Resolving Gas-to-Power Paradox

Energy

Emmanuel Addeh writes that despite owning the biggest gas reserve on the continent and being one of the top 10 in the world, the Nigerian power sector, appears to be constantly under the perennial constraint of gas for electricity generation. He also examines what is being done to resolve the age-long challenge

The Gas Problem again!

Just three days ago, precisely last Thursday, the federal government apologised for the worsening power supply in the country, blaming the breakdown of most of the generating plants and lack of gas supply for the current electricity challenges.

Although Nigerians continue to groan due to incessant blackouts , the situation has recently worsened as generation in the country fell below 3,922.2MW, with several of the power plants on the national grid not generating any megawatts of electricity.

Several distribution companies (Discos) have lamented the shortage in the allocation received from the national grid, and have therefore resorted to rationing of electricity to customers.

While the nation’s installed generation capacity is put at 12,954.40MW, available capacity, according to the system operator is 7,652.60MW, while transmission wheeling capacity remains at 7,300MW and the peak generation ever attained by the country remains at 5,801.60MW

An obviously distraught Minister of Power, Mr. Saleh Mamman, stated that nine of the power generating plants have broken down, while the ninth one has been shut down for maintenance.

In a statement released in Abuja and signed by the minister’s Spokesman, Aaron Artimas, Mamman noted that aside those that have broken down, seven of the integrated power plants were also having challenges with gas supply.

Mamman expressed the regret of the federal government on the power outages, stressing that the ministry of power was not unaware of the current power outages and shortages bedevilling many parts of the country.

“The problem is caused by the breakdown of some National Integrated Power Plants (NIPP) supplying electricity to the national grid. The plants are namely, Sapele, Afam, Olorunsogo, Omotosho, Ibom, Egbin, Alaoji and Ihovbor. The Jebba power plant was shut down for annual maintenance.

“Seven other integrated power plants, namely Geregu, Sapele, Omotosho, Gbarain, Omuku, Paras and Alaoji are experiencing gas constraints while the Shiroro plant has water management problems,” the minister stated.

Mamman added that “this unfortunate development” has drastically affected power generation, thus effectively minimising supply to the national power grid.

The statement noted that in view of the prevailing situation, the minister of power was working closely with all stakeholders to ensure that the problem is ameliorated at the soonest possible time.

“The minister regrets this unfortunate situation and offers his sincere apology to all affected Nigerians on the inconveniences the power shortages are causing.

“He assures that the ministry through the appropriate agencies is working assiduously to rectify the technical problems affecting the plants as well as resolving the gas issues to the others,” the statement explained.

Mamman further assured that the national grid will be restored to its previous “historic” distribution peak of about 5,600MW of electricity achieved early this year, so as to relieve Nigerians from the current harsh weather conditions and restore full economic activities.

Huge Gas Reserve, None for Power

Nigeria is the world’s 13th largest oil producer and with 203 trillion cubic feet of available gas , owns about the seventh largest gas reserves in the world.

It is the largest oil producer in Africa, holding the largest natural gas reserves on the continent and was the world’s fifth largest exporter of liquefied natural gas (LNG) in 2018.

Nigeria deploys gas to power about 83 per cent of energy used to generate power in the country, the commodity being the preferred source of energy because of its efficiency in energy generation, relatively low per capita cost and its capacity to serve as means of eliminating gas flares.

While several gas development projects have been embarked upon within the Nigerian oil and gas industry to deliver gas to the domestic sector, supply to Independent Power Plants (IPPs) has been problematic for years.

With 25 gas-fired plants with a combined installed capacity of about 11,500 MW, the total gas requirement to run all the plants at full capacity is approximately 3.0Bscfd.

Although gas production has increased over the years, with a current total volume of about 8 Bscfd being produced in Nigeria out of which 45 per cent is exported (NLNG), 8.5 per cent flared, 15 per cent consumed domestically, that is, for power and industries, and the balance mostly re-injected, one thing that is clear is that, it is barely enough for purpose.

Without doubt, the gas to power value chain has been riddled with issues that have affected the full generation of power based on installed capacity of existing gas fired power plants as depicted by the minister’s statement on Thursday.

While lack of sufficient power transmission capacity from the power generating plants, off spec gas volumes supplied to power generating plants, legacy debt repayment and payment for gas supply, weak payment structure remain recurring problems in the sector, by far the most pertinent has been inadequate gas supply.

A Drop in the Ocean

Obviously, while steps are being taken to address these issues, including development of power plants, gas transportation and power transmission infrastructure, it appears to be too little.

Paradoxically, while most of the projected capacity and efficiency gains of the power sector reforms initiated from 2001 – 2013 has been hinged on the secured, affordable and reliable gas supply, the outlook and trends depict fundamental regulatory and institutional misalignments between the domestic gas supply industry and the electric power market.

