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Domestic Gas Market in Focus as Shortage Lingers

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  • Domestic Gas Market in Focus as Shortage Lingers

Nigeria is home to the largest natural gas reserves in Africa and the ninth largest in the world but it has continued to suffer supply shortage over the years.

According to the Nigerian National Petroleum Corporation, the country has around 202 trillion cubic feet of proven gas reserves plus about 600 Tcf unproven gas reserves.

However, despite having the largest gas reserves in Africa, only about 25 per cent of the reserves is being produced or is under development today.

Out of the total gas supply of 2.83 trillion standard cubic feet last year, only 430.2 billion scf was commercialised for the domestic market while 1.23 trillion scf was exported, according to the NNPC.

The NNPC data showed that re-injection, fuel gas and flaring accounted for a total of 1.17 trillion scf.

Oil and gas firms operating in the country flared a total of 282.08 billion standard cubic feet of natural gas in 2018, compared to 287.59 billion scf in 2017.

The Chief Operating Officer, Upstream, NNPC, Mr Bello Rabiu, at the Nigeria Oil and Gas Opportunity Fair in Yenagoa, Bayelsa State last week, stressed the need to concentrate more on the huge gas resources in the country to stimulate economic development.

He said, “Nigeria’s average daily gas production is about 8.4 billion standard cubic feet per day. Only 18 per cent (1.5 billion scf pd) of the production is consumed in the domestic market; 43 per cent is exported as Liquefied Natural Gas, 32 per cent is re-injected for enhanced oil recovery and other operational uses like fuel gas while seven per cent of total gas production is currently being flared.”

He said to encourage the existing players in the industry, particularly the traditional joint venture partners, the NNPC undertook to settle all outstanding cash call arrears, amounting to $5bn.

Rabiu said the settlement of the cash call arrears had restored confidence in the industry, adding, “In the last three years, we have been very active in the investment market, securing about $3.7bn in new investment.”

Royal Dutch Shell, in its Nigeria Briefing Notes, said unlocking Nigeria’s natural gas potential would require partnerships between the Nigerian government and oil and gas companies “that have the ability to innovate, capacity to deliver major projects, and willingness to take on long-term commitments.”

According to the oil major, there are several challenges that need to be overcome in order to successfully develop growth projects for the domestic gas market.

It noted that a new funding regime for joint venture oil and gas operations in Nigeria had been operationalised, which was expected to resolve the NNPC’s funding constraints in the Shell Petroleum Development Company JV.

“This will increase gas production by optimising existing operations as well as accelerating the completion of new gas development projects,” it added.

According to Shell, a second challenge is to clear the backlog of deliveries of both power and gas to customers that have not been paid for.

It said, “Without the payment of outstanding gas and power invoice arrears, and securitisation of current and future revenues, operators are reluctant to commit additional investments to grow domestic gas supply.

“Another challenge deals with the need to attract investment to further develop infrastructure along the gas value chain, for example, to create a more robust pipeline network to improve reliability and security of supply.”

The oil major also said ensuring a conducive business environment was essential to attracting investments and running reliable operations.

It said, “This includes a respect for the sanctity of existing contracts, predictable regulatory, commercial and legal framework across the country.

“Overcoming security challenges in the Niger Delta that has experienced an increased risk to personnel and property as well as the disruption to operations is also very important.”

The Federal Government has said the Nigerian Gas Flare Commercialisation Programme is expected to unlock and supply 600,000 metric tonnes of liquefied petroleum gas to about six million homes in Nigeria.

President Muhammadu Buhari inaugurated the NGFCP in October 2016 and the programme is aimed at reducing gas flaring by harnessing flare gas to stimulate economic growth, drive investments and provide jobs in the Niger Delta through the utilisation of widely available innovative technologies.

The NGFCP was designed as the strategy to implement the policy objectives of the government for the elimination of gas flares from Nigeria’s oil and gas fields in the near term of between two and three years, with potentially enormous multiplier and development outcomes for Nigeria.

In December 2017, the Federal Government announced that it had commenced the verification of gas flare sites across the country and that it had discovered that there were at least 178 sites where gas was flared, as opposed to 140 sites listed in the past.

The Programme Manager, NGFCP, FMPR, Justice Derefaka, said the programme would attract $3.5bn worth of investments into the country.

He said, “It has been proven that global energy demand will nearly double by 2050. Most of the increase will come from the world’s emerging economies as a result of population growth and improved standards of living.

“The NGFCP will play an important role in meeting this energy challenge by harnessing Nigeria’s flare gas for sustainable value and wealth creation.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Federal Government Appeals to Electricity Union Amid Tariff Hike Tensions

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The Federal Government has made a direct appeal to the National Union of Electricity Employees (NUEE) amidst rising tensions over the recent hike in electricity tariffs.

The plea comes as the union continues to voice its dissatisfaction with the government’s decision to remove the subsidy on the tariff payable by Band A customers, warning of potential service withdrawal if the decision is not reversed.

In an interview with our correspondent, Adebiyi Adeyeye, the National President of the NUEE, reiterated the union’s stance against the increase, citing the impracticality of expecting their members to collect higher tariffs from customers without a proportional improvement in service.

