Strategizing for Nigeria’s Midstream and Downstream Gas Infrastructure

Introduction

Nigeria with over 200 trillion standard cubic feet (TSCF) of proven gas reserves has an opportunity to develop its gas resources and increase utilization for domestic and international markets vis a vis the energy transition and the Russian-Ukraine war.

Utilization of stranded gas resources using gas processing facilities and increased gas supply to the main gas transmission trunks, Escravos Lagos Pipeline System (ELPS), Obiafu-Obrikom-Oben Gas (OB3) Pipeline and the upcoming Ajaokuta Kaduna Kano (AKK) pipeline for gas utilization up north, will open opportunities for power generation, fertilizer, and petrochemical industries.

The Petroleum Industry Act (PIA) 2021 as a key enabler

Section 52 (1) of the PIA 2021 establishes the Midstream and Downstream Gas Infrastructure Fund (MGIF) resident in the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA). The MGIF according to section 52(7) (a)-(e) sources its funding from 0.5% of the wholesale price of petroleum products and natural gas sold in Nigeria, collected from wholesale customers and the funding cited under section 47(2) (c) of the PIA.

The functions of the MGIF cited in section 52(10) include the following:

• Making equity investments of Government owned or shareholding interests in infrastructure related to midstream and downstream gas operations aimed at:

  • Increasing the domestic consumption of natural gas by jointly financing gas projects with private investors.

  • Funding substantial risk projects (risk sharing) that facilitates investment in gas infrastructure (midstream and downstream) in Nigeria.

  • Minimizing/elimination of gas flaring.

Benchmarks for measuring growth in the midstream gas value chain

• Baseline

  • Gas flaring data in Nigeria.

  • Database of all midstream and downstream gas infrastructure regulated by the Authority.

  • Investment gaps in current/baseline midstream and downstream gas infrastructure.

• Target Key Performance Indicators (KPIs)

  • Trends in the reduction of Associated Gas (AG) flaring in comparison to baseline data.

  • Investment into strategic dormant/brownfield/inactive midstream and downstream gas infrastructure in accordance with section 2 above (“sort of low hanging fruits”) including:

    • Gas gathering (AG flare out projects).

    • Gas processing facilities (gas, fertilizer plants, petrochemicals (methanol etc.)).

    • Gas distribution facilities like LPG terminals, LNG transportation (trucking-out, virtual pipelines), regasification projects.

  • Deliberate identification and investment (beginning with the “low hanging fruits”) in strategic midstream and downstream gas infrastructure like power, gas for industries and gas for large commercial use e.g., estates, markets, malls etc. through techno-economic analysis.

• Regional benchmarking:

  • Upcoming projects in other regions of Africa should be studied and used as a sort of case study/benchmarking. E.g.: Five Important Gas Projects Coming Online in Africa in 2022/23 (energycapitalpower.com)

• International benchmarking:

  • The strategic midstream and downstream gas infrastructure plan should also be able to leverage global benchmarks in gas infrastructure projects. E.g.: Global Gas Infrastructure Tracker - Global Energy Monitor