Special Seminar Series: Developing Nigeria’s Local Gas Market
CPEEL Special Seminar Series Titled “Developing Nigeria’s Local Gas Market”
By: Engr. Fisoye Delano,
President & CEO
Delphi Ventura Group, United States of America
Date: Wednesday August 16, 2017
Abstract
Natural gas, one of the cleanest fuels available, continues to be the fuel of choice for the power and industrial sectors in many parts of the world, in part, because it emits less pollution than other fossil fuel sources such as coal and fuel oil. Today, power generation is the primary use of natural gas. There is significant unmet demand for electricity worldwide. The International Energy Agency (IEA) World Energy Outlook (WEO) 2016 reported that 1.2 billion people worldwide, mostly in India and sub-Saharan Africa, have no access to electricity. It is estimated that about 98 million Nigerians have no access to electricity.
Nigeria produces much more natural gas than is required for domestic consumption. Nigeria exports natural gas within the West Africa region by pipeline and globally as Liquefied Natural Gas (LNG). The percentage of associated gas flared has reduced to 19% in 2015 from 53% in 2006 and the non-associated gas production has increased from 748 billion cubic feet (bcf) in 2006 to 1,263 bcf in 2015. The 331 bcf of associated natural gas flared in 2015 indicates that significant opportunities exist in bringing this volume to market along with further development of non-associated gas reserves.
Natural gas is transported to parts of Nigeria that either do not have gas or require more gas via physical pipelines systems or virtual pipelines such as small-scale LNG or CNG. The liquefaction technology makes natural gas available throughout the country.
Many operators responsible for gas supply to the domestic market are no longer the major International Oil Companies (IOC). Many companies are prioritizing the gas production for domestic market. The current regulated gas price to the power sector of $2.50 (excluding transportation) for the Domestic Supply Obligation (DSO) gas is very attractive for investors. The gas demand for the unregulated sector, mainly industrial and commercial sector, provide even higher returns due to more attractive commercial terms negotiated with the producers and the local gas pipeline distribution companies. The gas price is sometimes indexed to available alternative fuel such as low pour fuel oil (LPFO).
The chances for additional large scale LNG development for export in the near term is low because of the growing domestic natural gas market.
Globally, about 70% of produced natural gas is used locally in-country.