Adeyeye emphasized the union’s concerns over the discrepancy between the promised 20 hours of daily power supply and the actual delivery, which he deemed “not feasible” due to existing infrastructural limitations.

The Federal Government, represented by Minister of Power Adebayo Adelabu, called for understanding and patience from the union. Speaking through his media aide, Bolaji Tunji, Adelabu assured that efforts were being made to improve electricity supply across the nation. He emphasized the necessity of these changes for the country’s long-term economic growth and job creation.

“We just want to appeal to the labor union to understand the context of these changes. It’s about working together to address the underlying issues within the power sector. It is not anybody’s joy that there are blackouts all the time,” Adelabu stated.

He added that the steps being taken would ultimately benefit the economy and urged the union to bear with the government during this transitional phase.

Adeyeye maintained that the union’s primary objective is to safeguard the well-being of its members, who are facing increased threats due to the tariff hike.

He stressed the need for immediate action from the government to resolve the issues, stating that the union would withdraw its services if necessary.

As the standoff continues, the public watches with interest, hoping for a resolution that will avoid disruptions to the country’s power supply and maintain a harmonious relationship between the government and electricity workers.

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Minister of Power Pledges 6,000 Megawatts Electricity Generation in Six Months

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Adebayo Adelabu has made a bold pledge to ramp up electricity generation to 6,000 megawatts (MW) within the next six months.

This announcement comes amidst ongoing efforts to tackle the longstanding issue of inadequate power supply that has plagued the country for years.

During an appearance on Channel Television’s Politics Today program, Adelabu said the government is committed to resolving the issues hindering the power sector’s efficiency.

He expressed confidence in the administration’s ability to overcome the challenges and deliver tangible results to the Nigerian populace.

Currently, Nigeria generates and transmits over 4,000MW of electricity with distribution bottlenecks being identified as a major obstacle.

Adelabu assured that steps are being taken to address these distribution challenges and ensure that the generated power reaches consumers across the country effectively.

The minister highlighted that the government has been proactive in seeking the expertise of professionals and engaging stakeholders to identify the root causes of the power sector’s problems and devise appropriate solutions.

Adelabu acknowledged the existing gap between Nigeria’s installed capacity of 13,000MW and the actual generation output, attributing it to various factors that have impeded optimal performance.

Despite these challenges, he expressed optimism that the government’s initiatives would lead to a substantial increase in electricity generation, marking a significant milestone in Nigeria’s energy sector.

Addressing concerns about the recent decline in power generation due to low gas supply, Adelabu assured Nigerians that measures are being taken to rectify the situation.

He acknowledged the impact of power outages on citizens’ daily lives and reiterated the government’s commitment to providing stable electricity supply within the stipulated timeframe.

The Minister’s assurance of achieving 6,000MW of electricity generation in the next six months comes as a ray of hope for millions of Nigerians who have long endured the consequences of inadequate power supply.

With ongoing reforms and targeted interventions, there is optimism that Nigeria’s power sector will witness a transformative change, ushering in an era of improved access to electricity for all citizens.

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Nigeria’s Economic Woes to Drag Down Sub-Saharan Growth, World Bank Forecasts

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The World Bank’s latest report on the economic outlook for Western and Central Africa has highlighted Nigeria’s sluggish economic growth as a significant factor impeding the sub-region’s overall performance.

According to the report, while economic activities in the region are expected to increase, Nigeria’s lower-than-average growth trajectory will act as a hindrance to broader economic expansion.

The report indicates that economic activity in Western and Central Africa is set to rise from 3.2 percent in 2023 to 3.7 percent in 2024 and further accelerate to 4.2 percent in 2025–2026.

However, Nigeria’s growth, projected at 3.3 percent in 2024 and 3.6 percent in 2025–2026, falls below the sub-region’s average.

The World Bank underscores the importance of macroeconomic and fiscal reforms in Nigeria, which it anticipates will gradually yield results.

It expects the oil sector to stabilize with a recovery in production and slightly lower prices, contributing to a more stable macroeconomic environment.

Despite these measures, the report emphasizes the need for structural reforms to foster higher growth rates.

In contrast, economic activities in the West African Economic and Monetary Union are projected to increase significantly, with growth rates of 5.9 percent in 2024 and 6.2 percent in 2025.

Solid performances from countries like Benin, Côte d’Ivoire, Niger, and Senegal are cited as key drivers of growth in the region.

The report also highlights the importance of monetary policy adjustments and reforms in supporting economic growth.

For instance, a more accommodative monetary policy by the Central Bank of West African States is expected to bolster private consumption in Côte d’Ivoire.

Also, investments in sectors such as agriculture, manufacturing, and telecommunications are anticipated to increase due to improvements in the business environment.

However, Nigeria continues to grapple with multidimensional poverty as highlighted by the National Bureau of Statistics.

Over half of Nigeria’s population is considered multidimensionally poor, with rural areas disproportionately affected. The World Bank underscores the need for concerted efforts to address poverty and inequality in the country.

Sub-Saharan Africa as a whole faces challenges in deepening and lengthening economic growth. Despite recent progress, growth remains volatile, and poverty rates remain high.

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