By: Chinenye Uwanaka, David Amachundi Adi and Nathaniel Ojobo
Nigeria has been described as a gas province with some quantum of oil in it by several industry experts and analysts. The reason for this assertion is that while the country’s proven oil reserve is about 37.2 billion barrels, her proven natural gas reserve stands at approximately 201 trillion standard cubic feet (tscf), according to statistics from the Department of Petroleum Resources (DPR). On an energy equivalent basis, Nigeria’s natural gas reserve is three times her oil reserve. Further, statistics estimate that the country’s unproven natural gas reserve is between 300-600 trillion standard cubic feet (tscf). These statistics show that Nigeria is abundantly endowed with natural gas deposits however most of the gas produced (associated gas) is incidental to oil production as most of Nigeria’s oil and gas contracts are focused on oil. A substantial portion of the gas produced is flared while a minute part is re-injected into the system and utilised. Several factors are responsible for this. Nigeria, a country of about 200 million people with enormous potential, has a lot to gain from the effective and efficient harnessing, exploitation and utilisation of this abundant natural resource, domestically and internationally.
2.0 UTILITARIAN VALUE OF NATURAL GAS
Natural gas is both energy and feedstock. The reason is that the multiplying effects in terms of the by-products of gas are enormous. Gas is useful for generating energy, useful in respect of petro-chemicals, solvents, alcohol, pharmaceuticals. Gas is useful in agricultural cultivation, manufacture of furniture, decoration, medicine and clothes. These by-products are used in almost every aspect of life. However, gas by virtue of its nature which is different from crude oil requires delicate handling. The technology to harness the potentials of gas is much more sophisticated and complex. Further, it is much more capital intensive and requires proactive long term planning and investment.
2.1 OPPORTUNITIES IN THE GAS SECTOR
Numerous opportunities and prospects abound in the gas sector, these include the following:
i. Gas production for power generation and domestic use
ii. Gas (Butane and Propane) wholesaling and retailing
iii. Manufacturing of gas cylinders, valves and regulators
iv. Installation of filing plants, retail distribution and development of simple, flexible gas burner
v. Natural Gas Marketing through serving as a middle man between producers and the market.
vi. Procurement and or production of gas pipelines.
2.2 APPLICATION OF TECHNOLOGY TO SOME OF THE ABOVE SUGGESTED BUSINESS MODEL IN THE GAS SECTOR
Gas cylinders capable of communicating with a tech-based central systems can be built and installed respectively so that consumers will be spared the need of bothering about their gas getting exhausted as suppliers will be alerted through the central system to drop off a filled cylinder and take the empty one in return while getting paid by the consumer for such service. This epitomizes an integrated system capable of bridging the gap between gas consumers and suppliers.
On the other hand, consumers of the commodity can be afforded a technology oriented application on their phones and or mobile devices. The purpose of the foregoing is that once there is a need to refill a consumer’s gas cylinder, such a consumer identifies the nearest gas station to him/her and either proceeds to refill the cylinder or makes an order for same to be delivered to him/her.
3.0 GAS PRODUCTION IN NIGERIA
According to the DPR Annual Report for the year 2017, the total volume of gas produced in 2017 was 2.9 trillion cubic feet (TCF), which averaged a daily production rate of 8.05 billion standard cubic feet daily (BSCFD). Out of the foregoing, the volume of gas produced comprised of 1.73 TCF Associated Gas, representing 58.74% of the total gas produced and 1.21TCF Non-Associated Gas, representing 41.26% of the total gas. Also, 2.59TCF (88.13%) of the produced gas was utilized while a total of 21.02BCF representing 0.7% was attributed to gas shrinkage. These represents a significant improvement from previous records/statistics. The remaining 11.04% (or average daily rate of 888.50 MMscf/d) of the produced gas, was flared. It is believed that this flaring percentage can be progressively reduced to the barest minimum.
4.0 GAS UTILISATION IN NIGERIA
In recent years, the Federal Government of Nigeria has developed a legal framework and policy frameworks with the objective of achieving effective and efficient utilisation of natural gas. It is noteworthy that this legal framework has led to the development of gas infrastructure including NLNG project and the long distant West African gas pipeline of about 678 km from Nigeria to Ghana. Despite all these infrastructure in place, Nigeria’s gas industry is said to be an evolving/developing one according to industry experts and analysts.
