Nigerian gas lures as Europe bypasses Russia
Nigeria has an opportunity to take advantage of the European plan to end Russian gas imports following Moscow’s war with Ukraine.
The International Energy Association (IEA), the Paris-based think tank that crafts energy policies for Western countries, has released a 10-point plan that would help Europe reduce its dependence on Russian gas, which which could open up new markets in Nigeria and other countries. gas producers.
In 2021, the European Union (EU) imported 45% of Russia’s gas, representing nearly 40% of its total gas consumption. Its support for Ukraine in the war against Russia opens cracks that other producers can exploit.
The IEA, in its 10-point plan, proposes a series of immediate steps that could be taken to reduce dependence on Russian gas, including the non-renewal of gas supply contracts with Russian companies , replacing Russian supplies with other alternative sources and introducing minimum gas storage obligations to improve market resilience.
10 point plan
The IEA says gas import contracts with Gazprom covering more than 15 billion cubic meters (bcm) per year are set to expire by the end of 2022, equivalent to around 12% of the country’s gas supplies. to the EU in 2021. Overall, contracts with Gazprom covering almost 40 billion cubic meters per year are due to expire by 2030.
“This provides the EU with a clear short-term window of opportunity to significantly diversify its gas supplies and contracts to other sources, taking advantage of the import options offered by its large liquefied natural gas infrastructure ( LNG) and pipelines,” the IEA said.
In a recent webinar hosted by the African Energy Chamber (AEC), panelists discussed how Africa can become the preferred supplier to European markets in the wake of the Russia-Ukraine crisis.
“Africa has the money to build its own infrastructure; it earns half a billion US dollars selling oil and gas per day,” said Leoncio Amada Nze Nlang, President of the AEC. “We just need to direct that money towards infrastructure development.”
At the same time, Africa also needs to improve its energy taxes to attract investment and avoid the majors leaving the market, according to Nlang, who added that “Chevron and other big companies are leaving the western market -African because the tax conditions are not favorable”. sense; there are high taxes.
It could open up new markets for Nigeria’s 206 trillion cubic feet of proven gas reserves valued at more than $803.4 trillion, but the country must address issues such as pipeline vandalism and access to finance. .
The IEA predicts that production inside the EU and imports of non-Russian pipelines (including from Azerbaijan and Norway) could increase over the next year by up to 10 billion meters cubes from 2021.
It estimates that it can replace around 30 bcm of additional gas supply from non-Russian sources through increased LNG imports, given its wide access to unused regasification capacity.
“LNG trading is inherently flexible; the crucial short-term variables are therefore the availability of additional shipments, particularly those with some contractual leeway on the destination, and the competition for this supply with other importers, particularly in Asia,” said the OUCH.
Nigeria’s best hope to fill an LNG gap in Europe is Nigeria LNG Limited (NLNG), which is currently struggling to maintain its supply amid a wave of pipeline attacks.
“The escalation in pipeline vandalism is affecting all pipelines, including those carrying associated gas, which is bad business for NLNG and other gas companies,” said Niyi Awodeyi, CEO of Subterra Energy. Resources Limited, a company exposed to the Nigerian gas market.
Italian oil giant Eni recently said an attack on its 24-inch gas line at Okaka in Yenagoa forced it to declare force majeure to NLNG in Bonny.
Other measures advocated by the IEA aim to reduce consumer storage and strengthen market resilience.
The IEA is betting on a harmonized approach to minimum storage obligations for commercial operators in the EU single gas market, as well as strong market-based capacity allocation mechanisms, to ensure the use optimum of all storage capacities available in the EU.
Another strategy considered by the IEA is to accelerate the deployment of new wind and solar projects. It forecasts an additional 35 TWh of generation from new renewable projects over the next year, beyond the growth already anticipated from these sources, reducing gas consumption by 6 billion cubic meters.
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The IEA is counting on maximizing generation from existing dispatchable low-emitting sources, including bioenergy and nuclear. The large fleet of bioenergy plants in the EU was operating at around 50% of its total capacity in 2021, but they could produce up to 50 TWh of additional electricity in 2022, if the right incentives and a sustainable supply of bioenergy are provided. put in place. The IEA hopes this will add 70 TWh of electricity generation from existing low-emission dispatchable sources, reducing gas consumption for electricity by 13 billion cubic metres.
The IEA also urges member countries to adopt short-term measures to protect vulnerable electricity consumers from high prices. It calls for temporary tax measures to increase the rates on windfall profits of electricity companies and the tax revenue redistributed to electricity consumers to partially offset the increase in energy bills. It hopes this will reduce consumers’ energy bills even when natural gas prices remain high, making up to €200 billion available to cushion impacts on vulnerable groups.
Another practical measure proposed by the IEA is to accelerate the replacement of gas boilers by heat pumps.
“Heat pumps offer a very efficient and cost effective way of heating homes, replacing boilers that use gas or other fossil fuels. Accelerating the planned deployment by doubling the current installation rates of heat pumps in the EU would save an additional 2 billion cubic meters of gas consumption in the first year, which would require a total additional investment of 15 billion euros,” the IEA said.
Other measures promoted by the IEA include accelerating energy efficiency improvements in buildings and industry, encouraging temporary thermostat adjustment by consumers, and stepping up efforts to diversify and decarbonize the sources of flexibility of the electricity system.