• About Us
  • Partners
  • Contact
Monday, May 5, 2025
  • Login
No Result
View All Result
NEWSLETTER
The Energy Intelligence
  • Home
  • Solid Minerals
  • Oil
    Maersk Drilling secures $12.1 million contract from Dana Petroleum Netherlands B.V.

    Maersk Drilling secures $12.1 million contract from Dana Petroleum Netherlands B.V.

    SPE ex-Chair picks holes in petroleum subsidy removal

    SPE ex-Chair picks holes in petroleum subsidy removal

    Axxis Geo Solutions names

    Axxis Geo Solutions names Ronny Bøhn as new CEO

    Equinor transfers operatorship of Bressay project to EnQuest

    Equinor transfers operatorship of Bressay project to EnQuest

    Aker Solutions Secures Brownfield Services Contract for Hebron Platform in Canada

    Aker Solutions secures Brownfield services contract

    We have also been able to maintain stable operations and implemented several measures to safeguard our financial strength,” says Eldar Sætre, President and CEO of Equinor ASA.

    Amid Covid-19, Equinor presents impressive Q2 results

    The two entities will join forces to create a new supplier company with a stronger position as a solid execution partner, enabling sustainable, low-carbon oil and gas production, and accelerating growth in renewable energy industries.

    Norwegian oil services firm Aker Solutions announces merger with Kvaerner, names new CEO

    Aker Solutions won several new contracts for projects on the Norwegian Continental Shelf in June, and the order intake is expected to be about NOK 7 billion in the quarter.

    Improved Q2 results for Aker Solutions

    On behalf of the Oseberg partners, Equinor has awarded Aibel a portfolio agreement for the Oseberg fields for the period 2020-2026.

    Aibel awarded Oseberg portfolio agreement

  • Marine Services
  • Industry News
    Sweden, Denmark leading the energy transition

    Sweden, Denmark leading the energy transition

    Nigeria dominates solar offgrid sales in West Africa

    Nigeria dominates solar offgrid sales in West Africa

    Logos of The Energy Intelligence, The Energy Leaders Dialogue and REEEA-ALLIANCE

    REEEA-ALLIANCE Becomes Official Partner of Energy Leaders Dialogue 2023

    West Africa’s largest renewable energy group announces Ayo Ademilua as new West Africa’s largest renewable energy group announces Ayo Ademilua as new president smiling

    REAN announces Ayo Ademilua as new president

    REAN appoints Salamatu Tunzwang as new executive secretary

    REAN appoints Salamatu Tunzwang as new executive secretary

    Eplan Senior Vice President Strategy & Corporate Program Marco Litto

    New service: Eplan Marketplace

    MAXXDRIVE® industrial gear units – NORD’s toughest for every situation

    MAXXDRIVE® industrial gear units – NORD’s toughest for every situation

    Student Energy announces $150m  youth-led UN Energy Compact

    Student Energy announces $150m  youth-led UN Energy Compact🇨🇦

    Nidec-Leroy-Somer-LSA-473-alternator

    Nidec Leroy-Somer announces launch of LSA 47.3 industrial alternator with increased performance and an optimized cooling system

  • Insights
  • Partners
  • Home
  • Solid Minerals
  • Oil
    Maersk Drilling secures $12.1 million contract from Dana Petroleum Netherlands B.V.

    Maersk Drilling secures $12.1 million contract from Dana Petroleum Netherlands B.V.

    SPE ex-Chair picks holes in petroleum subsidy removal

    SPE ex-Chair picks holes in petroleum subsidy removal

    Axxis Geo Solutions names

    Axxis Geo Solutions names Ronny Bøhn as new CEO

    Equinor transfers operatorship of Bressay project to EnQuest

    Equinor transfers operatorship of Bressay project to EnQuest

    Aker Solutions Secures Brownfield Services Contract for Hebron Platform in Canada

    Aker Solutions secures Brownfield services contract

    We have also been able to maintain stable operations and implemented several measures to safeguard our financial strength,” says Eldar Sætre, President and CEO of Equinor ASA.

    Amid Covid-19, Equinor presents impressive Q2 results

    The two entities will join forces to create a new supplier company with a stronger position as a solid execution partner, enabling sustainable, low-carbon oil and gas production, and accelerating growth in renewable energy industries.

    Norwegian oil services firm Aker Solutions announces merger with Kvaerner, names new CEO

    Aker Solutions won several new contracts for projects on the Norwegian Continental Shelf in June, and the order intake is expected to be about NOK 7 billion in the quarter.

    Improved Q2 results for Aker Solutions

    On behalf of the Oseberg partners, Equinor has awarded Aibel a portfolio agreement for the Oseberg fields for the period 2020-2026.

