Customer Logins

Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.

Customer Logins

Nigerian government retains focus on gas-based transition

16 August 2021 Keiron Greenhalgh

Nigeria's government is holding steady in its pursuit of natural gas as a path to decarbonization, but hurdles remain in the way for Africa's most populous nation.

The barriers to diversifying the economy, replacing refined products in the transportation sector, and kerosene, charcoal, and firewood in providing daily sustenance include financial constraints plus logistical and technical challenges.

Government officials are undeterred after declaring the 2020s Nigeria's decade of gas in March.

President Muhammadu Buhari doubled down in late July on an ambitious project to transport gas from fields in southern states to the country's restive north, where it would boost economic diversification and create well-paying jobs, and then potentially across multiple African countries to Europe.

Buhari said successful completion of the Ajaokuta-Kaduna-Kano (AKK) Project in 2023 would enhance domestic gas utilization, according to the state news agency, News Agency of Nigeria (NAN).

At a 29 July forum organized by state-owned Gas Aggregation Company Nigeria (GACN) to move the project forward, Minister of State for Petroleum Timipre Sylva added that projects such as AKK and greater gas usage could be a catalyst for achieving an economic diversification away from crude oil and as a transition to renewable energy.

Nigerian National Petroleum Corporation Group Managing Director Mele Kyari told forum attendees the $2.8-billion AKK project had been on the drawing board for the past 30 years, but when completed, it would provide enough gas for both domestic and export purposes, according to NAN.

Nigeria has ample gas reserves, estimated at about 190 Tcf, IHS Markit data show.

The 614-kilometer AKK would transport gas from Ajaokuta in Kogi State to Kano in Kano State, with supplies coming from existing infrastructure. Domestically, it is expected to feed power generation facilities as well as sectors that use gas as a feedstock, such as the fertilizer, liquefied petroleum gas (LPG), or chemical industries.

Construction of the pipeline—the biggest ever built in Nigeria—began in June 2020, and when finished, the government sees the potential for a much longer pipeline.

To Morocco and beyond

Morocco and Nigeria in late 2016 announced plans for a pipeline transporting gas all the way to the North African nation and then perhaps Europe, passing through countries including Benin, Guinea, and Mauritania.

The original plan was for a Trans-Saharan Pipeline, spanning from Nigeria to Algeria, but Nigeria ultimately decided to partner with Morocco, citing security concerns.

AKK was due to be financed by China Export & Credit Insurance, with Nigeria putting up 15% equity and well as backing the loan for 85% of the cost with a sovereign guarantee. The problem is, following the pandemic, China is decreasing its exposure to Nigeria, and has yet to disburse the promised funds, according to local media.

The government of Nigeria does not have the money available to replace the 85% share the Chinese export credit agency was due to provide. As a result, the government is soliciting help elsewhere, local media say. The government was already looking for the funding spigot to open from sources other than China for other projects.

Developed nations should afford African countries the same right they allow themselves in including gas-fired generation and gas-powered vehicles in decarbonization strategies, Vice President Oluyemi Osinbajo said in May.

Speaking at the Columbia Global Energy Summit on 18 May, Osinbajo said the ambitions of developing countries are being thwarted by Western nations hobbling energy-poor countries' ability to find backing for gas-fired power plants and gas-powered vehicle schemes.

But the practicalities of the most ambitious iteration of the AKK project also give analysts pause for thought.

"There is already one transnational gas pipeline out of Nigeria, the West Africa Gas Pipeline, but because of insurgency in the Niger Delta, [the Nigerian authorities] have never been able to operate it at full capacity and actually supply gas to West Africa," said Mickael Vogel, an analyst at Africa-focused investment research and sustainability reporting company Hawilti.

"So, if they cannot ensure gas supplies to their neighbors in Togo or Ghana, how can they be confident they can send it all the way to Morocco?" Vogel told Net-Zero Business Daily.

In addition, he said: "There are giant gas fields sitting undeveloped offshore Mauritania and Senegal now, so if Morocco really wanted to import gas by pipeline it would make a lot more sense to get it from there than all the way from Nigeria."

Nigeria currently exports gas in the form of LNG via the six-train Nigeria LNG (NLNG) project. Nigeria is the fourth largest LNG exporter globally, with nameplate liquefaction capacity of 22.3 million metric tons (mt)/year. A further expansion is another signature project for Buhari.

The expansion of NLNG with Train 7 is set to increase Nigeria's LNG production capacity by 35%, boosting the country's role in the growing market. But the extra capacity will also afford opportunities to boost LPG production, and aid Nigeria's shift to LPG as a cooking and heating fuel. The government plans to expand the use of LPG as a cooking fuel from 5% to 90% by 2031 under its National LPG Expansion Plan.

Domestic supply of LPG is already increasing and stood at 50.4% of total supply in the second quarter of 2021, according to Petroleum Product Pricing Regulatory Agency (PPPRA) data. The quarter saw the highest domestic LPG supply on record at almost 141,000 mt, with Nigeria LNG delivering a record 43,253 mt of LPG to the domestic market in June, according to Hawilti analysis.

LPG, generation

Hawilti notes that since the start of the year, four additional companies have started delivering LPG to the domestic Nigerian market: Greenville LNG, PNG Gas, Nigerian Petroleum Development Company, and Ashtavinakayak Hydrocarbon.

Nigeria imported over 263,000 mt of LPG between January and June 2021, 52% of which was delivered in Q2, the PPPRA data show. The US continued to be the main exporter of LPG to Nigeria, accounting for almost 81% of all LPG imported in the first six months of 2021.

