Reappraising Nigeria’s Gas Governance: Unlocking the Potential of the “Blue Gold”
Nigeria is endowed with an estimated 203 trillion cubic feet of natural gas reserves, the largest in Africa and the ninth-largest in the world. This remarkable resource, often referred to as “blue gold,” has the potential to be a transformative catalyst for the country’s economic and social development. Yet, Nigeria’s natural gas sector remains largely underutilized, with significant gas flaring, limited domestic utilization, and missed opportunities in the global Liquefied Natural Gas (LNG) market.
The current model of gas governance, which treats natural gas primarily as a byproduct of oil production and focuses on export-oriented strategies, has failed to leverage this resource for comprehensive national development. This article proposes a paradigm shift towards a “Development Gas” approach that views natural gas as a strategic asset for driving economic diversification, industrialization, energy security, and environmental sustainability.
The Development Gas approach aligns with Nigeria’s constitutional mandate to use natural resources for the benefit of all citizens and emphasizes domestic utilization of gas for power generation, industrialization, and value-addition. It also prioritizes local content development, revenue retention and reinvestment, and long-term sustainability through the transition to cleaner energy sources.
This article outlines the key principles of the Development Gas approach and presents a comprehensive set of recommendations to unlock the potential of Nigeria’s natural gas resources. By adopting these recommendations, Nigeria can transform its gas sector into a catalyst for unprecedented national growth and development, positioning the country as a regional and global leader in gas-based industries and technologies.
The Current State of Nigeria’s Gas Governance
Nigeria’s status as Africa’s largest gas reserve holder has not translated into commensurate economic and social benefits for its citizens. The country’s current approach to gas governance has resulted in several critical challenges. Nigeria flares an estimated 7 billion cubic meters of gas annually, equivalent to about $2.5 billion in lost revenue. This flaring contributes significantly to greenhouse gas emissions and local air pollution, harming the environment and human health.
Only about 15% of Nigeria’s gas is used for power generation, despite chronic electricity shortages. The industrial sector, which could greatly benefit from a reliable gas supply, remains underdeveloped, with a limited number of gas-based industries, such as fertilizer plants and methanol facilities. Compared to countries like Trinidad and Tobago or Qatar, Nigeria’s gas-based industrial sector is in its infancy, with only a handful of such industries established.
The domestic gas pipeline network is limited, hindering the distribution of gas to key industrial zones and population centres. The lack of processing facilities means much associated gas is wasted rather than captured and utilized. While Nigeria is a significant LNG exporter, the country has lost market share to more aggressive competitors like Qatar and Australia due to delays in expanding LNG capacity, costing the country billions in potential revenue.
These challenges have resulted in Nigeria’s natural gas resources failing to drive broad-based economic development, despite their contribution to the country’s export earnings. The current governance model focused primarily on exports and treating gas as a byproduct of oil production, has not effectively leveraged this resource for the welfare and security of all Nigerian citizens, as mandated by the Constitution.
The Development Gas Approach
To unlock the transformative potential of Nigeria’s natural gas resources, a fundamental shift in the country’s gas governance framework is necessary. The “Development Gas” approach views natural gas not just as an export commodity, but as a strategic asset for driving comprehensive national development. This approach is anchored on six key principles:
Strategic Resource Management: Treating gas reserves as national assets for long-term development, implementing a national gas reserve management strategy to ensure sustainable exploitation, and prioritizing gas projects based on their development impact, not just financial returns.
Integrated Economic Planning: Aligning gas sector policies with broader national development goals, coordinating gas sector planning with power sector, industrial, and environmental policies, and developing a comprehensive National Gas Master Plan that integrates with the National Development Plan.
Value Addition: Developing gas-based industries within Nigeria (e.g., petrochemicals, fertilizers, methanol), encouraging the establishment of gas-intensive industries like steel manufacturing and glass production, and promoting the use of gas as a feedstock for various industrial processes.
Domestic Gas Utilization: Prioritizing gas for power generation and industrial use within Nigeria, implementing a “gas-to-power” initiative to address the country’s electricity shortages, and developing a robust domestic gas market with appropriate pricing mechanisms.
Infrastructure Development: Investing in gas processing, transportation, and distribution networks, expanding the national gas pipeline network to reach key industrial zones and population centers, and developing gas storage facilities to ensure supply stability.
Environmental Stewardship: Eliminating gas flaring through strict regulations and incentives for gas capture, promoting the use of natural gas as a cleaner alternative to diesel and fuel oil, and investing in technologies for carbon capture and storage to mitigate greenhouse gas emissions.