    Aibel awarded Oseberg portfolio agreement

  • Marine Services
  • Industry News
    Sweden, Denmark leading the energy transition

    Sweden, Denmark leading the energy transition

    Nigeria dominates solar offgrid sales in West Africa

    Nigeria dominates solar offgrid sales in West Africa

    Logos of The Energy Intelligence, The Energy Leaders Dialogue and REEEA-ALLIANCE

    REEEA-ALLIANCE Becomes Official Partner of Energy Leaders Dialogue 2023

    West Africa’s largest renewable energy group announces Ayo Ademilua as new West Africa’s largest renewable energy group announces Ayo Ademilua as new president smiling

    REAN announces Ayo Ademilua as new president

    REAN appoints Salamatu Tunzwang as new executive secretary

    REAN appoints Salamatu Tunzwang as new executive secretary

    Eplan Senior Vice President Strategy & Corporate Program Marco Litto

    New service: Eplan Marketplace

    MAXXDRIVE® industrial gear units – NORD’s toughest for every situation

    MAXXDRIVE® industrial gear units – NORD’s toughest for every situation

    Student Energy announces $150m  youth-led UN Energy Compact

    Student Energy announces $150m  youth-led UN Energy Compact🇨🇦

    Nidec-Leroy-Somer-LSA-473-alternator

    Nidec Leroy-Somer announces launch of LSA 47.3 industrial alternator with increased performance and an optimized cooling system

  • Insights
  • Partners
No Result
View All Result
The Energy Intelligence
No Result
View All Result
hhh hhh hhh
ADVERTISEMENT
Home Insight

The Gas-to-Power Nexus in Nigeria: Challenges, Prospects and Outlook for Investments (II)

by Ivie Ehanmo
June 21, 2021
in Gas, Uncategorized
0
The Gas-to-Power Nexus in Nigeria: Challenges, Prospects and Outlook for Investments
0
SHARES
Share on FacebookShare on Twitter
Oman Petroleum and Energy Show
ADVERTISEMENT

This is a continuation of the The Gas-to-Power Nexus in Nigeria series

Current state of Gas-to-Power Projects

With private sector involvement, there have been significant improvements in the gas market. Some notable actors and projects include:

Shell Nigeria Gas (SNG) completed the Agbara-Ota Capacity Project in 2019. The gas plant is reported to have increased the country’s gas production and distribution capacity by over 150%.

Pan Ocean Oil Corporation recently completed the two phases of the Ovade-Ogharefe Gas Processing Plant.

The biggest gas pipeline project in Nigeria-the Obiafu-Obrikom to Oben (OB3) Gas Pipeline is scheduled for completion in 2021.

The ongoing Ogidigben Gas Revolution Industrial Park owned by the Nigerian National Petroleum Corporation (NNPC)
Ajaokuta-Abuja-Kano-Kaduna (AKK) Gas Pipeline Project which has attracted support from China’s Sinosure and a group of Chinese financial institutions to the tune of $2.3 billion and was flagged off in June 2020 by President Mohammadu Buhari
Dangote Complex- $2 billion fertilizer plant with a 3.0 MTPA capacity which depends on natural gas as feedstock.

Specifically related to gas-to-power, proposed and ongoing plans/projects include:

Gas-to-Power Challenges in Nigeria
“About 145 to 150 BCM gas is flared per year globally, enough to produce 750 billion kwh of power, which is more than the annual power consumption in the entire African continent”.

Gas is the primary source of power generation in Nigeria, and the power sector in the country has been affected by insufficient gas supplies to cater to the four gas-fired thermal successor generation companies, the anticipated National Integrated Power Project (NIPP) expected to rely completely on gas, and anticipated gas-fired power generation.

Despite the abundant gas resources currently in place in Nigeria, placing it as the ninth largest gas producer in the world, a significant portion of the country’s gas resources have not been converted to electric power.

The insufficiency of gas supplies has resulted in Gas Supply Agreements being made on ‘reasonable endeavours’ or ‘best endeavours’ basis, rather than gas supplies being made on definite quantities governed by stiff take-or-pay provisions.

This situation, in turn, has negatively affected the bankability of gas and power projects in Nigeria. The Key challenges in the gas-to-power value chain are highlighted below

