The Challenges Nigeria Is Facing To Expand Gas Production

Security to protect pipeline in some region of the world can be extremely challenging.

Nigeria has no shortage of gas; its reserve has proven to be biggest in Africa almost 5.7 Tcm reserves ready to be exploited. But with that comes the challenge to keep a consistent supply flowing through the pipelines to the terminal.

With thieves tapping into the pipelines, piracy to vandalism and kidnapping. The constant flows were reduced to 10% to shutdowns at oil and gas fields in the Delta region last year due to piracy. It is altering the output and expected production.

Nigerian National Petroleum Corp and foreign investors are now weighting if they are going to invest more than $10 billion to boost capacity by 40%. The decision could be taken later this year, if they decide to move forward with the project. Bonny Island terminal could flood as much as 66 MMcm (30 million tons) a year to Europe and Asia markets.

It could be a great investment to move forward but expanding this profitable venture could be double edge sword, with threat of higher taxes, pipeline vandalism in the Niger River delta region and volatile gas prices. This volatile region could put at risk the biggest oil producer in Africa to misses on the opportunity to move to cleaner fuels and improving its economy by becoming self-sufficient with its gas production.

Nigeria has an opening to invest in the next couple of years. They could strengthen their position. Last year they were the fourth-biggest exporter behind Qatar, Australia and Malaysia. They are still facing competition with the U.S, Mozambique and Russia, who are currently spending billions of dollars to start or ramp up their production.

Boosting capacity at Bonny Island which is the sized of Lower Manhattan, will required $12 billion, per New York-based Teneo Intelligence. It will add two processing unites. The terminal currently has six units, known as trains. The gas is compressed and cooled to 258 below Fahrenheit (-161 Celsius) before being piped as LNG onto ships.

Taxes could become an issue as well. Some Nigerian Politicians would like to remove tax breaks from foreign investors. President Muhammadu Buhari’s government is oppose to the idea citing it could killed any future expansion plans. Nigeria’s 49% stake has proven to be extremely lucrative according to the statement posted on NLNG’s website. Between 2004 to 2016 $16 billion of dividend earning to the government.

Having to transport gas safely in such a volatile region will remain the main obstacle for Nigeria to succeed on becoming the number one player in Africa. The supply is not the issue, but the question remains how to transport safely the gas without any interruption to the terminal. The opportunity for the country to grow and becoming self-reliant is at their fingertips.