Nigerian LNG exports to the U.S. substantially declined in 2011, while the country's LNG exports to Japan more than tripled in 2011.
Nigeria had an estimated 180 trillion cubic feet (Tcf) of proven natural gas reserves as of the end of 2011, according to the OGJ, making Nigeria the ninth largest natural gas reserve holder in the world and the largest in Africa.
Despite holding a top 10 position for proven natural gas reserves, Nigeria produced about 1 Tcf of dry natural gas in 2011 and ranked as the world's 25th largest natural gas producer. The majority of the natural gas reserves are located in the Niger Delta and, therefore, the sector is also impacted by the same security and regulatory issues affecting the oil industry.
Most of Nigeria's marketed natural gas is exported as Liquefied Natural Gas (LNG), with the remainder consumed domestically and other portions exported regionally via the West African Gas Pipeline. Shell Nigeria Gas Limited (SNG), a Shell-owned gas sales and distribution company, also delivers Compressed Natural Gas (CNG) to industries as far as 62 miles away from existing pipelines.
Dry natural gas production grew for most of the last decade until Shell declared a force majeure on gas supplies to the Soku gas-gathering and condensate plant in November 2008. Shell shut down the plant to repair damages to a pipeline connected to the Soku plant that was sabotaged by local groups siphoning condensate.
The plant reopened nearly 5 months later, but was shut down again for most of 2009 for operational reasons. The Soku plant provides nearly half of the feed gas to Nigeria's sole LNG facility; therefore, its closure led to a reduction in Nigeria's natural gas production, particularly from Shell's fields in the Niger Delta, and a 33 percent decline in LNG exports in 2009. Gas production partially recovered in 2010 after the plant reopened.
For the most part, the same national regulatory bodies and international oil companies (IOCs) involved in Nigeria's oil industry are also the actors involved in the gas industry. The Nigerian Gas Company Limited (NGC), a subsidiary of NNPC, is tasked with the marketing, transmission, and distribution of gas and oversees pipeline projects. The PIB proposes to divide the NGC into two organizations: the midstream National Gas Transportation Company, and a downstream gas marketing company.
Like in the oil industry, NNPC holds interest in gas projects alongside international oil companies.
International oil companiesShell dominates gas production in the country, as the Niger Delta, which contains most of Nigeria's gas resources, also houses most of Shell's hydrocarbon assets. Shell produced 707 MMcf/d of gas in 2011 and its latest gas project, the Gbaran-Ubie integrated oil and gas project, achieved peak gas production of 1 Bcf/d in early 2011. Gbaran-Ubie's gas is delivered to domestic power plants and to NLNG for export.
The second largest gas producer, Total, produced 534 MMcf/d in 2011. Total, along with Eni, is developing the Brass LNG facility, which will comprise two trains with the capacity of processing 5 million metric tons per year of LNG sometime after 2014. Eni was the third largest natural gas producer in Nigeria in 2011.
The company's natural gas output grew by almost 40 percent in the last three years and reached 354 MMcf/d in 2011. Chevron produced 343 MMcf/d in 2011 and is majority owner of major gas projects in the country, such as the WAGP and the Escravos GTL plant, as noted above.
Since Nigeria's oil fields lack the infrastructure to produce and market associated natural gas, much of it is flared. According to the National Oceanic and Atmospheric Administration (NOAA), Nigeria flared 536 Bcf of natural gas in 2010 – or about a third of gross natural gas produced in 2010, according to NNPC. In 2011, the NNPC claimed that flaring cost Nigeria US $2.5 billion per year in lost revenue.
The Nigerian government has been working to end natural gas flaring for several years, but the deadline to implement the policies and fine oil companies has been repeatedly postponed with the most recent deadline being December 2012, which appears unlikely to be enforced.
In 2009, the Nigerian government developed a Gas Master Plan that promotes investment in pipeline infrastructure and new gas-fired power plants to help reduce gas flaring and provide much-needed electricity generation. However, progress is still limited as security risks in the Niger Delta have made it difficult for IOCs to construct infrastructure that would support gas monetization.
