Gas has remained a sore point of Nigeria’s quest to provide power to its citizens. But in the outgone year, moves were made that suggests that government may have perfected a way to get around the problem. MUSA ADAMU writes.
Federal government may have laid out a plethora of plans to improve and expand the supply of gas used by its power sector, as part of a comprehensive overhaul of electricity generation this year.
As Africa’s largest economy, after rebasing last year, Nigeria has long faced several challenges in domestic power production, with current levels of gas supplies and generational capacity insufficient to meet the nation’s needs.
Day-to-day issues, such as disruptions to supplies, are adding to the problems, with the result that the country rarely reaches its 4GW optimum power capacity, a figure that even if achieved would equate to only 10% of the output of South Africa, which has a population half the size of Nigeria’s which is estimated at 170million.
As a result, some moves have shown that federal government has resolved that expanding generation capacity and strengthening the distribution grid are essential ingredients for Nigeria’s economic development.
This indication was given by no less a government personality than the Minister of Finance and the Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, when she reportedly said additional infrastructure, which requires higher electricity output, was pivotal to underpin growth.
“Nigeria’s economy has been growing at an average rate of 7% annually over the past decade with limited power supply. If we can double existing capacity in terms of hours of availability or megawatts, we expect to sustain economic growth of 8% or more,” she said.
Nigeria had concluded a major privatisation process a year ago, handing over the generation and distribution assets, a move seen by every Nigeria as first step towards boosting capacity and reducing network leakage, but that is not to be one year after.
This loss of momentum is variously blamed on lack of gas supply to the nation’s largely gas thermal based generation arm. Gas, which makes up just over 75% of the power capacity, is high grade (low sulphur content), sweet and rich in liquids, making it ideal for supplying power plants.
Nigeria has the ninth largest proven natural gas reserves in the world, with around180trn cubic feet (tcf), according to the BP “Statistical Review of World Energy 2014.”
Despite its reserves, Nigeria produced just 1.2 tcf of dry natural gas in 2012, ranking it as the world’s 25th dry natural gas producer, with production restricted by the lack of infrastructure to monetise natural gas that is currently being flared.
Giving hint on how government intends to stem the tide, the Acting Chair of the Presidential Taskforce on Power, Clement Adeyinka Oke, said the government’s plans for increasing gas output include handing the private sector a bigger role in operations.
He said a rising demand for power will fuel gas supply and infrastructure requirements.
“It is recognised that huge amount of funds which the government alone cannot afford is needed to grow the sector and hence privatisation and private public participation (PPP) is being encouraged,” he said.
He said key steps had already been taken to attract industry players, including the decision to increase the domestic price of gas from around $1 per 1000scf to $2.50.
Oke pointed out that government hopes the move, which closes the gap on returns for the international and domestic markets by bringing local prices closer to the standard export rate, would encourage producers to increase gas output and invest in new exploration and extraction projects.
Government aims to double electricity generational capacity within a decade, while also improving distribution networks.
Minister of Power, Prof. Chinedu Nebo, recently said N1.6 trillion ($10bn) worth of investment would be required to add 5000mw-worth of new production capacity.
He said the expansion would more than double current levels and upgrade both existing plants and transmission grids over the next ten years.
On their part, private producers are looking to ramp up their operations in gas production.
For instance, Heirs Holding Group, said it plans to generate at least a quarter of Nigeria’s power consumption needs following its acquisition of the Transcorp Ughelli power station in Warri, a gas-fired, thermal power generation plant, last year.
Chairman of the company, Tony Elumelu, said he expects the plant’s capacity to increase to 1000mw by the second quarter of 2015, noting that a greenfield project at the power plant would expand capacity by an additional 1000mw in the next three to five years.
In a separate move, the government is preparing to sell off the third and final segment of the power sector, the transmission services, having privatised the generation and distribution components in 2013.
The Minister of power gave this hint in September last year when he said government would be looking for starting offers of around $20 billion on its Transmission Company of Nigeria (TCN).
