EU Plans Increased Gas Supply From Nigeria

The International Energy Agency (IEA), the Paris-based think tank that draws up energy policies for Western countries, has published a 10-point plan to help Europe cut its dependence on Russian gas, which could open new markets for other gas producers. The European Union (EU) plans increased gas supply from Nigeria and other African countries to help replace imports of Russian natural gas and reduce dependence on Moscow by almost two-thirds this year. The communication on external energy engagement is set to be adopted by the European Commission later this month as part of a package to implement the bloc’s plan to cut energy reliance on Moscow.

Countries in Western Africa, particularly Nigeria, primarily offer the untapped potential for liquified natural gas. The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) says Nigeria’s proven natural gas reserve has risen to 209.5 Trillion Cubic Feet (TCF) as of Jan. 1, 2022. This is the ninth largest proven reserve globally. This resource size puts Nigeria in an enviable position within the comity of global hydrocarbon producers. Even in this era of the global energy transition, the oil and gas sector remains pivotal to the Nigerian economy.

The 27-nation bloc wants to shift away from its biggest supplier after President Vladimir Putin invaded Ukraine. The draft energy strategy also seeks to prepare the region to import 10 million tons of renewable hydrogen by 2030. This strategy aims to help replace gas from Russia, in line with the ambitious EU Green Deal to walk away from fossil fuels and reach climate neutrality by mid-century. The continent’s internal pressures have also opened conversations about the possibility of more cost-effective power generation sources like nuclear. In 2021, the EU imported 45 per cent of its gas from Russia, representing almost 40 per cent of its total gas consumption. However, the EU’s backing of Ukraine in the war against Russia is opening fissures other producers can exploit. Hence, the EU plans to increase gas supply from Nigeria, which is currently the fourth gas supplier to Europe.

As the future of Nigeria’s energy, industrial and economic development, gas has become more pressing, given the country’s growing population and urbanization. While this represents a massive opportunity for Nigeria’s foreign exchange and improved GDP, the sector is mainly underdeveloped as production-to-reserves is approximately 1%. To exploit this opportunity fully, the government of Nigeria must galvanize its efforts in the following ways:

• Gas infrastructure should be rehabilitated through concession (Public-Private Partnerships). Investments in vital infrastructure are, now more than ever, crucial to boost the production and supply of gas. However, most gas exploration and production activities are geared towards associated gas, even though Nigeria holds more reserves in non-associated gas. This is due to the shortage of investment needed to pursue non-associated gas sites.
• Security challenges should be resolved. The concentration of activities in the Niger Delta makes gas exploration and production highly susceptible to regional security challenges.
• The government should review and prioritize commitment to the implementation of the long-term plans of the National Gas Policy.

The unfavourable business climate in Nigeria is responsible for International Oil Companies (IOCs) leaving Nigeria. And while local players are taking advantage of this situation, there exists the problem of how they would navigate the Nigerian business terrain. And until the government passes applicable legislation that will tackle vandalism and insecurity, it may not adequately exploit the opportunity to strengthen its economy as the EU plans increased gas supply from Nigeria.