Gas Shortage Raises Concerns Over Viability of $25 Billion Nigeria-Morocco Pipeline
The federal government’s efforts to provide continuous gas supply for the Nigeria-Morocco gas pipeline, a $25 billion project designed to transport Nigerian gas to Europe through Morocco, are reportedly facing challenges due to ongoing issues with gas supply in the country.
The proposed pipeline, established in December 2016 following an agreement between the Nigerian National Petroleum Company (NNPC) Ltd. and the Moroccan government, aims to connect Nigerian gas to various coastal countries in West Africa before reaching Tangiers, Morocco, and Cádiz, Spain.
Despite assurances from the Ministry of State for Petroleum (Gas) regarding uninterrupted gas supplies to the Nigeria-Morocco Gas Pipeline Project, concerns have emerged about Nigeria’s ability to meet the necessary gas supply requirements for the successful implementation of the pipeline. The project is strategically important, and addressing these challenges is crucial for its success.
We have not been able in 30 years to extend the 100 million standard cubic feet per day West African Gas Pipeline beyond Ghana, and supply can be epileptic,” a senior industry operator in the gas sector said.
He added: “Nigeria is yet to complete the 48-inch, 127-kilometer, Obiafu-Obrikom-Oben Gas pipeline that would enable gas to move from the eastern delta to western Nigeria and feed their demand.
“The Ajaokuta-Kaduna-Kano natural gas pipeline project is already over budget and over time, commercial operation of Escravos-Lagos Pipeline System-2 to double domestic pipeline capacity between East and West to 2bcf/d has gone into voicemail as NNPC’s stock of excuses has long been exhausted.”
“Yet we are talking about participating in and being the primary supplier for a 5300-km pipeline from here to Morocco. This is the kind of thing that makes Nigeria a laughing stock,” the operator said.
According to Chinenye Ajayi, the team lead of the power and infrastructure practice at Olaniwun Ajayi LP, a significant challenge hindering the utilization of the country’s gas potential is the lack of sufficient gas infrastructure.
The absence of robust infrastructure is impeding the efficient harnessing and distribution of gas within Nigeria. Addressing this infrastructure gap is essential for unlocking the full potential of the country’s gas resources and ensuring reliable supplies for projects like the Nigeria-Morocco gas pipeline and the broader energy sector.
“In 2021, the federal government declared a decade of gas, yet not much progress has been made in this regard,” Ajayi said.
Nigeria’s ‘Decade of Gas’ is a government-led initiative with the objective of harnessing the country’s extensive gas reserves to stimulate economic growth and development. Launched on March 29, 2021, by then-President Muhammadu Buhari in Abuja, the initiative outlines a strategic plan for Nigeria to significantly increase gas utilization over the ten-year period from 2020 to 2030.
The collaboration with various stakeholders is integral to the successful implementation of this initiative, which aims to leverage the potential of gas as a key driver for economic advancement and sustainable development in the country.
The ‘Decade of Gas’ initiative is grounded in the belief that gas serves as a crucial catalyst for economic growth and development. Despite being endowed with nearly 209 trillion cubic feet of natural gas reserves, making it the ninth-largest in the world, Nigeria currently harnesses only about 8 billion standard cubic feet per day of gas. Furthermore, a significant portion of this extracted gas is directed to the export market.
The initiative aims to optimize the utilization of this abundant natural resource domestically, fostering economic development and sustainability over the designated ten-year period.
“There have been several efforts essentially. Thankfully, the Petroleum Industry Act came in at some point but there is still a lot that has not yielded results,” Ajayi said.
Ese Osawmonyi, a senior analyst at SBM Intelligence, has pointed out several challenges hindering Nigeria in supplying gas to domestic and international markets. These obstacles include financing issues, flooding, increased domestic consumption, and security concerns. Despite having significant natural gas reserves, Nigeria faces difficulties in optimizing its gas exports.
Osawmonyi highlighted that, partly due to infrastructure and security challenges, Nigeria has struggled to establish itself as a major liquefied natural gas (LNG) exporter to Europe.
These challenges underscore the need for comprehensive strategies and investments to address infrastructure limitations, enhance security, and overcome logistical hurdles to unlock the full potential of Nigeria’s gas resources for both domestic and international markets.
“Conflicting viewpoints between the government and experts underline the importance of conducting a full study of Nigeria’s gas supply capacity as well as potential impediments to the Nigeria-Morocco pipeline project’s ongoing feedstock supply,” Osawmonyi said.
Ese Osawmonyi emphasized that not meeting gas supply obligations can have significant repercussions, including legal and financial consequences. Failure to fulfill commitments in the gas sector can harm Nigeria’s reputation as a reliable supplier, potentially leading to strained international ties.
Ensuring a consistent and reliable gas supply is essential for maintaining positive relationships with both domestic and international partners, and it plays a crucial role in sustaining the country’s standing in the global energy market. Addressing the challenges in the gas sector becomes imperative for Nigeria to uphold its commitments and enhance its position as a dependable supplier of natural gas.
“Disruptions in gas deliveries might potentially reduce government earnings and deepen Nigeria’s FX liquidity crunch,” Osawmonyi said.
In 2022, NNPC Ltd. entered into agreements for the gas pipeline project with the National Office of Hydrocarbons and Mines of Morocco and the ECOWAS Commission. The proposed gas pipeline is envisioned to stretch 7,000 kilometers and is expected to play a crucial role in accelerating access to energy, improving living conditions, integrating economies within the sub-region, and addressing desertification.
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However, experts have outlined key requirements for the success of this ambitious project. These include the timely delivery of infrastructure projects, particularly pipelines, transitioning to market-based gas pricing, resolving historical debts to power plants, and providing incentives for fiscal and commercial terms in offshore non-associated gas developments.
These measures are seen as essential for realizing the intended benefits of the gas pipeline project and ensuring its positive impact on energy accessibility and economic integration in the region.
