Both presidents’ conversations had centered on investments and partnership, one of which being natural gas.
Scholz expressed interest in Nigeria’s natural gas reserves.
According to him, more Nigerian states with natural gas should pursue the export market since it is preferable to employ capacities where they are.
The German Chancellor’s recent visit to Nigeria was highly awaited due to the serious circumstances caused by shortages in gas delivery, particularly due to Russia’s invasion of Ukraine.
Before the invasion, Germany served as the primary route for Russian natural gas into continental Europe.
More than 40% of the gas consumed in continental Europe came from Russia, with a significant portion passing through the Baltic pipe, particularly Nordstream.
Since the conflict began in 2022, gas supplies through Nordstream and Germany have been severely affected.
Consequently, there is an urgent need for Germany and other European economies to find viable alternatives to the Russian gas pipelines.
This urgency prompted Chancellor Scholz’s visit, which is part of a series of visits to countries like Canada and Egypt, all aimed at exploring alternatives to Russian gas.
Nigeria emerges as a key option for replacing Russian gas, particularly because it has been a reliable source of liquefied natural gas (LNG) for European markets.
The Nigeria Liquefied Natural Gas (NLNG) Limited exports a significant portion, around 60% of its production, to the EU.
In fact, through NLNG, Nigeria stands as the fourth-largest natural gas supplier to the EU, making it a pivotal player in this quest for alternative gas sources. In discussions centred on replacing Russian gas, Nigeria plays a crucial role.
Note that Nigeria’s strategy for its energy transition revolves around the use of natural gas in various sectors, including automobiles, industries, and clean cooking.
Balancing these domestic plans with international gas export commitments, notably to Germany and the EU, requires meticulous planning and significant investment.
Germany’s interest in Nigeria’s gas resources has created the need to create a balance between energy security on the one hand and economic growth on the other.
The National Gas Expansion Program (NGEP) and the recent action steps taken by the Tinubu administration to establish more affordable compressed natural gas (CNG) as an alternative to petrol are clear indicators that Nigeria is in dire need of gas for its domestic market.
Meanwhile, the country is also in need of foreign exchange and indeed revenues as it is neck deep in debt and is desperate to industrialize to create jobs for its young population and harness its gas locally before the country transitions to clean energy in the coming years.
However, it is important to note that Nigeria faces significant challenges in its domestic gas supply.
There is a substantial demand for gas within the country, but this demand has been difficult to meet due to issues like pipeline vandalism and crude oil theft, which particularly affects the associated gas supply.
This situation has led to a shortage of domestic gas supply in Nigeria.
Regional Energy Partner at Energy Compact, Kayode Oluwadare tells Nairametrics that some of the factors that have affected low gas use on the domestic front in Nigeria include; the lack of investments in upstream projects to boost the non-associated gas profile of the country as well as the delay in the passage of the Petroleum Industry Act (PIA) which was eventually passed in 2021 and the wave of the energy transition in Europe that has discouraged a lot of European-based financial institutions in financing energy-based projects especially in developing countries like Nigeria.
Oluwadare said: “A combination of these factors has actually led to a drop in the volume of feed gas available for gas processing in Nigeria and this has actually hampered domestic gas availability. So, Nigeria actually needs more gas on the domestic front and of course, NLNG has also taken a hit.
“Currently, NLNG is doing less than 50% of its throughput capacity. It is clear we need more gas on the domestic front to develop the economy, to power the industrial sector like the petrochemicals production, and power generation sector, we also need it for clean cooking in Nigeria via liquefied petroleum gas (LPG).
“However, we also need to become more involved in gas exports. In my opinion, we can achieve both goals – gas exports and domestic demand. There are countries that are doing both – some include Qatar, the United Arab Emirates, the United States of America, and Australia. For Nigeria to be able to do both exports and meet domestic demand, it all boils down to the availability of feed gas processing which raises questions about upstream investments.”
Oluwadare also noted that recently, the Abu Dhabi National Oil Company and Qatar Energy have been developing new non-associated gas fields to be able to provide huge volumes of feed gas for their projected LNG expansion projects.
According to him, this is exactly what Nigeria needs – a lot of investments in upstream projects.
“We need to develop new non-associated gas fields to have enough gas for exports, processing, liquefaction, and domestic utilization. This has not been done on a large scale in Nigeria and this is what the NLNG is currently suffering from by not meeting its capacity. The key thing here is investments in the upstream,” he says.
Legal and Compliance Officer at Chimons Gas Limited, Chukwuebuka Ibeh tells Nairametrics that Nigeria possesses untapped gas reserves, making it imperative to attract foreign investors to bolster its gas industry, with foreign portfolio investment playing a crucial role in infrastructure development. He highlighted the fact that to fulfil its part of the 2015 Paris Agreement, Nigeria must prioritize gas infrastructure investment.
He noted that the 2022 NUPRC Commercialization Programme, which selected 42 companies to reduce gas flaring and enhance utilization in oil fields, faces a funding challenge, particularly for connection assets such as pipelines.
So, gas investments from Germany could substantially boost domestic gas demand and help Nigeria work towards its net-zero emissions goals.
He said: “Although Nigeria possesses substantial natural gas reserves, realizing its production potential by 2030 demands substantial funding. Germany’s willingness to invest could not only support Nigeria’s domestic gas demand but also contribute to achieving its net-zero objectives. A potential arrangement might involve extending export commitments to Germany after project completion, ensuring Nigeria can meet its industrial, automotive, and clean cooking gas needs.
“Nigeria needs to take up the German deal. More gas exports are one of the ways to increase our foreign exchange base. We cannot meet our demand without funding the gas sector. The federal government does not have the needed funds for our huge untapped gas.”
Meanwhile, oil and gas analyst, Dan D Kunle tells Nairametrics that Germany, as the strongest and most robust economy in Europe, heavily relies on gas to power its economy.
So, if they express interest in Nigeria’s gas, it could significantly boost both countries.
The important issues, however, are around the degree of investment: would it include gas exploration and production in Nigeria, or will it primarily rely on importing gas from Nigeria Liquefied Natural Gas (NLNG) facilities?
He also mentioned that Germany is interested in the Nigerian Morocco Gas Pipeline project, which is a welcome step. He stated:
“However, it is critical to stress the significance of upstream investments in gas production and processing.” Understanding the complete project, including its structure, funding channels, shareholders engaged, and the schedule for investment start-up, is critical. There have also been rumors of German interest in hydrogen investment in Nigeria, indicating a shift toward sustainable renewable energy.This is consistent with global objectives.
Nigeria stands to gain tremendously from collaborations with Germany is one of the big players. The current dynamic energy market position in Europe needs extensive reviews for nations such as Germany to assure a secure energy supply, especially considering the difficult experiences of the last 18 months.”The important issue is whether the Germans would invest in the gas pipeline or explore building more LNG plants in Nigeria, such as Brass or OK LNG.
The potential exist, and the aim is that all restrictions impeding investment flows, particularly the Petroleum Industry Act (PIA), will be removed.”Nigeria and Germany must work together to carve out this common interest, ensuring energy security and fostering economic growth.”
