NUPRC. Canvasses For African Investors' Involvement In The Operation 3.1 Million Cubic Feet Per Day Gas Deficit By 2030

 

NUPRC canvasses African investors to address a 3.1 million cubic feet per day gas deficit by 2030.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has urged businesses operating in the African oil and gas sector to take advantage of Nigeria's new regulatory and commercial environment. The aim is to halt the projected gas deficit of 3.1 billion cubic feet per day by 2030. Speaking at the Africa Oil Week in Cape Town, South Africa, the CEO of NUPRC, Mr Gbenga Komolafe, stated that opportunities are available for existing investors and new entrants in the Nigerian upstream gas sector.

During a presentation at a recent conference, Komolafe discussed the potential for investment opportunities in Nigeria's upstream petroleum sector about the Energy Transition Regime. He highlighted the favourable fiscal incentives outlined in the Petroleum Industry Act (PIA) and encouraged interested investors to take advantage of them. 

Komolafe also emphasized Nigeria's potential to become a significant player in the energy transition, thanks to its large population of over 200 million people and abundant energy resources that can be used to achieve the right energy mix. Nigeria has the second-largest oil reserves in Africa, ranking eighth in the Organisation of Petroleum Exporting Countries (OPEC) and 11th globally, with 36.966 billion barrels of oil. Additionally, the country is blessed with a vast reserve of natural gas, estimated at 208.83 Trillion Cubic Feet (TCF), which has significant potential for growth. 

Apart from hydrocarbon reserves, Nigeria also has the potential for green and blue hydrogen, solar, wind, biomass, and other renewable energy sources that can be leveraged to achieve the right energy mix in the energy transition regime. Komolafe urged investors to explore these opportunities to do business with Nigeria.

According to a recent statement, Nigeria has various critical minerals, including lithium, manganese, copper, graphite, and nickel, essential for developing clean energy technologies. The Solid Minerals Development Fund has declared that the country's mining sector possesses 44 commercially viable minerals valued at an estimated $700 billion. However, certain factors have hindered the progress of fully harnessing the country's resources in the past, such as an unfavourable fiscal regime before the enactment of the PIA.

Before the PIA was enacted in 2021, investments in the Nigerian oil and gas industry declined due to regulatory uncertainty, defunding of fossil fuel development caused by energy transition, and the global call for decarbonization. Many IOCs deprioritized Nigeria in their portfolios, leading to the redirection of capital expenditure to other countries and a consequent reduction in investment in Nigeria's upstream sector.

In 2014, Nigeria's annual upstream capital expenditure was $27 billion, but it decreased drastically to less than $6 billion in 2022, representing a 74% decrease in Capex. This was due to increasing competition from regional peers, which reduced the proportion of the overall upstream investment attracted to Nigeria. As a result of under-investment, the country's rig count was negatively affected. In 2019, Nigeria had, on average, 17 active oil rigs, one of Africa's highest counts. However, the average rig count declined to 11 in 2020, seven in 2021, and 10 in 2022. Thankfully, the rig count has grown to as high as 31 by August 2023, indicating new investments trickling into the country.

Although the relatively high crude oil prices may have contributed to the increase in activities in the petroleum upstream sector, Komolafe stressed that the development was also a reflection of investors' acceptance of the Petroleum Industry Act (PIA) and its practical implementation by the commission. The unfolding events have equally shown that natural gas is Nigeria's destination fuel, and it is projected to form a significant part of the energy mix for Nigeria by the year 2030 and beyond.

To drive sustainable development and overcome our challenges, the Nigerian government has introduced the 'Decade of Gas' program to ensure that gas plays a pivotal role. The program aggregates gas demand and supply views, infrastructure requirements, and a suitable pricing framework, enabling the unlocking of the required investments. The research indicates that gas demand is expected to grow at a compound annual growth rate of 16.6% annually between 2020 and 2030, which may outstrip supply. As a result, Nigeria may face a gas supply crisis with a potential shortfall of 3.1 bcf/day by 2030.

However, natural gas production is projected to increase from 8.0 bcfd in 2020 to 12.2 bcfd in 2030, driven by significant projects such as NLNG Train 7 & Train 8, Nigeria/Morocco pipeline, Ajaokuta-Kaduna-Kano (AKK) Natural Gas Pipeline Project, and many other gas projects.

Komolafe, the NUPRC boss, urged investors to capitalize on opportunities provided by the PIA, which includes zero-hydrocarbon tax for deepwater developments, reduced royalty rates based on production and terrains, and tax consolidation provisions, among others. He also emphasized that the new fiscal regime is benchmarked against the best international standards and aimed at achieving reduced unit cost per barrel, transparency in hydrocarbon accounting, and operational efficiency.

He also listed other reasons why the PIA was enacted, including the search for a conducive operating environment, increasing oil and gas reserves and production, and reducing carbon footprint.

The commission has been working hard to reduce flared gas and stop the release of methane and other harmful gases into the atmosphere. They plan to commercialize 49 flare sites through the Nigerian Gas Flare Commercialization Program (NGFCP). This program will provide more gas for domestic use as Liquefied Petroleum Gas (LPG) and power generation plants, fertilizer plants, petrochemicals, and export. Implementing the Host Communities Development Trust (HCDT) has also helped restore confidence and create a better relationship between the host communities and the operators. Potential investors can be reassured that the commission is taking measures to reduce harmful gas emissions while also creating investment opportunities.