This singular initiative has the potential to turn the Nigerian economy around, within a few years.
The development of enabling environment and basic infrastructure for LNG in the Nigerian energy market may be the long-awaited catalyst to kick off the country's industrial revolution and set us on the path to economic recovery. Careful and deliberate investments in new gas exploration projects and LNG plants have great potentials to create many new jobs across a range of sectors, including manufacturing, construction, transportation, agriculture, housing and energy.
Introduction
Currently Nigeria has over 23 grid-connected generating plants in operation, for public power supply, with a total installed capacity of 10,396 MW (and an available capacity of 6,056 MW), though less than 5GW can be sustainably evacuated due to limitations with primary energy supply, generation infrastructure and low reliability and capacity of transmission network. Availability of reliable alternative fuel for power generation and manufacturing, mostly in the private sectors, may be one of the most significant, fastest, and sustainable ways to quickly get Nigeria on the path to its economic greatness among the nations of the world. It cannot be overemphasised that the availability of uninterrupted power supply will have huge impacts on the Nigerian economy in a variety of ways, of which the most direct would be the in terms of the significant reduction of the cost of manufacturing. With the current state of power supply generation and transmission infrastructures, the exorbitant private electricity generation from automotive gas oil (AGO) is not a viable alternative. The cost of AGO has been the biggest singular factor for many SMEs going out of business.
The energy consumption of a nation is relatively proportional to its industrialisation and economic growth. Though Nigeria is estimated to have 206 trillion cubic feet (tcf) of natural gas reserves, ranked ninth in the world, we are however ranked 36th in gas consumption, despite our relative huge population and potential. Natural gas is distributed for domestic, commercial and industrial use through three main methods: pipelines, compressed natural gas (CNG), and liquefied natural gas (LNG). Depending on the application and environment, each method comes with different infrastructural requirements for safe distribution and consumption. As a nation, the experiment with piped gas distribution has largely failed for many reasons; from poor maintainability to vandalism. CNG and LNG are the most viable options that Nigeria needs to seriously explore.
Natural gas becomes LNG by liquefying the gas from 600 molecules to one.
LNG is not only much cheaper, it is available, and comes with significant environmental benefits. Adopting LNG as a major energy source for small scale industry has the potential to significantly reduce our carbon footprint as a nation, and fast-track our journey to carbon neutrality before 2060, as set by the Federal Government (Nigeria's Energy Transition Plan).
Nigeria is the seventh largest producer of LNG in the world, with 22.8 MTPA (million tons per annum), of which only about 3 per cent is consumed locally. Though the nation has made several billions of dollars over 25 years of commissioning the Nigeria LNG limited, from its 49 per cent shareholding in the company, still there could be much more benefit to the country's economic growth if only 40 per cent of this is made available locally to power homes, the manufacturing and transportation sectors. This calls for a deliberate investment by the government in the upstream sector of the value chain, and the provision of an enabling environment for the midstream sector. The downstream market only needs safety regulations. This should not be difficult at all to the industry regulators, with support from professional bodies like the Nigeria Society of Engineers (NSE), Process Safety Initiative of Nigeria (PSIN), etc.
This administration should explore harnessing LNG for domestic use, as one of our key energy sources for rapid economic development and energy independence.
Increased Energy Security
Although global experts expect Nigeria to be uniquely active in the energy transition, but we are however still napping. For an important economy like ours, energy security should come first, and we must use our existing and available resources. According to the Energy Progress Report 2021 (World Bank, 2021), the IEA, the International Renewable Energy Agency (IRENA), the United Nations (UN) and the World Health Organization (WHO), Nigeria was ranked as one of the world's worst country with regards to access to electricity, with over 90 million of the total population without power supply. Currently, there are over 23 generating plants connected to the grid, and a combined total installed capacity of 10,396 MW, but only 6,056 MW is available (58.25 per cent availability). Currently there are not enough data to publish the accurate combined reliability figures of these plants.
For an optimum economy for Nigeria, of the 30GW energy demand, less than 20 per cent is being generated by on-grid plants. It is estimated that off-grid power generation (mostly petrol and diesel generators) have about 14GW capacity, consuming over 4000 mncf/d of diesel. At the current average end user price of diesel at N1400/litre, this singular factor led to obliteration of many Small-scale Enterprises (SMEs), as mentioned above, which could not compete with cheaper products from China. The estimated price of LNG is less than N200/L.
Domestic LNG can help Nigeria achieve greater energy security by reducing its reliance on imported fuels and unreliable power supply infrastructure. This can help stabilise energy prices and reduce the country's exposure to international market fluctuations. Nigeria has much to gain from moving in the direction of domestic energy sources.