Key challenges 

  • Gas Availability (Demand growth v Feed Gas Supply) stemming from inadequate capital investment
    Lack of adequate capital for the needed upstream oil and gas developments owing to the competing political and socio-economic objectives of the government to which the government has to devote its financial resources and is therefore unable to sufficiently fund its interests under the respective Joint Venture/Joint Operating Agreements via cash calls, thus resulting in investment and infrastructural development challenges.It is estimated that almost 2,000 MW of power is stranded due to gas unavailability, despite the additional 1,000 MW that is also estimated to be stranded due to non-gas related constraints.
  • Gas Deliverability (Inadequate gas transportation and processing infrastructure across the value chain). There is currently a dire lack of adequate infrastructure to transport gas to power producers coupled with insufficient domestic gas price incentives. Gas Pipeline vandalism exists as a barrier to gas-to-power projects. For example, although repairs on the Escravos-Lagos pipeline that was vandalised in early March 2015 were completed by the end of the month, power plants were deprived of some 1500 MW, contributing to electricity shortages and low generation output.
  • Legal and Regulatory Impediments
    There is a misalignment between the legal, regulatory and policy framework across the gas-to-power value chain resulting in a lack of cooperation among key stakeholders in the gas-to-power value chain and a disjointed approach towards the regulation of domestic supply of gas in the country.
    There are also regulatory and institutional misalignments between the domestic gas supply industry and the electric power market and policy inconsistencies. For example, differing approaches are employed with regard to price regulation and resource allocation; a major impediment being the inconsistency between the power sector’s price and economic regulation approach which is an incentive based model in comparison with the gas supply industry which remains subject to the traditional cost of service/rate of return model.
    In addition, another notable example of divergence is with regard to the Nigerian Gas Transportation Network Code recently released to harmonise the contractual regime for the transportation of gas which was previously governed by gas transportation agreements that made provisions for delivery of accumulated gas at delivery points via dedicated gas transportation and distribution infrastructure. There is a non-alignment of the Code with existing contracts for power generation, thus creating inconsistencies in the contractual framework for gas to power transactions from the perspective of gas transportation for power projects.
    Of critical note is the fact that the regulatory and fiscal reforms in the oil and gas industry remain pending with the delay in the passage of the Petroleum Industry and Governance Bill which has dire implications on the government’s aspirations towards the attainment of a coherent gas-to-power value chain.
  • Security, Affordability, Reliability, Commerciality and Pricing of Gas Supply for Power Generation. The power sector in Nigeria is fraught with a debacle of issues across the value chain which have in effect resulted in a liquidity crisis in the sector. The main concern that has plagued the industry since its privatisation in 2013 is the lack of truly cost reflective tariffs, emanating from a series of issues that have resulted in a negative domino effect on the industry. These issues include:
  1. Low electricity generation as a result of network constraints in addition to gas infrastructure and pricing issues.
  2. Baseline Loss Studies (BLS) data as at the time of privatisation were not fed through into the Multi-Year-Tariff-Order in operation, for tariffs to reflect current realities.
  3. The sculpted nature of the tariffs which allow for under recovery in the early years and over recovery in later years with no adequate means of funding the gap based on the lack of credibility of the Distribution Companies who exist as the last mile agents in the value chain.
  4. Non-implementation of the various minor reviews which has not led to a ‘true-up’ or ‘true-down’ of the tariffs to reflect current realities based on changes in certain parameters such as generation capacity, inflation, exchange rates and gas costs, foreign exchange pass through costs not recoverable via end-user tariffs.
  5. Cost recovery and pricing mismatch based on the fact that the pass through costs from the Power Purchase Agreements (PPA’s) between the Nigerian Bulk Electricity Trader (NBET) and the Generation Companies (GenCos) to the Vesting Contracts between NBET and the DisCos are not recoverable via the MYTO tariffs.
  6. MDA (Ministries, Departments and Agencies) debts running into trillions of Nigerian Naira and not reflected in the collection loss component of the Aggregate Technical, Commercial and Collection (ATC&C) Losses factored into end-user tariffs.
  7. Lack of willingness to pay by end-use customers as some still view electricity as a social good.
  8. Technical Losses, Billing Inefficiencies and Electricity Theft leading to increased ATC&C losses, etc

 

 

The cumulative effect of the above listed issues which are not exhaustive has hindered the ability of the DisCos to fulfil their market remittance obligations to the value chain as the last mile collection agents of the industry.

On the gas end of the value chain, the shortage of gas supply continues to prevent the availability of new gas-fired power stations to generate sufficient amounts of electricity. In addition, the lack of an appropriate gas-pricing framework represents a major impediment to the commerciality of gas for power projects, leaving industries with no other option but to self-generate.

By legislation, the Federal Government is permitted to approve the price at which gas is sold domestically which may be viewed as being contrary to international best practice, given the high degree of what has been termed as ‘state controlled’ pricing.

Gas producers do not comply their Domestic Gas Supply Obligations (DGSOs) in flagrant disregard of the National Domestic Gas Supply and Pricing Policy 2008 and the National Domestic Supply and Pricing Regulations 2008 and instead opt for the exportation of natural gas.

Participation in the international gas market is usually a juicy sell to domestic gas producers, due to the investment-friendly prices. Gas companies will rather explore LNG export to the international market where there are preferable contract terms and appropriate levels of regulatory certainties and guaranteed reasonable return on investments.

This system/practice pushes unrealistically low prices for the domestic market and has created a huge shortage of gas in relation to domestic demand which has in effect halted industrial development across several sectors of the economy, notably the power sector.