Gas to liquids (GTL)
A Chevron-operated Escravos Gas to Liquids (GTL) project is currently underway. The project is a joint venture with NNPC and South Africa's Sasol and began in 2008. Escravos GTL has faced multiple delays and cost overruns, but is currently scheduled to be operational by 2013. The project will convert 325 million cubic feet of natural gas per day into 33,000 barrels of liquids, principally synthetic diesel, to supply clean-burning, low-sulfur diesel fuel for cars and trucks, according to Chevron.
Liquefied natural gas (LNG) A significant portion of Nigeria's marketed natural gas is processed into LNG. In 2010, Nigeria exported 17.97 million metric tons (875 Bcf) of LNG, making Nigeria the fifth largest LNG exporter in the world and the largest LNG exporter in the Atlantic Basin. Furthermore, Nigeria's LNG accounted for 8 percent of the total supplied to the world market and 30 percent of LNG coming from the Atlantic Basin in 2010.
However, although Nigeria's market share of LNG trade in the Atlantic Basin has been increasing, mainly due to decreased LNG exports from Algeria, the country's market share in the world has decreased from the 10 percent it once held to 7 percent, as reported by Nigeria Liquefied Natural Gas (NLNG) Limited in 2012. Nigerian LNG exports rose to 18.86 million metric tons (918 Bcf) in 2011, but due to no recent capacity increases and rising production from Qatar and Australia, Nigeria's world market share of LNG is slipping.
Nigeria's LNG production capacity is currently 22 million metric tons per year, and any major increase is not expected to come online before 2015.
In 2010, most of Nigeria's LNG was exported to Europe (67 percent), mainly Spain (31 percent), France (16 percent) and Portugal (12 percent), with smaller amounts to Turkey, United Kingdom, and Belgium. Other export destinations include Asia (15 percent) and North America (14 percent). The U.S. imported 0.86 million metric tons (42 Bcf) of Nigerian LNG in 2010, providing 1 percent of total U.S. LNG imports.
In 2011, U.S. imports of Nigerian LNG significantly decreased to 0.05 million metric tons (2.5 Bcf), according to EIA data, which is the lowest level recorded since Nigerian LNG exports began. In 2011, more of Nigeria's LNG exports were sent to Japan and other Asian countries due to higher demand for LNG imports in those countries. Most notably, Nigerian exports to Japan more than tripled in 2011, as Japan's LNG demand increased due to the Fukushima nuclear accident.
The Nigeria Liquefied Natural Gas (NLNG) facility on Bonny Island is Nigeria's only LNG complex. NLNG partners, including NNPC (49 percent), Shell (25.6 percent), Total (15 percent), and Eni (10.4 percent), completed the first phase of the facility in September 1999. NLNG currently has six trains and a production capacity of 22 million metric tons per year (1.1 Tcf). A seventh train is under construction to increase the facility's capacity by 8 million metric tons per year. However, regulatory and political issues, particularly regarding the long-delayed PIB, have delayed the project's start date to beyond 2014.
Three additional LNG plants with a total of seven trains were expected to come online after 2012, but their expected start dates have been postponed beyond 2016. Plans include OK LNG (4 trains), Brass LNG (2 trains), and Progress LNG (1 train). These are in varying stages of development, and investment decisions will depend heavily on security, world LNG markets, and the final outcome of the PIB. Availability of natural gas for export will also depend on Nigerian efforts to expand the use of natural gas for domestic electricity generation – efforts that are included in both the Gas Master Plan and the PIB.
Nigeria began exporting some of its natural gas via the West African Gas Pipeline (WAGP) in 2011. The pipeline is operated by the West African Gas Pipeline Company limited (WAPCo), which is owned by Chevron West African Gas Pipeline Limited (36.7%), Nigerian National Petroleum Corporation (25%), Shell Overseas Holdings Limited (18%), Takoradi Power Company Limited (16.3%), Societe Togolaise de Gaz (2%), and Societe BenGaz S.A. (2%).
The 420-mile pipeline carries natural gas from Nigeria's Escravos region to Togo, Benin, and Ghana. WAGP links into the existing Escravos-Lagos pipeline and moves offshore at an average water depth of 35 meters. According to WAPCo, roughly 85 percent of the gas is used for power generation and the remainder for industrial applications.
