Infrastructure deficit, vandalism hampering FG’s hope of profiting from Europe’s gas crisis

The federal government’s hope of exploiting the gas crisis in Europe to increase its foreign exchange earnings is hampered by the lack of pipeline infrastructure and vandalism on gas transportation.

Nigeria was hoping to benefit from the gas supply and price crisis that countries in Europe are experiencing as Russia imposes supply demands on them.

Russia, which is currently embroiled in a war with Ukraine, has forced European buyers to pay in its own currency, the rouble, rather than euros or US dollars.

Most European countries support the United States of America on sanctions against Russia.

The stalemate on Russian demand has led to huge gas shortages in many European countries, as the price of the commodity has risen sharply.

On September 5, Russia threatened to shut down its Nord Stream pipeline while Western sanctions were in place, driving up benchmark gas prices by another 30%, currently equivalent to around $400 a barrel of oil. .

Morgan Stanley, an American multinational investment management and financial services company, has forecast that at current forward prices, annual electricity and gas expenditure by consumers and businesses in the European Union could reach a staggering sum of 1.4 trillion euros, compared to 200 billion euros recently. years.

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Already, several European parliaments are discussing cost reduction measures and alternative sources of gas supply.

It is Nigeria’s hope to slip into these alternative sources.

Nigerian Minister of State for Petroleum Resources Timipre Sylva expressed optimism at the September 2022 Gas-Tech Conference in Milan, Italy that Nigeria could exploit this opportunity and supply gas to the Europe.

The minister said Sept. 7 at the conference that Nigeria would build a pipeline for Nigerian gas through Algeria to Europe, a project that would likely cost more than $10 billion.

But oil and gas analysts have reservations about Nigeria’s desire to quickly tap into the European gas market because of the infrastructure deficit it currently suffers from.

“Money is not sentimental; it goes where it can grow. Gas is a long-term investment. Yes, there is a market for gas, and Nigeria is blessed with huge gas assets. But the infrastructure is not there yet,” said oil and gas governance expert Ademola Henry Adigun. CIIR.

Adigun pointed out that Nigeria was so rich in gas that local suppliers were not even meeting demands. The Nigerian Liquefied Natural Gas Company (NLNG), for example, produces only about 60% of its capacity. The rest is hampered by insecurity in the Niger Delta and pipeline vandalism.

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He said, “For anyone entering the Nigerian gas market, the first problem is gas pricing policy. The price of gas is still set by the government. Going forward, let the market determine the price. Above all, we need a lot of money for infrastructure.

“The main thing now that there is an opportunity is to review gas policy and pricing so that the market can respect the price.”

He noted that instead of the government subsidizing the price of oil, it should subsidize gas production by supporting the Nigeria Bulk Electricity Trading (NBET) to easily pay gas companies.

Nigeria’s proven gas reserve is 209.5 trillion cubic feet and over 600 trillion cubic feet unproven. To date, Nigerian gas is estimated at over 80 trillion naira.

However, the infrastructure to maximize the gains from the use of gas is not there.

A number of analysts who have spoken on the subject believe that there is no miracle that can be accomplished in the short term.

“Where is the infrastructure?” an energy expert, Dan Kunle, wondered what Nigeria could do in the short term to increase gas supplies to Europe.

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Kunle said, “If I was in government, I would revisit the drawing board. I would ask for the Brass LNG document and the Olokola plan. I would then invite great personalities like Aliko Dangote, like Mike Adenuga to the table and say to them: ‘look, come join the CIOs and carry out this project’, because the government does not have the money to continue.

Stressing that the energy sector was capital-intensive, he said the government needed to find a way to integrate its own citizens into the sector, insisting that the orientation that only America could to do so was wrong.

A lawyer and former chairman of the Nigerian Electricity Regulatory Commission (NERC), Sam Amadi, said Nigeria should be concerned about its ability to improve generation.

Amadi maintained that at present, the oil and gas sector in Nigeria has structural constraints, technical issues and even commercial challenges, issues which he said need to be addressed before progress can be made.

Harrison Edeh is a journalist at the International Center for Investigative Reporting, always committed to promoting good governance by holding public officials and businesses accountable.

Mary I. Bruner