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Infrastructure deficit, vandalism hampering FG’s hope of benefiting from Europe’s gas crisis

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THE Federal government’s hope of exploiting the gas crisis in Europe to boost its foreign exchange revenue is being hampered by pipeline infrastructure deficit and vandalism on gas transportation.

Nigeria has been hoping to benefit from the crisis of gas supply and price that countries in Europe have been experiencing as Russia makes demands on its supplies to them.

Russia, which is presently engaged in a war with Ukraine, has compelled buyers in Europe to pay in its own currency, the rouble, rather than in euro or the American dollar.

Most of the European countries are backing the United States of America on sanctions against Russia.

Logjam over Russia’s demand has resulted in huge shortages of gas in many European countries, with price of the commodity shooting up sharply.

On September 5, Russia threatened it would shut down its Nord Stream pipeline for as long as Western sanctions are in place, sending benchmark gas prices surging by another 30 per cent, presently the equivalent of about $400 for a barrel of oil.

Morgan Stanley, an American multinational investment management and financial services company, projected that at today’s futures prices, annual spending on electricity and gas by consumers and firms across the European Union could rise to a staggering €1.4 trillion, up from €200 billion in recent years.

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Already, several parliaments in Europe are discussing cutting-cost measures and alternative gas supply sources.

It is Nigeria’s hope to slide into those alternative sources.

The Nigerian Minister of State for Petroleum Resources, Timipre Sylva, expressed his optimism at the September 2022 Gas-Tech conference in Milan, Italy, that Nigeria could tap into this opportunity and supply gas to Europe.

The minister stated on September 7 at the conference that Nigeria would build a pipeline for Nigerian gas through Algeria to Europe, a project that would likely cost more than $10 billion.

But oil and gas analysts are expressing reservations on Nigeria’s readiness to quickly tap into the European gas market due to the infrastructural deficit it presently suffers from.

“Money is not sentimental; it goes where it can grow. Gas is a long-term investment. Yes, there is a market for gas, and Nigeria is blessed with enormous gas assets. But the infrastructure is not there yet,” an oil and gas governance expert, Ademola Henry Adigun, told The ICIR.

Adigun pointed out that Nigeria was so blessed with gas that local suppliers were not even meeting up with demands. The Nigerian Liquefied Natural Gas (NLNG) company, for instance, is producing only about 60 per cent of its capacity. The rest is being hampered by insecurity in the Niger-Delta and vandalism of pipelines.

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He said, “For anyone entering Nigeria’s gas market, the first issue is the gas-pricing policy. Gas pricing is still set by the government. Going forward, let the market determine the price. Above all, we need a lot of money for infrastructure.

“The key thing now that there is an opportunity is to review the gas policy and the pricing so that the market can meet the price.”

He noted that rather than the government subsidising petroleum price, it should subsidise gas production by supporting the Nigeria Bulk Electricity Trading (NBET) to easily pay the gas companies.

Nigeria’s proven gas reserve is 209.5 trillion cubic feet and over 600 trillion cubic feet unproven. As at today, Nigeria’s gas is estimated to be worth more than N80 trillion.

However, the infrastructure to maximise the gains from gas utilisation is not there.

A number of analysts who spoke on the matter believed that there is no miracle that can be performed in the short-term.

“Where is the infrastructure?” an energy expert, Dan Kunle, wondered when asked what Nigeria can do in the short-term to ramp up gas supply to Europe.

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Kunle said, “If I were government, I would revisit the drawing board. I would ask for the Brass LNG paper, and the Olokola plan. I would then invite big figures like Aliko Dangote, like Mike Adenuga to the table and say, ‘look, come and join the IOCs and get this project done’, because government doesn’t have the money to continue.”

Stressing that the energy business was capital intensive, he stated that government must find a way to incorporate its own citizens into the business, insisting that the orientation that only America can do it was wrong.

A lawyer and former Nigerian Electricity Regulatory Commission (NERC) chairman, Sam Amadi, stated that Nigeria must worry about capacity to improve production.

Amadi contended that at present, the oil and gas sector in Nigeria has structural constraints, technical issues and even commercial challenges, issues he asserted must be resolved before any progress could be made.

 

Author profile

Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.

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