The outlook for natural gas has shown that demand for the commodity is set to rise as new gas infrastructure across value chains will support the rise in traded gas flows. While power generation remains the largest gas-consuming sector in Nigeria, opportunities also abound in the logistics sector. The constraints lie not only in the nation’s readiness to embrace renewable energy as a signatory to the Paris deal, but in developing infrastructure to drive gas usage. FEMI ADEKOYA writes.
Gas forms about 45 per cent of Nigeria’s energy mix in terms of power generation, and has led to increasing demand in the industrial sector for fuelling their generators in the absence of steady supply from the grid.
However, it also means less flexibility to respond to fluctuations in price, as industrial consumers can rarely switch to other fuels if gas prices rise, while power systems typically are more responsive and flexible in modulating their fuel mix.
Some of such fluctuations were source of concerns to local manufacturers in the country, especially in relation to pricing and the absence of foreign exchange at the time.
The switch to gas has some important advantages for power generation, notably the relatively low capital costs of new plants, and the ability to ramp generation up and down quickly – an important attribute in systems that are increasingly rich in solar and wind power.
The Federal Government had said the LPG Penetration Programme along with the Nigeria Gas Flare Commercialisation Programme (NGFCP), were components of Nigeria’s intended nationally designed contributions under the Paris agreement for reducing annual greenhouse gas emissions by the Year 2020.
The Programme Manager, National Gas Flare Commercialisation Programme (NGFCP), Federal Ministry of Petroleum Resources, Justice Derefaka, stated that Nigeria loses approximately $1 billion of revenue through gas flaring, due to its inability to capture and commercialise flared gas in the country.
He further stated that if flared gas is properly exploited, it has the potential to create 300,000 jobs, produce 600,000 MT of LPG per year, and generate 2.5 GW of power from new and existing IPPs, as approximately 700mmscf/d is flared at 178 flare sites in Nigeria.
On the NGFCP, the government stated that the programme was a key component of the Nigerian Gas Policy, which had the aim of reducing the environmental and social impact caused by flaring of natural gas, protect the environment, prevent waste of natural resources, and create social and economic benefits from gas flare capture.
However, the gas sector is also the sector in which competition is most formidable; lower-cost renewable and the rise of other technologies for short-term market balancing – including energy storage – diminish the prospects for gas growth in the power sector, particularly in the Sustainable Development Scenario (SDS).
According to local manufacturers, the switch to gas powered plants under their Independent Power Project (IPP), has not only aided improved access to electricity but improved the quality of energy generated for production.
An energy company, Equinor had recently projected growth in global demand for gas by around 10 per cent towards 2030, driven by opportunities for gas and need to lower emissions.
In an energy scenario consistent with the two-degree climate target, global gas demand would only be “slightly lower” than today even in 2050, Equinor said in the statement.
That entails “massive needs” for investment in future gas supply “in the decades to come,” Equinor stated.
With the need for new infrastructure to drive adoption of CNG, the Chief Executive Officer (CEO) of Etefa, Johann Rieger explained that seeing CNG as an alternative to diesel and PMS in the near future for Nigeria would very much depend on factors such as the implementation of the new gas flaring bill, adding that the continuation of subsidy especially on petrol is another factor.
Although LPG and CNG vehicle is gaining penetration in developing countries due to low-cost of CNG and LPG over rising prices of petroleum products, Rieger said: “For as long as petrol is sold below the raw oil price, you cannot expect the people in time to see the advantages in gas. And also, we need to understand that treating gas is delicate, so there are also the disadvantages of gas we are treating. With all these and from the real economic perspective, we cannot expect the people to have a longer perspective to it.
“The removal of subsidy from diesel is another push for the market, and as soon as the gas flaring act is implemented, companies would adjust because of the drastic increase in gas flaring penalties”, he added.
Having promoted the use of Compressed Natural GAS since 2009, Manager, Corporate Communications of NIPCO, Taofeek Lawal, explains that effort to give the push for the revolution is still being hampered by paucity of infrastructure across the country.
“The most important of this infrastructure is laying of pipelines for gas transportation. Government seems to have realised this inadequacy with their award of construction of pipelines from Ajaokuta to some of the Northern state of the federation. We are hopeful that if these projects are completed within the next 24 months, some of the problems plaguing the gas of sector of the industry will have been addressed”, he added.
Indeed, the largest increase in gas demand in the New P olicies Scenario is projected to come from industrial firms.
Where gas is available, it is well suited to meeting industrial demand. Competition from renewables is more limited, especially for provision of high-temperature heat.
However, Lawal, stated that the use of LPG as household fuel appears to have gathered momentum than for other uses.
“Other areas such as use of gas for power generation and industrial applications have been on low ebb due to plethora of reasons. Cardinal among the reasons is the fact that most of the vehicles being used in Nigeria are not designed to use gas unlike other fuel—petrol and diesel. This has resulted in higher cost of using an LPG power vehicle by motorists. You can hardly find motorist across the nation using LPG as auto fuel except for scores of vehicle owned by Sahara energy
dotting some parts of Lagos”, he added.
dotting some parts of Lagos”, he added.
Gas typically beats oil on price, and is preferred to coal for convenience (once the infrastructure is in place) as well on environmental grounds. Gas demand in industry is also projected to be more resilient in the SDS than power generation, where demand is far more sensitive to growth of renewables.
The federal government stated that the recently gazetted Flare Gas (Prevention of Waste and Pollution) Regulations 2018, was the legal basis for the implementation of the NGFCP and the payment regime (penalties) for gas flaring.
It stated that the regulation adopted the polluter pays principle, similar to a carbon tax, adding that “results of work done to trigger up to 85 projects that will utilise flared gas, generate approximately 300,000 direct and indirect jobs and annual revenue generation/Gross Domestic Product impact estimated at $1billionn/annum are also highlighted.
On the sustainability of the tempo for transition to lower carbon energy sources and the emergence of new business models, Rieger noted that the tempo can be sustained, because 20 per cent of the carbon emissions are coming from flared gas.
“There is enormous potential of reduction and we must not forget that Nigeria is a gas country and sustainability starts here. There are many untapped gas resources here in the country which cannot be monetised as long as we don’t build the market. But we are in the chicken and egg situation and this is why we are in a pilot project”, he added.