Nigeria’s natural gas reserve is so vast that it accounts for one of the ten largest natural gas reserves in the world and approximately 50% of this reserve is associated gas. In Africa, Nigeria possesses the largest deposits of natural gas which are located in and around the Niger Delta region. The quality of Nigeria’s gas is very high as it is rich in liquids and low in sulphur. Natural gas has proven to be the cleanest burning fossil fuel which is rapidly becoming the world’s preferred energy source. All these facts account for the huge demand for Nigeria’s gas in the international market. Market indices show that Nigeria exports liquefied natural gas (LNG) to Portugal, Belgium, Italy, Spain and the United States. Statistics show that in 2014, Nigeria’s export of LNG was about 900 billion cubic feet. In fact, Nigeria’s liquefied natural gas exports to Portugal powers the whole country. Also, between 1999-2018, the NLNG has converted 180.5Bcm (billion standard cubic meters) or 6.37Tcf (Trillion cubic feet) of Associated Gas to export products (equivalent to more than 2310 LNG and NGL cargoes) which otherwise would have been flared.
In this vein, the Nigeria Gas Flare Commercialisation Programme (NGFCP) which was conceived to address the challenge of gas flaring in the Niger Delta towards the realization of the year 2020 target for zero flare is highly commendable. The Programme is pursuant to Paragraph 34(b)(i) of the First Schedule to the Petroleum Act, 1969 (As Amended) which confers on the Federal Government of Nigeria the right to take natural gas produced with crude oil by oil companies free of cost at the flare or at an agreed cost and without payment of royalty. The aim therefore is to commercialise gas flares that are amenable to use through matured and commercially deployable flare capture technologies. In essence, it will introduce an award regime for the grant of Right to Access Associated Gas to Flare to deserving entities in collaboration with licencees or lessees of the oil producing fields.
In order to achieve effective gas utilisation in Nigeria, laws are not enough rather they must be proactively implemented and complied with. It has been said that there are three key areas the development of which will lead to effective and efficient gas utilisation in Nigeria. These are:
· the adequate use of gas to generate electricity in order to meet our national demand,
· the development of liquefied petroleum gas (LPG) and
· the development of compressed natural gas (CNG)
Consequently, effective gas utilisation for adequate power generation will fast track Nigeria’s ambition of becoming one of the 20 most industrialised nations in the world by 2020.
In the light of the foregoing, the extent of the current legal framework in facilitating effective and efficient gas utilisation in Nigeria is vital. Several Questions arise such as, is gas being maximised in Nigeria, are there loopholes in the existing legal framework, if there are, then what amendments or proactive measure need to be taken, can the current legal framework achieve a sustainable gas utilisation in the country; and so on. The answers to these questions will be pertinent in developing local and foreign gas tech solutions in Nigeria’s oil and gas industry.
5.0 FURTHER CHALLENGES OF GAS TECH AND GAS UTILISATION IN NIGERIA
In the past, reports showed that the absence of adequate gas infrastructure in Nigeria led to flaring of about 75% of associated gas while only 12% of it is re-injected. However, statistics from the Nigeria Liquefied Natural Gas Company Limited (NLNG) shows that the Gas Flaring Profile of Nigeria is now less than 25% as a result of the company’s operations although several industry watchers still rate this as high. Therefore the NLNG project has helped to reduce gas flaring to an extent. That notwithstanding, a Monthly Petroleum Information (MPI) puts the percentage of gas flared as 12.03% of the total production of 230.05 billion standard cubic feet (BSCF). In terms of infrastructure, there the NLNG projects and a long distant West African gas pipeline of about 678 km from Itoki Terminal Lagos Nigeria to Takoradi, Ghana. Despite all these infrastructure which are export oriented, industry experts and analysts say that Nigeria does not yet have a developed gas infrastructure for domestic transmission and distribution as it is not fully integrated. Due to Nigeria’s low industrialisation, what we have is a developing/evolving system. Experiences from developed gas provinces in the world has shown that there is a co-relation between a proactive legal framework, adequate infrastructure and effective and efficient gas utilisation. The first ensures there is a system and conducive atmosphere in place for developing the requisite infrastructure for effective and efficient utilisation.