ADVERTISEMENT

In addition, the cost of building additional infrastructure to sell to the domestic market, does not make economic sense to gas producers who do not have to contend with such challenges in the international market.

Another disincentive is the fact that in the domestic gas market, gas producers will need to identify credible off-takers beforehand, unlike in the international market where most of the gas is traded in the spot market.

Nevertheless, optimistic propositions exist to the effect that:
– The illiquidity in the Power sector is addressed and holistic pricing reforms are set in place which is currently ongoing;
– For the other markets, the FG introduces reforms for the removal of price subsidy to foster a free market interplay such as the recent Market Based Pricing Regime for Premium Motor Spirit (PMS) Regulations, 2020 released by the Petroleum Product Pricing Regulatory Agency (PPPRA) on the 4th of June 2020. The Regulations provides for a system which seeks to deregulate the pricing regime in the sector.

The totality of the challenges impacts the commercial viability of gas utilisation projects, most of which are currently operating on a ‘best-endeavour’ basis hinged on the non-enforcement of securitisation terms agreed between parties, occasioned by the all-round liquidity impediments across the gas-to-power value chain.

Tags: Cash callsEscravos-Lagos pipelineGas Supply AgreementsGas to Power challengesgas-to-power value chainIvie EhanmoJoint Operating AgreementsNational Integrated Power ProjectObiafu-Obrikom to Oben (OB3)Ogidigben Gas Revolution Industrial ParkPan Ocean Oil Corporation
Ivie Ehanmo

Ivie Ehanmo

Ivie Ehanmo is a renowned multi-jurisdictional expert in the energy sector with over 12 years’ experience where she has been involved in a wide array of complex transactions for multiple clients in Nigeria and across Africa. She has and continues to provide expert legal, regulatory, governance and transaction advisory support to global institutions and agencies such as the World Bank, U.S Agency for International Development (USAID), Millennium Challenge Corporation (USA), United Nations Office for Project Services (UNOPS), United Kingdom Nigeria Infrastructure Advisory Facility (UKNiAF) among others. She is a Legal and Regulatory Consultant for Energy Market and Regulatory Consultants (a member of the MRC Group) and a Partner within the Energy and Infrastructure Projects Unit at the law firm of George Etomi & Partners. Ivie is a Doctoral Researcher at the Centre for Energy, Petroleum and Mineral Law & Policy [CEPMLP], University of Dundee. Her PhD (Electricity Law and Regulation) focuses on exploring Legal and Regulatory mechanisms to scale up investments in Power Markets across Sub-Saharan Africa. Outside work, Ivie enjoys spending quality time with her family, charitable initiatives and catching up on Netflix movies.

Hyundai marks nearly three decades of hydrogen fuel-cell electric vehicle (FCEV) powertrain development by unveiling the Initium concept that also displays an entirely new design language.

Hyundai unveils latest hydrogen fuel-cell concept

November 3, 2024
Air pollution levels in Lahore rise 40 times above WHO limit

Air pollution levels in Lahore rise 40 times above WHO limit

November 3, 2024
EXCLUSIVE: Norway launches program to tackle climate change in Nigeria, others

EXCLUSIVE: Norway launches program to tackle climate change in Nigeria, others

November 1, 2024

Popular News

    Tweet at us!

    Connect with us

    Newsletter

    Join thousands of other senior energy decision makers and gain access to exclusive stories and reports
    SUBSCRIBE

    Category

    • Amazons in Energy
    • Bio Energy
    • Clean Cooking
    • Climate Change
    • EnergyPreneur
    • Environment
    • Events
    • Food and Pharmaceuticals
    • Gas
    • Geothermal Energy
    • Governance
    • GreenTech Made in Africa
    • Hydro Power
    • Hydrogen Power
    • Industry News
    • Insight
    • Logistics
    • Magazine
    • Marine Services
    • Nuclear Power
    • Oil
    • Partners
    • Press Release
    • Recycling
    • Solar Energy
    • Solid Minerals
    • Sustainable Mobility
    • Technergy
    • Uncategorized
    • Wind Power

    Our Mission

    The Energy Intelligence is dedicated to focusing on all the key trends and developments that are emerging from within the Global Energy industry through Business Intelligence, Networking and Strategic Communications.

    • About Us
    • Partners
    • Contact

    © 2020 The Energy Intelligence. All rights reserved

    No Result
    View All Result
    • Home
    • Solid Minerals
    • Oil
    • Marine Services
    • Industry News
    • Insights
    • Partners

    © 2020 The Energy Intelligence. All rights reserved

    Welcome Back!

    Login to your account below

    Forgotten Password?

    Create New Account!

    Fill the forms bellow to register

    All fields are required. Log In

    Retrieve your password

    Please enter your username or email address to reset your password.

    Log In
    You cannot copy content of this page