A significant gas to power market opportunity
The Nigerian Government has stated that it sees the provision of adequate gas supply as a means of increasing industrial output and electricity supply, and thereby economic growth, prosperity and employment opportunities. The National Gas Policy, which was approved in June 2017, seeks to reposition Nigeria as an attractive gas-based industrialised nation and is geared towards harnessing Nigeria’s vast gas resources. Nigeria has one of the lowest rates of electricity generation capacity per capita in the world, according to the Federal Government’s Power Sector Recovery Program Report of April 2017.
Electricity power consumption (KWh per capita)1,2
Nigeria has a population of approximately 201 million4 people with an installed power generation capacity of 12,522MW5, but only approximately 31%4 of this capacity is operational due to gas supply constraints and other operational issues in the power sector. Approximately 85%4 of installed capacity is from 22 gas-thermal power plants and the remainder is hydro-electric. The young population is growing at a rate of 2.5% per annum and is forecast to reach 392 million people in 20506, becoming the world’s fourth most populous country. The population is urbanising rapidly and is already suffering chronic electricity shortages. Based on the country’s GDP and global trends, electricity consumption could be expected to be four to five times higher than it is today. Approximately half of the population has no access to grid-connected electricity and those who are connected suffer extensive power outages. At present, the domestic and industrial demand for electricity is satisfied through an estimated 8 GW-14 GW generated by decentralised diesel generators, which are expensive to run and far more polluting than grid-based gas-fired power stations.
Power capacity vs population 1,2
Nigeria’s growing economy requires a reliable and affordable power supply. The rationale and benefits for the development of gas for use in power generation and industry are as follows:
- gas is a cleaner fuel than other hydrocarbons and is an abundant under-exploited local resource;
- gas is a cheaper source of fuel than diesel, almost all of which is imported;
- as gas infrastructure is developed, the economic and logistical issues in transporting gas will ease, encouraging energy consumers to switch to gas, and catalysing the development of additional gas resources;
- utilising Nigeria’s 320 Bscfpd of flared gas requires additional infrastructure and has the potential to generate 3,300MW of electricity;
- reliable power will mean more jobs can be created; and
- the urbanising population is leading to a growing demand for cement and steel; both of these industries are highly energy intensive.
Compelling economic and environmental switching dynamics
Compelling switching economics ($/Mscfe)
Indicative customer carbon intensity reduction opportunity (Kg of CO2 / kWh)7
Domestic gas demand
- Nigeria has a fast-growing and urbanising population of approximately 201 million with amongst the lowest grid-based power generation per capita in the world.
- Nigeria is dependent on higher-cost diesel-fired generation to maintain consistent electricity supply for homes and offices.
- All the gas-fired power stations are located in the gas-rich south-eastern Niger Delta region or in close proximity to existing gas distribution infrastructure in south-western Nigeria.
Accugas gas supply
- Accugas has a dominant position in the extreme south-east of Nigeria with a gas pipeline network of 260km, installed to supply gas to the domestic market.
- Accugas has established a reputation as a reliable supplier with a track record of meeting 100% of all customer nominations since its first gas delivery in 2014.
- Nigeria has 190 Tscf of proved natural gas reserves, of which it is estimated that in excess of 10 Tscf is within economic tie-in proximity of Accugas’s pipeline network.
Huge energy demand growth forecast (TWh)9
The majority of gas produced in Nigeria is considered associated gas, a by-product of oil production. In contrast, Savannah produces non-associated gas whose production is not impacted by oil production factors.
Consequently, since the 2020 low oil price environment commenced when other domestic producers reduced gas supply for power in line with their reduced oil production, Savannah has been one of the few producers who have been able to step up gas supply to help to meet Nigeria’s power generation needs. On average, Accugas currently provides gas contributing to over 10% of Nigeria’s available power generation capacity.
Accugas gas-to-power performance under Savannah’s ownership3 (average quarterly power generation (MW))
Average monthly grid generation capacity and gas shortage during Savannah’s ownership3 (MW)
1. Source: World Bank.
2. CIA World Factbook, World Bank.
3. Source: Daily generation broadcast by the National Control Centre – an arm of the Transmission Company of Nigeria.
4. World Development Indicators.
5. Nigerian Grid Transmission Study.
6. The World Bank – Population estimates and projections.
7. Source: Greenhouse Gas Emissions From Energy Systems: Comparison And Overview by R. Dones, T. Heck, S. Hirschberg.
9. Source: GIZ 2015 (FMP and power holding company of Nigeria data and UN 2010 rural/urban population data for off grid projections).