Nigeria is endowed with abundant gas resources, the current fiscal terms/regimes are very generous to encourage investment in the gas sector, Nigeria’s location vis-a-vis the viable market provides opportunity for the monetisation of her abundant gas resources, Domestic consumption of gas will increase particularly in the generation of electricity and further when the Trans Algerian pipeline is constructed and operational, Government and operators are making efforts to drastically reduce incidences of community disturbances/instability and vandalism of facilities in host community, Gas is the energy of the future and Nigeria will play a huge leading role in global gas supply.
An appraisal of Nigeria’s legal framework for effective gas utilisation reveals that the Nigerian government needs to
i. make gas a priority as there is virtually no grant of gas-specific concessions for the production of gas,
ii. put in place adequate and attractive incentives (fiscal, tax and so on) to encourage investors to invest in the gas sector,
iii. implement proactive plan for development of gas central processing facilities (CPFs) (reason why these are yet to be developed is because of lack of best practices, non-adherence to contractual terms, ) and independent gas processing plants,
iv. ensure that the interests of investors/IOCs is aligned with the national interests, respect the principle of price liberalisation in Nigeria’s gas market.
· A.A. Carim and M. Onyekonu, ‘Review of Gas Resource Utilisation Using Applicable Technologies: A Case Study of Nigeria’ (2016) The International Journal of Engineering and Science (IJES) Vol. 5 Iss. 3, p. 71.
· Department of Petroleum Resources (DPR), ‘2017 Nigerian Oil and Gas Industry Annual Report’ pp. 10, 88.
· Department of Petroleum Resources (DPR), ‘Nigeria’s Gas Reserves Rise To 200.79 Trillion Cubit Feet – DPR’ Available at: https://www.dpr.gov.ng/nigerias-gas-reserves-rise-to-200-79-trillion-cubic-feet-dpr/ Accessed 19 August, 2019.
· D.S. Olawuyi, Principles of Nigerian Environmental Law (Revised Edition, Afe Babalola University Press, 2015).
· Energie Platform (Nigeria’s First Energy Talk Show) on Nigeria Info FM MHz 95.1 Abuja, 2017. Guest, Engr Charles A. Osezua.
· KPMG Professional Services, ‘Nigeria’s Oil and Gas Industry Brief’ (June, 2014); p. 5.
· L. Nosike, How the Oil and Gas Industry Works; Overview of the Petroleum Industry: A New Perspective in the Saga of the Oil and Gas Struggle (Delizon Publishers, 2017); pp. 57-58.
· National Petroleum Investment Management Services (NAPIMS), ‘Gas Utilisation’ Available at: https://napims.com/gasutilisation.html Accessed 19 August 2019. The ratio of Nigeria’s associated and non associated gas is 50/50.
· Nigeria Liquefied Natural Gas (Fiscal Incentives, Guarantees and Assurances) Act, CAP N87, Laws of the Federation of Nigeria, 2004.
· Nigeria Liquefied Natural Gas Limited (NLNG), Company Profile Available at: https://www.nlng.com/Our-Company/Pages/Profile.aspxAccessed 19 August 2019.
· Nigeria Liquefied Natural Gas Limited (NLNG), ‘Facts and Figures 2019’; p. 36.
· Nigerian National Petroleum Corporation (NNPC), Monthly Petroleum Information (MPI-May 2016) p. 7. Available at: http://nnpcgroup.com/Portals/0/NNPC_Files/Monthly/2016/137.%20MAY%202016%20MPI.pdf Accessed 19 August 2019.
· Petroleum Act, 1969 (As Amended).
· U. Udok and E.B. Akpan, ‘Gas Flaring in Nigeria: Problems and Prospects’ (2017) Global Journal of Politics and Law Research Vol. 5, No. 1, p. 16. Also available at: https://www.eajournals.org/wp-content/uploads/Gas-flaring-in-Nigeria-Problems-and-Prospects.pdf Accessed 19 August 2019.
THE FIRMA ADVISORY, PLOT 1015 , GWANDAL CENTRE, FRIA CLOSE OFF ADEMOLA ADETOKUNBO CRESCENT WUSE II, ABUJA, NIGERIA