As Nigeria continues to navigate the dynamic nature of its economy, the oil and gas sector remains a crucial driver of growth. The Nigerian National Petroleum Company Limited is leading the charge with substantial investments in gas, significantly impacting the sector’s contribution to the Gross Domestic Product. Recent statistics underscore the importance of these initiatives in the context of Nigeria’s economic landscape.
In the second quarter of 2024, Nigeria’s oil sector recorded a GDP growth rate of 3.52 per cent, reflecting a recovery from previous downturns. The growth is not only attributed to crude oil production but increasingly to the expanding natural gas sector. According to the National Bureau of Statistics, the oil and gas sector’s contribution to GDP has seen a remarkable improvement, with gas output playing a vital role.
Currently, Nigeria is recording an average daily oil production of 1.7 million barrels per day (mbpd), higher than the daily average production of 1.4 mbpd recorded in the same quarter of 2023. It is also 0.13mbpd higher than the first quarter of 2024 production volume of 1.57 mbpd.
Data from the NBS showed that the oil sector’s real growth was 10.15 percent (year-on-year) in the second quarter of 2024, an increase of 23.58 percentage points relative to the rate recorded in the corresponding quarter of 2023 (-13.43 percent).
Growth in the sector also increased by 4.45 points when compared to Q1 2024 which was 5.70 per cent. The oil sector recorded a growth rate of -10.51 per cent in Q2 2024 on a quarter-on-quarter basis.
Recognizing the strategic importance of gas, NNPC Ltd is shifting its focus from solely oil production to include significant gas investments. With Nigeria possessing over 200 trillion cubic feet of proven natural gas reserves, the growth potential is enormous. From infrastructure development to domestic gas utilization and gas-to-power projects, the impact of NNPC Ltd’s gas investments on Nigeria’s economy has been remarkably profound.
Just last month, at the 2024 Gas Technology Conference and Exhibition (Gastech), in Houston, United States, the NNPC Ltd under the visionary leadership of the Group Chief Executive Officer, Mallam Mele Kyari commenced discussions with investors toward bringing back two Liquefied Natural Gas (LNG) projects, Brass and Olokola LNG projects.
The revival of the Brass and Olokola Liquified Natural Gas Projects is to maximize the nation’s abundant gas resources for economic development and prosperity.
Brass LNG and Olokola LNG are two LNG projects with the potential of manifold economic benefits for the country which include job creation, power generation, revenue generation and economic diversification. The multi-billion-dollar projects were, however, stalled due to unfavorable market dynamics and slow decision-making by the political class in the past.
In past years, gas prices were down and the economics of the Brass LNG and Olokola LNG projects meant a high capital expenditure, which was a disincentive for investors and partners. But with the passage of the Petroleum Industry Act (2021), which has positioned the NNPC Ltd into a commercially driven entity, the company recognizes that there are abundant gas resources in many parts of the world and therefore, the earlier Nigeria makes smart decisions to bring partners to the table, the better.
The NNPC Ltd is also getting the much-needed support from President Bola Ahmed Tinubu in driving new projects in the oil and gas industry through the Presidential Executive Orders on Oil & Gas Reforms.
The Presidential Executive Orders are targeted at unlocking up to $2.5bn in new oil and gas investments in the country.
These Executive Orders, signed on February 28 this year, put in place, fiscal incentives for certain types of non-associated gas projects, reduce contracting costs and timelines in the sector, and obliterate any leakages impacting the compliance with local content requirements within the Nigerian oil and gas sector.
Similarly, the Petroleum Industry Act, 2021 which provided fiscal incentives for investors is creating the enabling environment that has rekindled hope in the energy sector.
The fiscal incentives provided by the President through the Executive Orders have enabled the take-off of the $550m upstream gas project between the NNPC Ltd and TotalEnergies on the development of the Ubeta field. The Ubeta field, which was discovered in 1964, is located northwest of Port Harcourt, Rivers State.
The upstream gas project would deliver 350 million standard cubic feet of gas per day when operational. The major energy reforms introduced by President Bola Tinubu since June 2023 have also focused on improving energy security, attracting investments, and deepening collaboration with key partners, including the United States government.
The key reforms have improved the viability of the gas-to-power value chain of the country. The reforms included initiatives to improve cash flows in electricity distribution through smart metering and payment of outstanding debts owed investors and to reduce carbon emissions from gas production.
The NNPC Ltd has also embraced new technologies that would help the Company decarbonize its operations and promote its abundant LNG resources to the global market.
In the area of infrastructure development, NNPC Ltd is spearheading the construction of key gas pipelines and processing facilities. The completion of the Ajaokuta–Kaduna–Kano (AKK) gas pipeline is set to enhance the transportation of gas across Nigeria, facilitating greater domestic supply and export capabilities.
The AKK gas pipeline which is expected to be completed by the first quarter of next year is a flagship project that will deepen the integration of the northern region of the country with the Niger Delta and other parts of the country.
The pipeline can transport two billion standard cubic feet of natural gas per day to three proposed independent power plants in Abuja, Kaduna, Kano, and other gas-based industries as well as other identified and proposed commercial off-takers along the entire pipeline route.
To support local industries, NNPC Ltd has committed to increasing the availability of gas for power generation and manufacturing. This initiative is crucial, given that the power sector remains a bottleneck for industrial growth in Nigeria.
Significant investments in gas-to-power initiatives are addressing Nigeria’s persistent electricity challenges. With an increasing focus on sustainable energy, these projects aim to boost electricity generation capacity, supporting overall economic growth.
The NNPC Ltd’s partnerships with global energy firms have also been instrumental in attracting foreign direct investment. For instance, collaborations aimed at liquefied natural gas (LNG) projects are expected to enhance export capacity and revenue generation.
In the area of job creation, the expansion of the gas sector is projected to generate over 500,000 jobs in the coming years, both in construction and operational capacities.
Also, the growing gas sector is expected to contribute to increased export revenues, stabilizing Nigeria’s economy. With global gas prices on the rise, Nigeria stands to benefit significantly from enhanced exports.
By investing in gas, NNPC Ltd under the visionary leadership of Kyari is helping to diversify Nigeria’s energy portfolio, reducing dependency on oil and mitigating risks associated with oil price volatility.
With NNPC Ltd’s strategic investments in gas, the future of Nigeria’s oil and gas sector looks promising. The focus on natural gas aligns with global energy trends and positions Nigeria as a key player in the African gas market.
In conclusion, NNPC Ltd is playing a pivotal role in driving Nigeria’s economic growth through strategic gas investments. By leveraging the country’s abundant gas resources, the company is enhancing the oil sector’s contribution to GDP and laying the groundwork for a resilient and diversified economy in the years to come.
Onuba, a Chartered Accountant wrote from Abuja