Nigeria Heading For Geo-Political Resource Conflict If Gas Production Not Diversified, Expert Warns

The Northern region and the rest of the country could be on a gas-fuelled collision if non associated gas fields are not developed, an oil and gas expert, Charles Majomi, has said.

Majomi spoke in an interview with SaharaReporters on Tuesday.

He said the sole domestic gas investment of the Buhari administration (a 40-inch wide 614km long duct that connects the Assa gas plant in Imo State with the North through the Obigbo-Umuahia-Ajaokuta and Ajaokuta-Kaduna-Kano pipelines) would carry 3.5 billion cubic feet (BCF) of Nigeria’s daily production of 8bcf to one part of the country, shortening available supply to the more industrialised South.

Majomi observed that the only functional pipeline that serves the Nigerian market, the Escravos Lagos Pipeline System (ELPS1), carries 2bcf every day at full capacity from the South-South Warri to the South-West Lagos.

This amounts to 25 per cent of daily production. 

His concern is not related to the increased offtake of gas to the largely unindustrialized North but with the limited level of production of the raw material in the country.

“The federal government was going to build ELPS 2, which follows the same loop but they put that on hold. The East-West interconnect that we have been hearing for how many years now, hasn’t been completed,” he says.

Majomi said the government abandoned these and went on to construct the AKK pipeline, through a government-guaranteed contract financed scheme, without increasing the pot of associated and non-associated gas available in the market.

He said, “There was a complete suspension of gas-based projects in the Southern part of the country. There was a refocus in Bauchi and the Lake Chad basin, where they were desperately looking for gas and oil so that they could maintain their energy security in the North. 

“That hasn’t happened. That pipeline has to be built in the North. If not, the North will fall massively behind the development in the South.”

According to him, Nigeria’s gas production comes chiefly from associated gas, which is the one produced and largely flared during oil production. 

With Nigeria’s inability to develop greenfield projects and create financial conditions that dissociate gas production as well as processing from oil, the AKK pipeline will give one half of the country massive leverage over the other. 

This will be made more obvious by the anticipated decline in oil production, which will inadvertently reduce the country’s 8bcf a day volumes.

“64 per cent of our gas is associated gas which is produced along with oil. Now that COVID-19 has come and global demand has substantially decreased, it is unlikely that you can meet the demand for gas-to-power, gas-to-industry and gas to the commercial sector. We need to increase our non-associated gas production,” he noted.

Describing the project, which is in its procurement phase, the Infrastructure Concession Regulatory Commission (ICRC), he said Hydrocarbon liquids that form part of the gas collected from different gas gathering systems in the Southern part of the country, “will be further processed at Ajaokuta to produce liquefied petroleum gas (LPG), while the remaining will be transported through the pipeline to serve as feedstock for power and new petrochemical facilities planned for Abuja, Kaduna, Kano, and Katsina. 

There is another cost to the regional concentration of the AKK pipeline though. With most of Nigeria’s gas production coming from associated gas 63 per cent of which is flared, communities around flare stacks will continue to endure the degradation of their environment.

President Muhammadu Buhari ratified the United Nations Framework Convention on Climate Change (UFCCC) treaty in Paris in 2016.

At that conference, he had promised to end gas flaring in Nigeria by 2020.

In 2017 Nigeria developed a gas flare commercialisation programme. The purpose was to bring in local and foreign investors to offtake and commercialise the wasting resource by turning it into job-creating products. 

The country also increased the penalty for flaring gas from N10 to $2.00 per 1,000 cubic feet in an oil field producing 10,000 barrels a day or more $0.50 per thousand cubic feet for oil fields producing less than 10,000 BPD.

An advocate for the end of gas flaring, Father Edward Obi, said the pace of the gas flare commercialisation programme had been stalled since the change of management at the department of petroleum resources.

“There has been a takeover of the gas flare commercialisation programme and this takeover does not bode well for Nigeria,” the priest said. “Real strong contenders, do not see a future in the gas flare commercialisation programme.”

In his opinion, no one in government can plead the case of communities affected by flaring, for the smooth implementation of the scheme.

“As it is now, there may be no person of consequence who has the government’s ear looking into this matter. And the present gentleman there — the DPR DG, Sarki Auwalu, is not used to dialogue. 

Charles Majomi notes his fears about the programme too. He said the commercial returns on the project do not add up.

“I cannot imagine a scenario where there will be sufficient global liquidity to make investments in the Niger Delta for naira offtake gas projects that will have to be funded in dollars,” he said, predicting that the programme would be severely stalled.

Majomi said only a few of the bidders, out of the 200 who expressed interest in the 178 flare sites, would be in the running to invest in commercialising any of the wasting gas when the deadline for bid submission ends this week.

He told SaharaReporters that most of the viable feels had been given to the oil companies responsible for the flares who have gas utilisation strategies in place. 

The DPR boss, Sarki Auwalu, said in February that 45 flare sites were available for the 200 bidders to compete for.

Media reports emerged this week that since the increase of the gas flare penalty, oil companies and DPR, have been reporting fewer flares than is been recorded by an independent satellite tracking system housed in the National Oil Spill Detection Regulatory agency (NOSDRA). 

Majomi said the federal government should use the monies realised from the gas flare penalty which should be about $1bn annually, if all parties are honest, to gather the flared gas rather than wait for foreign investors.

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