Apart from the fact that 80 per cent of these refined oil products (for off-grid generators) are imported from abroad at premium costs (including subsidy), the value chain is mostly for the benefit of a few individuals and other countries, with the cost significantly outweighing the value. On the other hand, LNG can be made readily available, and can mostly fill in the gap of this unsecured and expensive venture, with high potential to increase both on-grid and off-grid power generation.
Domestic LNG can help Nigeria achieve greater energy security by reducing its reliance on imported fuels and unreliable power supply infrastructure. This can help stabilise energy prices and reduce the country's exposure to international market fluctuations. Nigeria has much to gain from moving in the direction of domestic energy sources.
Making LNG Available to the End Users
As mentioned earlier, Nigeria is the seventh producer of LNG in the world, with 22.8MTPA (Million Tons per Annum). There are two LNG plants currently operating in Nigeria; Nigeria LNG Limited (22MTPA) and Greenville LNG (0.8MTA). Nigeria LNG exports 100 per cent of the LNG it produces to Europe and Asia, while Greenville LNG markets and sells all its product locally. Like other petroleum fuels, LNG can be safely and reliably distributed across the country, via LNG road tankers, as being done currently by Greenville LNG. So, what is being proposed is not a novel idea, as there's a mini model that's currently in operation at Rumuji, Rivers State. With trucks, Greenville transports its product to different parts of the country seamlessly. Though this is a very small operation, this and similar models can easily be scaled up to have significant impact on Nigeria's economy.
With the recent commissioning of the Lekki deep seaport, we now have seven major seaports in Nigeria. If the government mandates this and there are the right motivations, these ports can have LNG receiving terminals, for products for the domestic market, which would be fully funded by investors from the private sector or in partnership with the Federal Government. There are several local and international investors who would be enthusiastic about such opportunity.
Though Nigeria LNG limited has a relatively long SPA (Sales Purchase Agreement) with some European companies, the global LNG market trend reveals that spot sales are more attractive to producers than the SPAs. With the current price of alternative fuels, spot LNG would still be very competitive for the Nigerian energy market.
Cheaper Option for Public Transport
If alternative vehicle fuels become cheaper than gasoline and diesel, many organisations and car owners would consider a switch to vehicles with less operating costs.
The entire fleet of product distribution trucks for Greenville LNG runs on the LNG fuel. The reason is not farfetched: Why run on diesel if a much cheaper and cleaner fuel is available?
LNG is a cleaner-burning fuel compared to diesel and PMS. It produces significantly less carbon dioxide (CO2) and other harmful pollutants. This could help Nigeria meet its commitments under the Paris Agreement on climate change, as well as improve air quality and public health.
Railway operators globally are moving in the direction of cheaper, cleaner and sustainable energy, of which LNG is becoming popular. In 2015, Florida East Coast Railway commenced the trial to use liquefied natural gas (LNG) as the fuel for its locomotive fleet. Today the entire mainline locomotive fleet runs on LNG. They transport goods in containers from three ports in Florida, USA to different parts of the state and US national rail tracks.
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If some percentage of public transport vehicles and equipment, like buses, trucks and trains are run on LNG, the operating costs would be lower and may motivate more local and international private investors in this sector.
Carbon Footprint
LNG is a cleaner-burning fuel compared to diesel and PMS. It produces significantly less carbon dioxide (CO2) and other harmful pollutants. This could help Nigeria meet its commitments under the Paris Agreement on climate change, as well as improve air quality and public health.
The impact of domestic LNG on Nigeria's carbon footprint would largely depend on the extent to which it replaces diesel, which is one of the most carbon-intensive fuels. With a diesel consumption of about 11 million litres daily, Nigeria needs less than 10MTPA of LNG to replace 50 per cent of diesel consumption.
As highlighted in the country's Energy Transition Plan, gas will play a critical role as a transition fuel in Nigeria's net-zero pathway.
Conclusion
The development of enabling environment and basic infrastructure for LNG in the Nigerian energy market may be the long-awaited catalyst to kick off the country's industrial revolution and set us on the path to economic recovery. Careful and deliberate investments in new gas exploration projects and LNG plants have great potentials to create many new jobs across a range of sectors, including manufacturing, construction, transportation, agriculture, housing and energy.
There are huge opportunities in making LNG available in the domestic market. If only our government looks into the American energy ecosystem, LNG stands out, consolidating the country's energy independence. This may not be difficult to implement, at a relatively low cost to the government. This singular initiative has the potential to turn the Nigerian economy around, within a few years.
Dayo Babatunde Afolabi in an energy consultant.