Only the LPG sector can attract foreign investors, Hawilti's Vogel said, given the arena's huge expansion on a Sub-Saharan-wide basis.

The power generation sector will also benefit from additional gas supplies from AKK and the NLNG expansion. But first the power sector's existing transmission infrastructure needs revamping. That task has been handed to Germany's Siemens, a deal sealed with the presence of Chancellor Angela Merkel.

The $3-billion Siemens deal is aimed at maximizing the potential of the existing system by 2025. Phase one of the program will see operational transmission capacity increased to 7 GW from 5 GW. Phase two will see Siemens boost transmission capacity to 11 GW, while phase three is aimed at raising capacity to 25 GW by 2030. Phase three would see new gas-fired power production capacity added. Siemens did not respond to a request for comment on the project's progress.

Nigeria needs to expand transmission capacity by investing in lines at the 330-kV level and at the sub-transmission or 132/33 kV level to successfully dispatch power from generation companies to load centers, according to a country profile released earlier this year by IHS Markit analysts Silvia Macri and Vignesh Sundaram.

Another use foreseen for gas in Nigeria is for fueling transportation. The government unveiled its National Autogas Roll-out Initiative in December 2020. The government expects about 1 million cars to be converted to "autogas" before the end of 2021.

Alongside improving the environment, converting from gasoline or diesel to autogas would also help Nigeria's balance of payments, as nearly all its refined products are imported due to routine and unexpected downtime at the country's four refineries.

Decarbonization pillar

IHS Markit analysts believe in the merits of the Nigerian plan. Gas plays a pivotal role in today's global economy, providing almost one quarter of the world's energy supply, the analysts said in a July study, A Sustainable Flame, and continues to be critical to the future of energy, joining renewable electricity as a second pillar for decarbonization.

Gas can play a critical and unique role, particularly in developing economies, the analysts observed in the study. Especially in developing countries, gas will serve as a key bridge fuel for a minimum of 10-15 years, they added. It is also critical to recognize, they said, that much midstream and downstream investment is a prebuild of the backbone of a decarbonized world. Gas currently accounts for about 8 gigatons (Gt) of the 37 Gt of CO2-equivalent produced by the energy sector, according to the study.

However, not all observers believe so strongly in gas' role in a rapidly decarbonizing world. No new oil and gas exploration projects should be undertaken globally if a "narrow" path to achieving net-zero carbon emissions by 2050 is to be successfully navigated, the International Energy Agency (IEA) said 18 May in its now seminal "Net Zero by 2050: A Roadmap for the Global Energy Sector" report.

"Immediate action," including the shelving of oil and gas production projects yet to be committed to as of 2021, is required "to begin an unprecedented transformation of how energy is produced, transported, and used worldwide" in "perhaps the greatest challenge humankind has ever faced," according to the IEA. It called for "nothing short of a total transformation of the energy systems that underpin our economies."


Nigeria's leaders are continuing to hold their ground on expanding the role of gas in the country though. Osinbajo on 19 July told the 2021 Nigeria Oil and Gas Strategic Conference and Exhibitions the federal government is working conscientiously to ensure that the country meets the global demands on cleaner energy.

Gas has ability to meet the increasing global requirements for cleaner primary energy use, while at the same time enabling domestic industrialization and rapid economic growth in countries such as Nigeria, he told the conference.

That stance was mirrored by Sylva 3 August. The transition to low carbon energy sources must involve a simultaneous global effort, he told a Society of Petroleum Engineers conference, but it must also bear in mind the "different socio-economic, political and developmental peculiarities of individual nations."

"Let me state categorically that our approach towards the climate-change net-zero emission debate is to optimize the use of our abundant gas resource domestically as a transition fuel option towards meeting our Nationally Determined Contributions on climate change," he said.

"We are determined to encourage more penetration of natural gas and its derivatives for domestic utilization, power generation, gas-based industries and propulsion in all aspects of the national economy," he said.

Nigeria's state-owned oil and gas company NNPC aims to raise domestic utilization from less than 1.3 billion Bcf/d in 2018 to 4.7 Bcf/d by the mid-2020s.

Gas can produce fertilizer and petrochemicals, Sylva told local TV stations, adding that an increase in local production of fertilizer would benefit Nigeria's farmers.

The Brass Fertilizer and Petrochemical methanol project, which will monetize gas output, moved to the final investment decision stage in early 2020. It would be the first methanol plant in Nigeria. A separate fertilizer plant, which will use Nigerian gas and Moroccan phosphate and is backed by the governments of both countries, is also moving ahead.

So decarbonization progress continues, but the challenges are stiff.

Posted 16 August 2021 by Keiron Greenhalgh, Senior Editor


Follow Us

May 11

RT @SPGlobal: Essential Intelligence from S&P Global helps you dive below the surface. Because a better, more prosperous world is yours for…

{"items" : [ {"name":"share","enabled":true,"desc":"<strong>Share</strong>","mobdesc":"Share","options":[ {"name":"facebook","url":"","enabled":true},{"name":"twitter","url":"","enabled":true},{"name":"linkedin","url":"","enabled":true},{"name":"email","url":"?subject=Nigerian government retains focus on gas-based transition | IHS Markit &","enabled":true},{"name":"whatsapp","url":"","enabled":true}]}, {"name":"rtt","enabled":true,"mobdesc":"Top"} ]}
Filter Sort