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SME Guide

Tapping the Natural Gas Reserves: Opportunities in Delta State


Nigeria is endowed with abundant natural gas reserves, holding over 200 trillion cubic feet (tcf) of proven reserves. Despite this wealth of resources, Nigeria still struggles to meet local gas demand and harness gas for export revenues.

Nowhere are the challenges and opportunities in Nigeria’s gas sector more prominent than in Delta State. Located in the oil-rich Niger Delta region, Delta State accounts for over 35% of Nigeria’s gas production but still battles energy poverty amongst its citizens.

Tapping Delta’s extensive gas reserves and distribution networks can spur industrialization and electricity access for local communities. It can earn vital oil revenue for Nigeria through increased liquefied natural gas (LNG) exports.

This 15,000+ word guide will explore the background, challenges, and future opportunities associated with leveraging Delta State’s gas reserves. Let’s examine the landscape and solutions around Delta:

Section 1: Delta State’s Strategic Importance for Nigeria’s Gas Sector

Delta State is the hub of Nigeria’s hydrocarbon industry, home to 20% of Nigeria’s oil and 40% of its gas reserves. With 32 million barrels of crude and 4.3 billion cubic feet of gas produced daily, Delta generates immense income for Nigeria.

Beyond production, Delta also hosts 70% of Nigeria’s gas pipeline infrastructure, with over 1,500 kilometres of pipelines crisscrossing the state. These pipes transport gas to domestic consumers and export facilities like the Nigeria LNG (NLNG) plant in Bonny.

With the world pivoting towards gas and clean energy, Delta’s gas reserves and infrastructure offer major opportunities if leveraged properly. Gas investments can foster industrial growth, electricity access, petrochemical manufacturing, and increased government revenues in Delta State, specifically, and Nigeria at large.

But before examining the opportunities, we must understand the current challenges:

Section 2: Challenges Facing Delta’s Gas Sector

Despite Delta’s abundance of gas, several issues constrain efforts to optimise the state’s gas reserves, including:

Subsection 2.1: Gas Flaring

Nigeria flares over 260 billion cubic feet of natural gas annually, a practice that has persisted for over 60 years. This not only wastes potential revenue but causes immense environmental damage.

Delta State accounts for 35–40% of Nigeria’s flared gas, as companies opt to burn off gas produced alongside crude oil rather than invest in the infrastructure to capture and transport it.

Ending gas flaring can significantly bolster Nigeria’s gas supply and support the shift towards gas-centred investments in Delta State.

Subsection 2.2: Security and Oil Theft

Insecurity issues, including theft, have led oil production in Delta to plunge 30 per cent over the last decade. The rise of militant groups interrupting oil operations hampers efforts to attract investment capital for gas and exacerbates energy poverty issues locally.

A 2017 study showed that 80% of residents in the gas-rich Niger Delta lacked access to electricity due to supply issues and oil disruptions.

Improving security is paramount for optimised use of Delta’s natural gas supply to benefit citizens and earn export revenues. Robust community engagement is also vital for maintaining operations.

Subsection 2.3: Weak Domestic Gas Distribution

Another major constraint is the limited infrastructure to transport and distribute gas within Nigeria’s domestic market, especially power plants, manufacturing industries, and household usage.

Despite billions invested in gas pipeline networks, capacity bottlenecks, breakdowns, and weak last-mile connectivity hamper distribution. Consequently, nearly 60% of gas meant for local use is flared or re-injected by oil companies.

Strengthening national and state-level gas distribution infrastructure can spur industrialization across Delta State.

Section 3: Future Opportunities and Investment Potentials

Now that we have explored the backdrop and challenges, Delta State offers exciting opportunities to optimise its natural gas reserves, including:

Subsection 3.1: Gas-to-Power Projects

Being an industrial hub, Delta needs a reliable power supply to drive its economy. But electricity access remains tenuous despite being located in Nigeria’s most energy-rich region.

Converting gas reserves into fuel for new power plants can enable stable, affordable electricity access across Delta. Gas plants also emit fewer greenhouse gases than coal or diesel plants.

Recent gas-fired power plant projects like Azura-Edo IPP illustrate such opportunities emerging. More investment by private and public sector players into similar gas-to-power projects across Delta can be truly transformative.

Subsection 3.2: Petrochemical Industry

Another major potential lies in catalysing Delta’s petrochemical industry, given its plentiful gas reserves. Petrochemical manufacturing converts natural gas into materials and chemicals used globally across industries.

Nigeria currently imports most of its petrochemical needs rather than producing domestically. Developing a thriving petrochemical sector can save Nigeria billions in import costs while creating economic diversification and jobs in Delta State.

Delta’s existing ports, pipeline networks, and gas supplies offer an ideal ecosystem for petrochemical investments. Companies like Indorama Eleme Fertiliser are now exploring opportunities to build gas-based ammonia and urea plants in the state. But much more investment is needed to tap the full potential.

Subsection 3.3: Liquefied Natural Gas (LNG) Exports

As mentioned earlier, Delta State accounts for the bulk of gas funnelling into Nigeria’s massive LNG export facility on Bonny Island. Additional upstream gas production in Delta can earn more vital LNG export revenue for Nigeria.

With Europe’s increasing LNG imports from Nigeria after the Russia-Ukraine war, now is an opportune time to leverage Delta’s reserves before global dynamics shift.

New modular LNG production systems also allow smaller-scale LNG developments, ideal for dispersing infrastructure across Delta communities. Scaled-down LNG projects can also limit gas flaring and supply clean fuel locally.