The Development Gas approach aligns with Nigeria’s constitutional mandate to use natural resources for the welfare and security of all citizens (Section 44(3)). It emphasizes the strategic importance of gas resources and the need to leverage them for comprehensive national development, rather than treating them solely as an export commodity.
Success Stories in Gas-based Development
Several countries have successfully leveraged their natural gas resources for broad-based economic and social development, providing valuable lessons for Nigeria. Qatar became the world’s largest LNG exporter, using the proceeds to diversify its economy and develop a world-class gas processing and petrochemical industry. Qatar also invested heavily in education, healthcare, and infrastructure, using its gas wealth to transform the country.
Trinidad and Tobago developed a robust petrochemical industry based on its natural gas, becoming the largest exporter of methanol and ammonia in the world. The country also established a Heritage and Stabilization Fund to save a portion of its gas revenues for future generations. Indonesia successfully used its gas resources for domestic industrialization and power generation, implementing a domestic market obligation to ensure sufficient gas for local needs. The country also developed a thriving fertilizer industry using natural gas as feedstock.
Norway developed advanced gas technologies and a sovereign wealth fund from gas revenues. The state-owned company, Equinor, became a global leader in offshore gas production, and the country invested heavily in renewable energy technologies, positioning itself for a post-fossil fuel future.
These success stories demonstrate the transformative potential of natural gas when it is strategically managed and leveraged for comprehensive national development. Nigeria can draw valuable insights from these experiences to unlock the full potential of its “blue gold.”
Recommendations
To implement the Development Gas approach in Nigeria, the following policy recommendations are proposed:
Establish a comprehensive National Gas Master Plan with specific targets for domestic utilization, export, and flare reduction. Set clear goals for increasing the share of gas in Nigeria’s energy mix and define targets for gas-based industrialization and job creation.
Implement a “gas-to-power” initiative to address Nigeria’s electricity shortages. Prioritize gas supply to power plants, incentivize investment in gas-fired power plants, and develop small-scale gas power solutions for off-grid and rural areas.
Invest in gas processing plants and a national gas pipeline network. Expand the existing pipeline network to cover key industrial zones and cities, and develop gas processing facilities to capture associated gas from oil fields.
Provide incentives for gas-based industries (e.g., petrochemicals, fertilizers, methanol). Offer tax breaks and other fiscal incentives for gas-based industrial projects, and create special economic zones focused on gas-based industries.
Strengthen local content policies in the gas sector. Set targets for Nigerian participation in gas projects and invest in training and capacity building for local professionals and companies.
Create a conducive fiscal regime to attract investment in gas infrastructure. Review and update the gas pricing framework to ensure profitability while remaining competitive, and offer tax holidays or reduced rates for gas infrastructure projects.
Implement stricter penalties for gas flaring and incentives for gas capture and utilization. Increase fines for gas flaring and enforce them rigorously, and offer tax credits or other incentives for companies that invest in gas capture technologies.
Develop human capacity in gas technologies and management. Establish specialized programs in universities focused on gas engineering and management, and partner with international institutions for knowledge transfer and training.
Foster regional gas markets through West African Gas Pipeline expansion. Expand the West African Gas Pipeline to reach more countries in the region and develop a regional gas trading hub to facilitate cross-border gas commerce.
These policy recommendations, if implemented effectively, can transform Nigeria’s natural gas sector into a powerful engine for economic diversification, industrial development, energy security, and environmental sustainability. By adopting the Development Gas approach, Nigeria can unlock the immense potential of its “blue gold” and create a more prosperous and equitable future for all its citizens.
Conclusion
Nigeria’s natural gas resources hold the promise of transforming the country’s economic and social landscape. However, the current model of gas governance has failed to capitalize on this potential, resulting in massive gas flaring, underutilization of gas for domestic needs, and missed opportunities in the global LNG market.
The “Development Gas” approach proposed offers a revolutionary shift in the way Nigeria views and manages its natural gas resources. By treating gas as a strategic asset for comprehensive national development, rather than just an export commodity, Nigeria can unlock a new era of prosperity, energy security, and environmental stewardship.
The recommendations provide a roadmap for implementing the Development Gas approach, covering strategic resource management, integrated economic planning, value addition, domestic gas utilization, infrastructure development, and environmental stewardship. These recommendations, if adopted and executed with unwavering commitment, can transform Nigeria’s gas sector into a catalyst for unprecedented national growth and development.
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