Lack of gas takes toll on Nigeria’s power sector

Despite Nigeria’s huge proven gas reserves of 202 trillion standard cubic feet, lack of gas has constrained the generation of 66,645 megawatts, MW, and by extension supply, in the first three weeks of February 2020.

This showed an increase of 45.4 per cent when juxtaposed against 36,415.48 MW not generated due to lack of gas in the corresponding period of 2019.

The compilation of data obtained from the office of Vice President Yemi Osinbajo, by Vanguard, yesterday, showed that despite the claims of the success of the government Gas – to- power initiative, inadequate gas remains a major problem.

Specifically, on February 21, 2020, the report stated: “3,308.5 MW was not generated due to unavailability of gas.

The dominant constraint on February 21, 2020 was due to unavailability of gas – constraining 3,308.5 MW from being available on the grid.

“The power sector lost an estimated N1, 588,000,000 (One Billion Five Hundred and Eighty-Eight Million Naira) on February 21 2020 due to constraints from insufficient gas supply, distribution infrastructure and transmission infrastructure.”

Similarly, the report stated: “On February 20, 2020, average energy sent out was 3,889 mw, down by 251.05 mw from the previous day. 3,970.5 MW was not generated due to unavailability of gas. The dominant constraint on February 20, 2020 was due to unavailability of gas – constraining a total of 3,970.5 MW from being available on the grid.”

Impact

Investigation by Vanguard showed that many parts of the nation did not have adequate supply, thus encouraging individuals, households and companies to generate their independent power at higher cost.

It was also gathered that the high cost of power generation has culminated in high prices of goods and services in the domestic market, as producers shift the burden to consumers.

Payment

The Managing Director, Lopacoil Limited, Dr Lawrence Ijebor, said: “There are underlying problems in the industry particularly gaps in the price of both export and local gas."

"There is no significant change in the relationship between the export and local gas and this means that suppliers or producers will tend towards exportation because that is where maximum returns is made. This is why the federal government made it an obligation to forcefully withhold some gas in the local market."

“About 60 per cent of the gas left in the local market is used for power generation and the balance for industrialization and this has a significant impact on the economy. Some industry commentators focus on flared gas and believed that converting flared gas into products will eliminate the problems. The actual gas needed for power and industrialization cannot be generated through flared gas but through Non-Associated Gas. There is need to invest in reducing Non-Associated Gas to achieve the goals and plans of the nation.”

Chief Operating Officer, COO, Nigerian National Petroleum Corporation, NNPC Gas, Mr. Yusuf Usman, had stated at the just concluded Nigeria International Petroleum Summit, NIPS, in Abuja that, the international oil companies, IOCs may not be keen to fully harness the gas potential of Nigeria unless there is a guaranteed sustainable payment for the product.

Speaking on the imperatives of gas production and energy security, he had said: “If you consume and you don’t pay, you destroy the economy of the country. The IOCs are ready to produce gas; so long, they can be guaranteed a sustainable payment. In addition, that speaks to some of the issues. At a certain time in the country, we were selling gas at 50 cent and we ended up with a mounting debt. My message to operators and consumers is that we should be responsible in our consumption.”

Transmission, distribution

However, managing director/CEO, Transmission Company of Nigeria, TCN, Mr. UG Mohammed, said there was a need for all stakeholders to work together in providing adequate power to consumers, especially as power generated cannot be stored, but must be transmitted and distributed to users.

He said: “TCN has employed different strategies in its expansion drive, starting with the use of in-house capacity to install transformers and equipment across the country, and had also completed previously slow and non-performing contracts."

“These have resulted in the installation of 67 transformers across Nigeria, contributing to capacity increase from 5,000MW in February 2017 to 8,100 MW in December 2018. In addition, TCN recovered 775 containers out of 800 containers with power equipment stranded in the port, which were utilized in executing some of the projects."

“Management established implementation structures that gave confidence of donors under which $1.661 billion was raised; management also changed procurement methods and introduce strategies that have mitigated risks associated with joint-venture/consortium."

"TCN requested and obtained the support of most donors to use advance procurement, which has significantly improved projects implementation in the company.”

Expert

President, Lagos Chambers of commerce and Industry, Mr. Toki Mabogunje, who noted the relationship between power and inflation, said: “Intense inflationary pressures also have a negative impact on investment as cost of production and business operations increases."

"This typically takes a toll on profit margins as sales and turnover declines. We believe government can stem rising consumer prices through increased investment in infrastructure especially power and transportation.”