Current recipients are Volta River Authority's Takoradi Thermal Power Plant in Ghana and Electricity Community of Benin (CEB), a company co-owned by Benin and Togo. Exports should eventually reach initial capacity of 170 million cubic feet per day (MMcf/d) and plans are underway to expand capacity to as much as 460 MMcf/d and possibly extend the pipeline further west to Cote d'Ivoire.
As of early October 2012, the pipeline is shutdown due to a loss of pressure around the Lome segment that it experienced at the end of August 2012. The WAPCo has noted that maintenance to the damaged pipeline is planned for completion at the end of December.
Nigeria and Algeria continue to discuss the possibility of constructing the Trans-Saharan Gas Pipeline (TSGP). The 2,500-mile pipeline would carry natural gas from oil fields in Nigeria's Delta region to Algeria's Beni Saf export terminal on the Mediterranean and is designed to supply gas to Europe.
In 2009, the NNPC signed a memorandum of understanding (MoU) with Sonatrach, the Algerian national oil company, to proceed with plans to develop the pipeline. Several national and international companies have shown interest in the project, including Total and Gazprom. Security concerns along the entire pipeline route, increasing costs, and ongoing regulatory and political uncertainty in Nigeria have continued to delay this project.
Nigeria's electricity sector is relatively small. Brazil and Pakistan, two countries with similar population sizes, generate 24 times and 5 times more power than Nigeria, respectively. Bangladesh, a country slightly smaller in population and with a smaller gross domestic product (GDP) than Nigeria, produces nearly twice as much electricity as Nigeria.
The latest EIA estimates show that Nigeria's net generation was 18.8 billion kilowatthours (KWh) in 2009. Installed electricity capacity has remained relatively stable over the last decade at 5.9 GW, although net generation has slightly decreased from its peak of 23 billion KWh in 2004, mainly due to a decline in hydroelectric power.
The majority of electricity generation comes from thermal power plants (77 percent), with about two-thirds of thermal power derived from natural gas and the rest from oil. Hydroelectricity (23 percent), the only other source of power generation, has decreased gradually from its peak of 8.2 billion KWh in 2002 to 4.5 billion KWh in 2009.
Nigeria's electricity net consumption was 17.7 billion kWh in 2009, slightly less than generation, and exported most of the remainder to Niger through an agreement under the West African Power Pool.
According to a World Bank report, Nigeria experienced power outages on average for 46 days per year from 2007-2008, and outages lasted almost 6 hours on average. Population growth coupled with underinvestment in the electricity sector has led to increased power demand without any significant increases in capacity, in addition to inadequate maintenance, insufficient feedstock and an inadequate transmission network. Businesses often purchase costly generators to use as back-up during outages and the majority of Nigerians use traditional biomass, such as wood, charcoal, and waste, to fulfill household energy needs, such as cooking and heating.
Nigeria's electricity sector is divided into three sub-sectors: existing Federal Government of Nigeria (FGN) Power Generation facilities, Independent Power Projects (IPPs), and National Integrated Power Projects. The majority of power stations, both thermal and hydro, are FGN facilities funded by the government, while IPPs are backed by the private sector. The largest IPP and power plant in Nigeria is the 650 megawatt (MW) Afam VI Power Generating Plant owned by Shell. According to Shell, between 14-24 percent of overall generation contributes to the national grid.
The National Integrated Power Project (NIPP) is a plan launched by the Nigerian government to construct multiple new power plants and reduce gas flaring for feedstock. However, plans to bring NIPPs online have repeatedly been delayed, as government plans to privatize electricity generation and distribution companies have been slow.
Two major challenges of privatization is unbundling the state-owned Power Holding Company of Nigeria, which was established to regulate pricing and competition, and publically managing the expected 88 percent rise in electricity tariffs once privatization is underway. The Nigeria Electricity Regulatory Commission has also said that new tariffs will be imposed on selected cities.
Currently, there are some IPPs under construction such as ExxonMobil's 388-MW gas-fired plant in Bonny and ABB's 450-MW gas and steam turbine in Abuja. Nonetheless, according to the government, the country needs $10 billion of investment a year for at least a decade to meet its power sector needs. In addition to funds, Nigeria's ability to meet power demand heavily relies on its ability to reduce gas flaring, increase gas distribution infrastructure, and diversify power generation sources.
Culled from www.eia.org