    Clear government backing

    One of the standout articles of the year was President Muhammadu Buhari’s “How not to talk with Africa about climate change” published in the Washington Post. In this article, President Buhari advocates for Africa to utilise its gas resources and calls out the hypocrisy surrounding climate change with Africans facing the harshest impacts of climate change despite contributing the least to global emissions. This bold statement to the global community was a long overdue backing of Nigeria’s gas-first agenda.

    In terms of policy development, 2022 saw the introduction of the Nigeria Energy Transition Plan, a framework that sets out in fine detail what is required to achieve net zero carbon emissions by 2060. Importantly, the plan recognises the role gas will play as the transition fuel – improving power generation and serving as an alternative fuel for cooking and transportation. While the plan requires sustained financing its clear design and objective are a good step in achieving its ambitions.

    This clear recognition of the role gas has to play in Nigeria’s economic and industrial growth is exactly the kind of political backing that the gas sector needs. I hope that as the country transitions to another regime, this active and conspicuous support continues.

    Local financing 

    A consensus among gas stakeholders is that more financing needs to come from within Africa. With a lukewarm approach from international financiers towards gas projects, bankable gas projects on the continent now have to become more imaginative with how they approach financing.

    That’s why the news of the African Export-Import Bank (Afreximbank) signing a reserve-based lending facility term sheet with Amni Petroleum was so heartwarming. Notably, the $635 million lending facility is expected to boost gas production for use in power generation across West Africa, presenting a cleaner alternative to coal or oil. The gas generated will also be exported in the form of LNG.

    The inauguration of the Midstream & Downstream Infrastructure Fund (MDGIF) with a mandate to secure funding for critical gas infrastructure projects alongside an active commitment by the Nigeria Content Development Monitoring Board (NCDMB) to invest in gas projects by indigenous players is also a positive boost for the gas sector. We can expect to see more gas projects kickstarted in 2023 with adequate funding while stalled projects will be completed.

    Gas infrastructure 

    2022 was a milestone year for gas infrastructure. Leading the way in terms of scale and ambition is the Nigeria – Morocco gas pipeline. The 5,600-kilometre pipeline which aims to connect African gas resources to Europe in the face of limited gas supply due to the Russia-Ukraine conflict is the kind of ambitious project that is required to participate in the global gas market. With additional agreements signed between Nigeria, Morocco, Senegal and Mauritania, the project has received clear political backing and I am eager to see it progress into its design and execution phase in 2023.

    Last year also brought the announcement that Nigeria’s first floating liquified natural gas (FLNG) project has moved to the implementation stage with the signing of a front-end engineering design (FEED) agreement between UTM Offshore and United Kingdom’s Kellogg Brown and Root, Japan Gas Corporation and Technip Energies. Coupled with the continued development of the Ajaokuta-Kaduna-Kano (AKK) pipeline, a 614 km-long natural gas pipeline which aims to connect Northern Nigeria to a steady gas supply, 2023 is shaping up to be an exciting year for gas infrastructure.

    Challenges

    Despite the growth experienced in the gas sector in 2022, the year was not without its challenges. The persistent vandalisation of oil pipelines which affected gas production was a significant dent in the sector’s progress. The effect of reduced gas supply due to vandalisation had negative consequences on the country’s industrial sector particularly the Lagos-Ogun axis which is home to thousands of industries and a major employer of labour. In addition, the issues around gas accounting and the lack of transparency in the application of the provisions of the Network Code on the Escravos – Lagos Pipeline System (ELPS) were of great concern to the local gas distribution companies supplying gas to the various end users.

    It is hoped that 2023 will bring renewed efforts to sensitise communities about the dangers and consequences of oil theft and vandalisation, promoting a sense of communal ownership. This will lead to a situation where community members actively police key infrastructure and collaborate with security agencies. To complement these efforts, relevant security agencies must also be provided with the resources to adequately protect our key oil and gas infrastructure.

    Enhanced regulatory oversight is also expected in the new year to ensure a more transparent application of the Network Code, especially during times of gas supply restrictions.

    Conclusion

    From regulatory engagement to local financing and clear government backing, 2022 provided major progress for the gas sector. I look forward to this progress being accelerated in 2023.

    What highlights of 2022 would you like to continue in 2023? Or what are your general thoughts and projections for the gas sector this year?

    • business a.m. commits to publishing a diversity of views, opinions and comments. It, therefore, welcomes your reaction to this and any of our articles via email: comment@businessamlive.com

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    • Chris Ikosa
      Chris Ikosa

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