New Telegraph

Report: Nigeria’s natural gas output faces imminent decline

Amid widespread campaign for Nigerians to embrace natural gas as an alternative source of energy to the rising cost of Premium Motor Spirirt, a new report has revealed a possible decline in the country’s output within the next three years. Although the situation is not peculiar to Nigeria, it is, however, worrisome for the fact that natural gas is becoming the next major source of energy for most industries in the country.

According to the report titled, “The State of African Energy Q1 2023,” prepared by the Executive Chairman, African Energy Chamber, NJ Ayuk, there is a worrying decline in African countries’ natural gas output as many of the production fields are reaching the end of their productive lives. He said many of Africa’s existing gas production fields, particularly those in the north and west, were maturing or in decline, meaning they are quickly reaching the end of their productive lives.

“For example, Nigeria, Angola, and Equatorial Guinea currently account for 85 per cent of the total gas output from the West Africa region, and volume is expected to remain the same until 2025. “After that, levels will gradually decline to 75 per cent by 2030, 70 per cent by 2035, and 60 per cent by 2040. Although these fields are considered crucial for sustained production, the need for new projects to come online is critical to prevent a stall in output.”

He said although Africa’s natural gas production is expected to remain relatively flat over the next two years — increasing only slightly, from 268 billion cubic meters (bcm) today to 272 bcm in 2025 — there’s room for optimism about the continent’s potential. Nigeria currently boasts of huge volume of natural gas reserves. It had proven natural gas reserves reaching approximately 5.8 trillion standard cubic meters as of 2021. Same year, Nigeria natural gas exports amounted to over 38.4 billion standard cubic meters.

This represented an increase compared to the previous year and the other years reviewed. In February this year, a report by Independent Commodity Intelligence Services projected that Nigeria was aiming to export 16.2 million tonnes of Liquefied Natural Gas in 2023. According to ICIS, Nigeria’s LNG exports depreciated in 2022, falling 15 per cent compared with 2021.

“We forecast Nigerian exports will rise slightly to 16.2 million tonnes, but still below the 17.1 million tonnes exported in 2021,” the report said. It also disclosed that the expectation of Africa re-starting LNG imports in 2022 failed to materialise due to the soaring cost of LNG following the start of the war in Ukraine.

According to ICIS, the floating power plants of Senegal and Mozambique are unlikely to switch to gas-fired generation. On its part, the ECA report advised that for Africa to move forward and grow its natural gas output, a two-pronged approach is required: Gas producers must continue to pump from existing fields while countries with new discoveries must get these undeveloped projects to the final investment decision (FID) stage as quickly as possible.

“Fortunately, many major new gas finds have been announced in recent years, including finds in Senegal, Mauritania, Angola, Ghana, South Africa, Namibia, and the Ivory Coast. In Namibia alone, Shell’s Graff discovery holds approximately two billion barrels of oil equivalent (BOE). “These new gas discoveries will, however, remain dormant potential unless African governments and gas producers come together quickly to forge realistic actionable plans to capitalize on these vast new resources. Otherwise, new hopes will simply fade into the past as yet more symbols of lost opportunity.

“These fields along with newly discovered pre-final investment decision (FID) projects have the potential to supercharge output and allow Africa to realize its enormous natural gas potential. As the AEC report notes, any new production growth expected over the next decade will come from both pre-FID potential — such as emerging upstream economies like Mozambique, Tanzania, Mauritania, Senegal, South Africa, and Ethiopia — as well as from mature producers like Nigeria, Libya, and Algeria.”

“At a very conservative forecast, production from these pre-FID projects is expected to double year-on-year from 2025 to 2029, with a continued gradual increase until around the late 2030s. Currently, just over 10% of Africa’s gas production comes from these preFID volumes and will increase to over half of the total output. Therefore, these volumes play a critical role in the continent’s natural gas export aspirations, and in becoming a true player in international markets.

“There is also great excitement building around the growth of Africa’s liquefied natural gas (LNG) export business.: As the report further asserts, “Africa LNG export infrastructure also is shaping in a similar way to the natural gas forecast. Between the bigger producers like Algeria, Nigeria and Egypt, Algeria and Egypt are expected to maintain their existing LNG infrastructure capacity of about 29 million tonnes per annum (MMtpa) and 12.7 MMtpa, respectively. Nigeria’s plans involve increasing its LNG infrastructure capacity from the existing 22 MMtpa to 30 MMtpa via the Nigeria LNG (NLNG) Train 7 development and further marginally to just over 31 MMtpa via UTM Offshore’s FLNG project.”

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