The major challenges relate to the lack of or the inadequacy or timeliness of infrastructural investments, as well as the security and affordability of gas supply to power generators.

It is estimated that within the first seven days of March this year alone, Nigeria’s power sector lost about N6.8 billion to challenges related to insufficient gas supply to electricity generation companies (Gencos).

In alignment with previous reports, the last quarterly report of the Nigerian Electricity Regulatory Commission (NERC) showed that gas supply shortage remains a challenge in the sector.

It stated: “Gas continues to dominate the electricity generation mix accounting for 81.53 per cent of the electricity generated during the second quarter of 2020. This implies that approximately 8.15kWh of every 10kWh of electric energy generated in Nigeria in the second quarter of 2020 came from gas.”

Shamefully, gas supply remains a major threat to the Nigerian Electricity Supply Industry (NESI).

Aside poor supply, low remittances by the Discos mean that generation companies (Gencos), even if the supply is available are unable to pay gas suppliers.

NNPC’s Ramps up Production

Last week, the Nigerian National Petroleum Corporation (NNPC), in its monthly report, said that along with its Joint Venture (JV) its partners produced a total of 223.55 Billion Cubic Feet (BCF) of natural gas in the month of January, 2021.

It disclosed that this translated to an average daily production of 7,220.22 Million Standard Cubic Feet per Day (mmscfd), representing a 4.79 per cent increase over output in December 2020.

The corporation stated that the daily average natural gas supply to gas power plants increased by 2.38 per cent to 836mmscfd, equivalent to power generation of 3,415MW.

For the period of January 2020 to January 2021, it stated that a total of 2,973.01BCF of gas was produced, representing an average daily production of 7,585.78 mmscfd during the period.

“Period-to-date production from Joint Ventures (JVs), Production Sharing Contracts (PSCs) and Nigerian Petroleum Development Company (NPDC) contributed about 65.20 per cent, 19.97 per cent and 14.83 per cent respectively to the total national gas production,” it disclosed.

Out of the total gas output in January 2021, the national oil company stressed that a total of 149.24BCF of gas was commercialised, consisting of 44.29BCF and 104.95BCF for the domestic and export markets respectively.

This it said , translated to a total supply of 1,428.65mmscfd of gas to the domestic market and 3,385.57mmscfd to the export market in the month under review.

“This indicates that 67.15 per cent of the daily gas output was commercialised while the balance of 32.85 per cent was re-injected, used as upstream fuel, or flared,” it noted.

Plans to Add 5,000MW to National Grid

Indeed, with the ongoing gas projects throughout the country, NNPC says it is set to deliver an additional 5,000 megawatts of electricity to the national power grid soon.

Group Managing Director of the corporation, Mallam Mele Kyari, who spoke recentl on the efforts , explained that the NNPC was committed to fulfilling President Muhammadu Buhari’s directive to the national oil company to boost domestic gas supply.

The NNPC helmsman stressed that progress was being made on several of the projects , including the NLNG train 7, with a foreign direct investment of between $3 billion to $5 billion.

He listed others as the AKK, which he described as one the largest and most aggressive gas infrastructure that has ever been embarked upon in Nigeria, stretching 614 km from Ajaokuta, Abuja, Kaduna and Kano and the lot B of the OB3 gas project which he noted is already producing 125 mmscfd of gas.

Kyari stated that by the end of this quarter, the project would “cross the River Niger”, which will successfully create a highway to move the huge gas resources in the eastern area to the west.

He disclosed that the NNPC was looking to establish two gas hubs, one at Oben and the other at Brass, saying that one of the presidential mandates is to deliver on gas and power and create a market in the domestic environment that will consume the planned 4.5bcf of gas.

According to Kyari, for the first time, the corporation in collaboration with its partners was able to raise about $260m within Nigerian merchant banks and two African banks for the Asa north gas project.

He said: “Something we need to emphasise in terms of gas utilisation in Nigeria is the power sector. All our projections have shown that 60 to 70 per cent of this gas that we hope to sell of the 4.5 bcf will come from power.

“At the moment, the power sector is challenged and all efforts have to be put in to unlock the liquidity in the downstream sector and expand the transmission network. This will enable us sell the gas we have already invested in and enhance the economic prosperity of the country.

“Within the NNPC, we are looking to establish about 5gigawatts of additional power into the network. So, NNPC is engaging with the stakeholders to resolve the power sector issue so that investment that has been made in generating gas can be realised.”

In industry, he stated that the NNPC had begun to create a link between the domestic gas pipelines infrastructure and export gas pipelines to ensure that there is an outlet into the export route which will make the projects more bankable.

Should Nigerians be hopeful that the nightmare of perennial darkness will end soon? Only time will tell!