Nigeria has a copious supply of natural gas; it is one of the top ten producers in the world. In Africa, Nigeria has the largest natural gas reserve on the continent, boasting 5.91 trillion cubic meters. It is a cleaner alternative to coal and oil, with a lower carbon footprint. Electricity generation is largely driven by natural gas, making it a crucial component of the national power grid. It is deemed a more sustainable energy source which can help to mitigate the effects of climate change.
During his visit to Nigeria last week, German Chancellor Olaf Scholz said Germany wants to import natural gas from Nigeria to secure and diversify its energy sources. “This will also impact the global gas price, if more states offered gas on the global market, prices would decrease,” Scholz said after a meeting with President Bola Tinubu in Abuja on Sunday, October 29th.
Russia’s invasion of Ukraine sent shockwaves through the global energy market, leading to major disruptions in gas supply across Europe. The disruptions have resulted from Russia’s control over key pipelines and frameworks that transport natural gas from Russia to Europe. The crisis has exposed the vulnerabilities of Europe’s gas supply infrastructure and prompted countries like Germany to consider other viable options.
It’s no surprise that Nigeria is one of the countries that have emerged on their radar because of its export of liquefied natural gas (LNG). The Nigeria Liquefied Natural Gas (NLNG) Limited exports approximately 60% of its natural gas to Europe.
Germany currently imports crude oil from Nigeria, not natural gas. Its increasing demand for natural gas is a multifaceted response to the nation’s commitment to a greener, more sustainable future. As Germany seeks to achieve its energy transition goals, reduce emissions, and support its industries, natural gas has undisputedly become a pivotal energy source.
However, there are doubts about Nigeria’s capacity to fulfil Germany’s natural gas requirements. Findings from the African Energy Chamber’s August 2023 State of African Energy report reveal that the short-term output of gas producers in Africa such as Nigeria, Algeria, and Egypt is expected to level off. Meanwhile, Nigeria’s output is predicted to see minor fluctuations between 4.5 Bcf/d and 5.5 Bcf/d.
In March 2021, President Muhammadu Buhari announced that from January 1, 2021, to December 31, 2030, Nigeria will focus on using more gas to improve energy, create jobs, and reduce poverty. This period is called Nigeria’s Decade of Gas. Early this year, the status of Nigeria’s ‘Decade of Gas’ policy showed that two years into the timeline, it had achieved only 5% of the set targets. It failed to hit the 85% benchmark set by the federal government.
The Energy Outlook Advisors also noted Nigeria’s natural gas production dropped greatly. It was at its highest in 2020 at 49.4 billion cubic meters but fell to 40.3 billion cubic meters by 2022.
Poor infrastructure for natural gas transportation and distribution still remains a major hurdle in Nigeria. Pipelines, processing facilities, and storage capacity are often deficient, leading to gas supply interruptions and inefficiencies. It has also limited Nigeria’s ability to export natural gas, consequently, plummeting the potential revenue that can be generated from its vast reserves.
The disparity between the actual level of natural gas production and potential capacity is starkly evident when we consider Nigeria’s limited capacity to supply natural gas to countries like Germany, which has a high demand for clean energy sources.
This situation underscores the urgent need for proactive and strategic efforts to bridge the gap between Nigeria’s current capabilities and the vast potential locked within its gas resources. The need for a forward-looking, data-driven policy framework has never been more pressing. It must also invest in upgrading its infrastructure and expanding its supply chains.