- Despite Huge Gas Reserves, Power Plants Suffer Shortages
Over the years, many of the nation’s gas-fired power plants which are responsible for over 70 per cent of the energy being generated continue to suffer gas shortages.
Nigeria has around 181 trillion cubic feet of proven gas reserves plus much more in undiscovered gas resources. But despite having the largest gas reserves in Africa, only about 25 per cent of those reserves are being produced or are under development.
The country currently has around 7,000 megawatts of installed electricity generation capacity but less than 5,000MW is often in operation. Total electricity generation stood at 3,659.60MW as of 6am on September 25, the latest data from the Federal Ministry of Power, Works and Housing showed.
The nation has three hydropower plants and 24 gas-fired plants.
National gas production stood at 241.63 billion cubic feet in April, translating to an average daily production of 8.054 billion standard cubic feet per day, representing 1.34 per cent decrease compared to March statistics, according to the Nigerian National Petroleum Corporation’s latest monthly report.
The corporation said the daily average natural gas supply to gas power plants was at 835.27mmscfd, equivalent to power generation of 3,283MW.
It said, “Out of the 242.16Bcf of gas supplied in April, a total of 144.16Bcf of gas was commercialised comprising of 39.71Bcf and 104.45Bcf for the domestic and export market respectively.
“This implies that 59.53 per cent of the average daily gas produced was commercialised while the balance of 40.47 per cent was re-injected, used as upstream fuel gas or flared. Gas flare rate was 9.52 per cent for the month under review i.e. 769mmscfd compared with average gas flare rate of 10.24 per cent i.e. 810.03mmscfd for the period March 2017 to March 2018.”
The President, Nigerian Gas Association, Mr Dada Thomas, said last week that turning natural gas into a profit-making venture required huge investments in infrastructure that would address the five component areas of gas availability, gas affordability, deliverability, funding and the legal and regulatory framework.
He said, “Even with obvious challenges, companies are making significant strategic investments in gas pipelines and production to power Independent Power Plants and industrial customers and it is estimated that about 1,000 megawatts of the IPP capacity is presently idle due to a lack of gas delivery.
“As the market moves towards the concept of ‘willing buyer, willing seller’ and the government continues to make the investment environment more attractive, the country has massive prospects.”
The Group Chief Executive Officer, Oando Plc, Mr Wale Tinubu, said gas development in Nigeria had been stunted by the slow development of the market and the difficulty in accessing long-term, low-interest capital needed to undertake the massive projects that can ensure delivery of gas to all parts of the country.
“Gas development is closely tied to infrastructure development – or the lack of it. Gas infrastructure is a high-cost, low-margin business. It has a high barrier of entry and requires deep technical and terrain knowledge and experience to succeed,” he said in an interview with The Oil & Gas Year.
Tinubu said, “We believe the private sector is best positioned to fill the huge gap that remains in gas infrastructure investments, and Axxela remains at the forefront of championing progress in the expansion of natural gas supply to the nation.”
The Chairman/Chief Executive Officer, Nestoil Limited, Dr Ernest Azudialu-Obiejesi, at an industry event earlier in September, called on the Federal Government to increase the construction of gas pipeline in order to enhance access to natural gas supply by power-generating stations and other areas where gas is needed.
Azudialu-Obiejesi, who spoke at the second edition of the Nigerian International Pipeline Technology and Security Conference in Abuja, said, “Nigeria, with its abundant reserves of petroleum and gas, stands on the threshold of its own industrial revolution. To kick-start this industrialisation, we must not only extract these resources in the most efficient manner, but also refine and deliver them efficiently, and in a secure and cost-effective manner.”
In May, the Group Managing Director, NNPC, Dr Maikanti Baru, said the country was expecting over $25bn worth of investments in the gas sector.
He also stated that policies that would put an end to the flaring of gas had been developed by the corporation, adding that gas flaring in Nigeria had reduced significantly from 25 per cent to 10 per cent in the last decade.
Concerned about the volume of gas being flared in the country, the Minister of State for Petroleum Resources, Dr Ibe Kachikwu, said last week that any oil firm that could not end gas flaring ought not to be producing.
Kachikwu stated, “Government wants to end flare; oil companies still give lots of reasons why flare cannot be ended. Bottom line is cash call and money. But the reality is that whether or not we deal with cash call issues, it is not an optional agenda. It is a compulsive immediate agenda. It is destructive to the populace; it is intolerable in developed countries and it should not be tolerable here either.
“Any oil company that cannot find a way to end its flare ought not to be producing. And I have said to the DPR that beginning from next year, we are going to get quite frantic about this. For companies that cannot meet with extended periods, the issue is not how much you pay in terms of fines for flaring; the issue is that you will not produce. We need to begin to look at foreclosing of licences. It is that urgent.”
