Gas discoveries in Nigeria disappointing over the last decade – PwC

PricewaterhouseCoopers (PwC) has described gas discoveries in Nigeria as disappointing over the last decade despite the country being a major gas consumer. This is according to its November 2023 Africa Energy Review report.

The report noted that West Africa has experienced limited gas discoveries since 2019, but significant gas discoveries were made in Mauritania between 2015 and 2019 and Senegal between 2015 and 2016.

These two countries are currently in the process of monetizing their discoveries and are expected to begin operations in 2024.

The implementation of domestic gas allocation has the potential to decrease reliance on diesel generators and coal power generation.

It read: "Nigeria’s gas discoveries have been disappointing over the last decade and only the Nkonan and Omo discoveries in 2023 and 2013 with an estimated 247 mmboe and 225 mmboe of substance.”

The Trans-Saharan Gas Pipeline

The Algerian and Nigerian governments signed an MOU in 2022 regarding the 4,128KM Trans-Saharan Gas Pipeline (TSGP), which was first mooted in the 1970s.

However, the report noted that the project is still in the planning stages, and political instability in the region, investor funding concerns, and operational safety issues are all contributing factors to the additional delay.

Beginning in the Warri region of Nigeria, the pipeline is intended to traverse Niger before arriving in Hassi R’Mel, Algeria.

It will establish connections in Hassi R’Mel with the pre-existing Medgaz, Galsi, Trans-Mediterranean, and Maghreb-Europe pipelines.

The Nigeria-Morocco Gas Pipeline

The Nigeria-Morocco Gas Pipeline (NMGP), originally envisioned to traverse Nigeria, Benin, Togo, and Ghana, will be expanded to encompass the following countries: Senegal, Mauritania, and Guinea-Bissau, in addition to Guinea and Guinea-Bissau.

Establishing this would necessitate an enormous quantity of collaboration, coordination, and administration.

The anticipated duration may prompt the EU to pursue alternative gas agreements, particularly those involving LNG/FLNG, which can be expanded at a faster rate and a lower cost through modular expansion.

Nigeria’s top gas consumer

The report further noted that although Nigeria consumes a large amount of gas in the West Africa region, there is the challenge of inadequate infrastructure stifling the market growth in the country.

It read:“There are limited local gas markets in Ghana, Ivory Coast, Benin and Togo. Nigeria consumes the bulk of the gas with domestic consumption of around 26 bcm and the other countries in the region less than 1 bcm annually.

“The lack of infrastructure remains the most significant barrier to growth, although this has become slightly less of an issue with greater use of networks with the expansion of CNG networks.”

The power sector challenge in the country was also highlighted, with the report noting:

“Rolling blackouts remain a constant issue in the region with Nigeria having experienced ‘system’ collapse (4 times in 2022 and again in 2023).

“Diesel and petrol generators and inverters are a common source of electricity as the electrical system has failed.

Most businesses and affluent families can afford to resort to using their generators due to the instability and lack of capacity on the national grid even though the cost of running diesel generators is 4 times that of the electrical tariff per kWh.

“The Nigerian national grid capacity is 13,128MW (4 and 5 times less than South Africa and Egypt). The Transmission Company of Nigeria has noted that the daily average of power generated is 4100MW or 31% EAF due to a lack of maintenance, corruption and mismanagement of the infrastructure.”

It, however, noted that the most populous nation in Africa, boasting a population of 219 million, presents the most advantageous prospects.

Its domestic market is pre-established, consisting of 17 cities with populations exceeding one million, despite the presence of numerous obstacles.

Government and business must continue to work together for the public benefit to address the most significant obstacles, which include legislation, corruption, governance, and transparency.

It further noted that in 2024, Nigeria will export approximately 79% of the gas produced, adding “However the 20% domestic gas will need to be carefully managed to ensure it is utilized for the public good.”

The Dangote Factor

The report further commented on the prospects that come with the full operations of the Dangote Refinery, which is about give years behind schedule.

It noted that with the refinery fully running, the amount of refined product imported into Nigeria will likely reduce to below 20% while adding about $20 billion to $30 billion to the Nigerian economy.

The report read:“The Dangote refinery, which cost around $19bn and is Africa’s largest oil refinery and the world’s largest single-train refinery, is expected to start operations in Q4 2023 and ramp up to 650,000 barrels a day by the end of the year.

Although five years behind schedule, it demonstrates how private businesses can drive energy security and contribute to the Nigerian energy sector.

“This mega refinery will do that and reduce the amount of imported refined product from 80% to below 20% and produce fertilizers that can supply the entire region.

The refinery can potentially reduce petroleum imports across the continent by 36% and benefit the Nigerian economy by between $20 and$30 bn.

“The refinery will be self-sufficient in that it has 435MW of IPP-produced electricity and a deep seaport. The power supplied by the independent power plants (IPPs) will add 15% to the total power generated on the national grid).”