IEA Cites Militancy, Lack of Reforms as Reasons for Nigeria’s Gas Shortages

  •  50% reduction in gas-fired generation hurting economy
  • Nigeria, Egypt, Algeria account for bulk of gas consumption in Africa

Kunle Aderinokun

Militant attacks on facilities, absence of political reforms and lack of investment have been identified as the major factors that led to structural gas shortages in Nigeria. A new report by the International Energy Agency (IEA), called, “Gas 2017: Analysis and Forecasts to 2022,” revealed this. The report stated that the drop in gas-fired power generation by 50 per cent from recent average levels had deprived millions of power and hurt the economy.

Given the severity of its implications, gas shortages have caused Nigerians and businesses untold hardship. A newspaper reported that sometime in April the national grid lost about 2,239 megawatts (mw) of its supply after 45 turbines were shut down due to gas supply constraints and other technical issues. According to the report, statistics showed that 68 hydro, steam and gas power turbines were available and could have generated 6,376mw but only 45 functioned on the particular day, generating 3,639mw. The magnitude of suffering that businesses and residents experienced can only be imagined.

Many projects have been rendered comatose as a result of chronic gas shortages.
The IEA report, which was renamed Gas 2017, is a market report that provides a detailed analysis of supply and trade developments, infrastructure investments, and demand-growth forecast through 2022. It assesses the main changes that will likely transform the gas market, led by rising demand in countries that include China, India, and Pakistan, thanks to on-going economic growth and relatively low LNG prices. It also explores widening regional differences to traditional gas users, with flat demand forecast in Europe and structural demand decline in Japan.

In the report, which is its latest, IEA stated that concerns relating to security of gas supply had also manifested in some other major producing countries.

According to report, “The recent standoff between Qatar and some of the other Gulf States and Egypt has also underscored some potential risks to gas supply security from the Middle East: Qatar supplies around 30 per cent of the world’s LNG.

“Longer-term risks to gas security could also arise from a shortage of investment in new gas supply infrastructure, although, the US looks well placed to respond once international markets show signs of tightening. Well-supplied markets in the short term are maintaining downward pressure on prices and discouraging new upstream investment in LNG. “

The report recalled, “In 2016 only two new final investment decisions (FIDs) were taken to expand existing or build new LNG facilities and, at the time of writing, only one FID has been taken so far in 2017.”

It explained, “If major new investments in gas supply struggle to make headway, this would increase the risk of a hard landing for gas markets in the 2020s.” The report, however, believed, “brownfield expansions of existing facilities, notably in the United States, provide a safety valve since they could bring new gas to markets relatively rapidly once the need arises.”

Similarly, the IEA Gas report projected that gas will grow faster than oil and coal over the next five years, helped by low prices, ample supply, and its role in reducing air pollution and other emissions.

“In our new five-year forecast to 2022, gas demand will grow at 1.6 per cent per year, a slight upward revision from last year’s forecast of 1.5 per cent,” IEA stated.

It noted that resource-rich parts of the Middle East and Africa also saw strong demand for locally-produced gas.

“The Middle East will experience relatively strong growth in consumption of 2.4 per cent per year, to around 540 bcm, met in the main by increasing domestic production. Growth is relatively strong in the power sector, where there are opportunities to substitute gas for oil, as well as in the industry sector as the region’s economies grow and diversify.”

Specifically, the report noted, “Consumption in Africa rises even more quickly, at 3.1 per cent per year, to reach more than 150 bcm. Egypt, Algeria and Nigeria are the main countries pushing consumption higher, even though lower hydrocarbon revenues and economic growth hold back demand in some resource-rich parts of the continent. Elsewhere, annual gas demand growth in Latin America averages 1.3 per cent, while the consumption outlook remains flat in the Russian Federation, Eastern Europe and Central Asia.”

Besides, the IEA report pointed out that the volume and diversity of LNG trade flows were increasing rapidly with the appearance of new exporting and importing countries. For instance, it projected: “Liquefaction capacity is expected to grow by 160 bcm over the period to 2022, led initially by Australia (30 bcm), but with the largest increase in growth then coming from the United States (90 bcm). “

The report explained, “This additional LNG capacity is being added to a market that is already well supplied, particularly as demand is declining in some of the large, traditional LNG importing countries such as Japan.

“In these conditions, with relatively low LNG prices, exporters are having to work hard to open up new markets. A sign of this effort is the rapid growth in the number of countries importing LNG, which has already grown from 15 in 2005 to 39 today. This growth in LNG has been helped by the increased use of floating storage and regasification units, and it will absorb some of the surplus gas on the market as another eight countries are expected to add LNG import facilities by 2022. Nonetheless, the growth in LNG demand is not expected to be sufficient to rebalance the LNG market before the end of the forecast period.”

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