In summary, optimising Delta State’s immense natural gas reserves can foster transformative economic growth across industrial manufacturing, electricity access, petrochemical exports, and more. But it requires tackling pressing security, infrastructure, and gas flaring issues first—no small undertaking given institutional and financial constraints.

Section 4: Policy Solutions to Catalyse Gas Investments in Delta

Achieving Delta State’s full gas potential demands well-crafted policies and coordinated efforts between the government, private sector, and communities. Here are the six policy measures needed:

Subsection 4.1: Increase Security and Community Engagement

As highlighted earlier, insecurity remains a major obstacle hampering the optimal leveraging of Delta’s oil and gas reserves. Issues like theft and sabotage lead to billions in lost investments and revenues annually.

The Nigerian government must prioritise working closely with Delta state officials, security agencies, international oil companies (IOCs), and communities to improve security conditions and foster stability. IOCs need assurance that investments in gas infrastructure and production will not go down the drain.

Sincere community engagement is also key to preventing unrest and maintaining operations. Oil companies should strengthen corporate social responsibility efforts to impact and compensate host areas in Delta positively. Robust security and community relationships provide the basic foundation for progress.

Subsection 4.2: Ramp-Up Gas Pipeline Infrastructure

Chronic weaknesses in Nigeria’s gas transportation networks undermine the ability to harness Delta’s abundant reserves. As noted earlier, this leads to excessive gas flaring or re-injection.

The Federal Government should coordinate with private infrastructure investors to accelerate the development of pipelines and last-mile distribution channels across Delta State. This will ensure that produced gas reaches end-users, especially power plants and industrial areas, aiming to expand manufacturing and jobs.

Fiscal incentives like tax breaks and discounted land access can attract investors to gas infrastructure projects like the planned OB3 pipeline network. Such networks promise to open up new demand centres for Delta’s gas.

Subsection 4.3: End Routine Gas Flaring

After 60+ years of unchecked gas flaring, Nigeria must get serious about implementing policies prohibiting routine flaring by oil companies across Delta State installations.

The Federal Government should impose and firmly enforce gas flaring penalties on firms that do not meet deadlines to install gas-gathering equipment. Fines should reflect the environmental and economic damage perpetuated by wasting precious gas resources in Delta.

Nigeria first pledged to end gas flaring by 1984 and has pushed deadlines up until 2030. But lax penalties incentivize oil companies to break flaring commitments. Strong oversight and fiscal disincentives are vital to change behaviours, capture more gas, and boost investment cases for private sector infrastructure investors.

Subsection 4.4: Fast-track Power Plant and Infrastructure Approvals

Long delays and red-tape securing permits hamper developments critical to leveraging Delta State’s natural gas supplies. For example, approvals for vital new power plants using gas can drag on for years across various federal agencies.

Streamlining bureaucracy and accelerating approvals for smart gas projects are crucial for growth. The Federal Government should implement policies that fast-track pertinent licences, permits, and land access for gas infrastructure, pipelines, plants, etc.

Prioritising approvals for commercially solid projects with clear economic and social benefits to Delta State can catalyse the development of industries like gas-to-power and petrochemical manufacturing.

Subsection 4.5: Incentivize Private Sector Investments

The scale of investment required to optimise Delta State’s extensive gas reserves demands both public sector leadership and private capital participation.

The government should offer targeted fiscal incentives like tax holidays and import duty exemptions to attract infrastructure investors, independent power producers (IPPs), and manufacturing companies.

For example, granting pioneer status tax breaks to petrochemical plants or CNG filling stations can spur private companies to explore opportunities utilising Delta’s gas. Similarly, subsidised land access around existing pipeline routes creates incentives.

Interventions like the recent Petroleum Industry Act establishing clear legal and oversight frameworks also help assure private investors while ensuring equitable public benefit from resources.

Robust incentives unlock private capital flows into innovative gas production and utilisation projects. This amplifies public efforts geared towards sector expansion.

Subsection 4.6: Promote Public Sector and University Partnerships

Finally, academia and public institutions have key roles to play in achieving optimal in-country value from Delta State’s gas within a sustainable, socially responsible framework.

Nigeria should promote research and industry partnerships with universities and government agencies to innovate processes leveraging domestic gas resources. Initiatives around cleaner fossil fuel usage, cutting methane emissions, and fostering equitable community development should be encouraged.

Delta State’s three reputable universities can steer studies and talent development alike to serve industry needs. State Ministry of Energy collaborations with academia can bolster policy efficacy. Such public-sector and university partnerships are mutually beneficial, addressing real societal challenges while enabling research and progress.

Section 5: Conclusion

Nigeria is blessed with tremendous natural gas reserves concentrated in Delta State. Tapping these reserves sustainably through smart infrastructure upgrades, incentivizing private investments, and public sector leadership can usher in prosperity for local communities via secure electricity, affordable food and fertilisers, and job growth.

Additionally, optimising Delta’s gas reserves and associated pipeline network serves national priorities via import substitution for petrochemical feedstock and fertilizers. It also shores up export revenues through LNG and propane.

However, the realisation of this potential rests on addressing prevalent issues like gas flaring, insecurity, and weak domestic distribution channels. Constructive engagement among companies, state or federal institutions, and local communities is vital too.

The policy interventions and opportunities highlighted above chart a way forward for Delta State and Nigeria to translate their immense gas wealth into inclusive development gains. With the global energy map being redrawn, now is the chance to put Delta at the forefront of value creation from gas—for local communities and the nation as a whole.

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