The Minister of State for Petroleum Resources, H.E. Chief Timipre Sylva, declared 2020 as ‘the year of gas for the nation,’ an announcement that set the theme for the year. Consistent with the Federal Government of Nigeria (FGN) drive towards transitioning to gas based economy, this decade has further been declared as “the decade of gas”.
Nigeria is the largest oil producer in Africa and holds the largest natural gas reserves in Africa. According to the Department of Petroleum Resources (DPR), Nigeria’s proven gas reserves has increased by 0.57% from 202tcf recorded in January 2019 to 203.16tcf as at June 2020.
Given the country’s huge gas reserves and the comparative advantage of gas as a cleaner source of energy, Nigeria has witnessed significant increase in domestic consumption. Studies have demonstrated that oil reserves may dry up in the next 40 years. Thus, there is a paradigm shift that Nigeria is now referred to as a gas producer with proven oil reserves rather than the traditional label of an oil producer.
A significant amount of Nigeria’s gross natural gas production is either exported or re-injected while the rest is consumed for domestic use or flared.
The domestic market is categorized into 4 Sectors as follows:
- Power
- Gas Based Industries
- Commercial (Local Distribution Companies)
- Domestic LNG (newest category)
Power sector is currently the largest offtaker of domestic gas in Nigeria.
The table below depicts an overview of performance of the domestic market in 2021 vis-à-vis
NB: 2021 data represents Q1 ONLY.
Nigeria’s natural gas sector is affected by the following issues which invariably impacts performance:
- Power sector value chain challenges particularly liquidity;
- Forex exchange fluctuations occasioned by devaluation of the Naira;
- Gas transportation/Infrastructure network and virtual pipeline solutions;
- Regulatory framework including Fiscal incentives;
- Gas Pricing
The domestic market witnessed significant events in 2020, some which are enumerated below:
- Finance Act – Passed in January 2020
- Increase in VAT from 5% to 7.5% – Passed in February 2020
- Nigerian Gas Transportation Network Code (NGTNC) launched in February 2020, operationalized in August 2020
- The Covid-19 pandemic
- VAT Modification Order (VAT exempt items) – May 2020
- Slump in Crude Oil prices
- Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline Project – construction flagged off in July 2020
- Review of the Petroleum Industry Governance Bill (PIGB) for anticipated passage
- National Gas Expansion Programme (NGEP) to expand domestic Autogas – rolled out in December 2020
- Commissioning of Dangote Fertilizer project (Train 1)
- Entrance of new independent gas Producers
In conclusion, the domestic market is expected to continue to grow rapidly with support of the FGN’s drive to ensure that gas significantly contributes to the growth of the Nation’s economy through gas to power generation, creation of new Gas Based Industries and utilization of gas as automobile fuel (Autogas), evident by critical infrastructure such as Ajaokuta-Kaduna-Kano (AKK) gas pipeline, Obiafu-Obrikum-Oben (OB3) gas pipeline and Escavos-Lagos Pipeline System (ELPS 2) which are all currently being prioritized to support the FGN’s initiative.
Sources
- Nigerian National Petroleum Corporation (NNPC)
- Department of Petroleum Resources (DPR)
- Gas Aggregation Company Nigeria Limited (GACN)
- Energy Information Administration (EIA)