Oil Jumps to $67.70 as OPEC+ Extends Production Cuts
Oil Jumps to $67.70 as OPEC+ Extends Production Cuts
Brent crude oil, against which Nigerian oil is priced, rose to $67.70 per barrel on Thursday following the decision of OPEC and allies, known as OPEC+, to extend production cuts.
OPEC and allies are presently debating whether to restore as much as 1.5 million barrels per day of crude oil in April, according to people with the knowledge of the meeting.
Experts have said OPEC+ continuous production cuts could increase global inflationary pressure with the rising price of could oil. However, Saudi Energy Minister Prince Abdulaziz bin Salman said “I don’t think it will overheat.”
Last year “we suffered alone, we as OPEC+” and now “it’s about being vigilant and being careful,” he said.
Saudi minister added that the additional 1 million barrel-a-day voluntary production cut the kingdom introduced in February was now open-ended. Meaning, OPEC+ will be withholding 7 million barrels a day or 7 percent of global demand from the market– even as fuel consumption recovers in many nations.
Experts have started predicting $75 a barrel by April.
“We expect oil prices to rise toward $70 to $75 a barrel during April,” said Ann-Louise Hittle, vice president of macro oils at consultant Wood Mackenzie Ltd. “The risk is these higher prices will dampen the tentative global recovery. But the Saudi energy minister is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production.”
Gold Hits Eight-Month Low as Global Optimism Grows Amid Rising Demand for Bitcoin
Gold Struggles Ahead of Economic Recovery as Bitcoin, New Gold, Surges
Global haven asset, gold, declined to the lowest in more than eight months on Tuesday as signs of global economic recovery became glaring with rising bond yields.
The price of the precious metal declined to $1,718 per ounce during London trading on Thursday, down from $2,072 it traded in August as more investors continue to cut down on their holdings of the metal.
The previous metal usually performs poorly with rising yields on other assets like bonds, especially given the fact that gold does not provide streams of interest payments. Investors have been jumping on US bonds ahead of President Joe Biden’s $1.9 trillion coronavirus stimulus package, expected to stoke stronger US price growth.
“We see the rising bond yields as a sign of economic optimism, which has also prompted gold investors to sell some of their positions,” said Carsten Menke of Julius Baer.
Another analyst from Commerzbank, Carsten Fritsch, said that “gold’s reputation appears to have been tarnished considerably by the heavy losses of recent weeks, as evidenced by the ongoing outflows from gold ETFs”.
Experts at Investors King believed the growing demand for Bitcoin, now called the new gold, and other cryptocurrencies in recent months by institutional investors is hurting gold attractiveness.
In a recent report, analysts at Citigroup have started projecting mainstream acceptance for the unregulated dominant cryptocurrency, Bitcoin.
The price of Bitcoin has rallied by 60 percent to $52,000 this year alone. While Ethereum has risen by over 660 percent in 2021.
Oil Prices Extend Gains to $64.32 Ahead of OPEC+ Meeting
Oil Prices Rise to $64.32 Amid Expected Output Extension
Oil prices extended gains during the early hours of Thursday trading session amid the possibility that OPEC+ producers might not increase output at a key meeting scheduled for later in the day and the drop in U.S refining.
Brent crude oil, against which Nigeria oil is priced, gained 0.4 percent or 27 cents to $64.32 per barrel as at 7:32 am Nigerian time on Thursday. While the U.S West Texas Intermediate gained 19 cents or 0.3 percent to $61.47 a barrel.
“Prices hinge on Russia’s and Saudi Arabia’s preference to add more crude oil production,” said Stephen Innes, global market strategist at Axi. “Perhaps more interesting is the lack of U.S. shale response to the higher crude oil prices, which is favourable for higher prices.”
The Organization of the Petroleum Exporting Countries (OPEC) and allies, together known as OPEC+, are looking to extend production cuts into April against expected output increase due to the fragile state of the global oil market.
Oil traders and businesses had been expecting the oil cartel to ease production by around 500,000 barrels per day since January 2021 but because of the coronavirus risk and rising global uncertainties, OPEC+ was forced to role-over production cuts until March. Experts now expect that this could be extended to April given the global situation.
“OPEC+ is currently meeting to discuss its current supply agreement. This raised the spectre of a rollover in supply cuts, which also buoyed the market,” ANZ said in a report.
Meanwhile, U.S crude oil inventories rose by more than a record 21 million barrels last week as refining plunged to a record-low amid Texas weather that knocked out power from homes.
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