Nigeria’s energy infrastructure is not keeping pace with needs

By Eromo Egbejule

A swathe of projects required to meet Nigeria's energy export and consumption goals are falling behind schedule.

For decades, Nigeria overwhelmingly relies on crude oil for the majority of its forex earnings. But the energy sector – like other sectors – has fallen behind in infrastructure investment.

As just one example, all four of its four refineries were set up in the 1960s and 1970s and operate at levels below their refining capacities.

Currently, Nigeria’s daily crude production is around 2 million barrels.

As oil revenues continue to fall and the country’s efforts to diversify its economy continue at snail speed, stakeholders in the sector are hoping for a pick up in the pace of delivery.

Here are some of the key projects, and their progress:

Red light: Halted pipelines, halted policy

Elements of important legislation to help unlock investment, such as the Petroleum Industry Bill have been passed by parliament…. but not agreed to by President Buhari.

Now, the ambition is to pass the bill before the end of 2020, says Senate President Ahmad Lawan.

Progress has also stagnated on a number of pipelines being built across the country, due to financing issues.

“Building pipelines are expensive”, Ademola Henry, team leader at the Facility for Oil Sector Transformation (FOSTER) told BusinessDay. ” When there is no money it’s impossible to mobilise contractors.”

A 614km gas pipeline is being built from Ajaokuta in Kogi state through Kaduna to Kano and could possibly stretch to Algeria. The first phase was due to be completed in 2020 but presidential spokesman Bashir Ahmad tweeted from Saudi Arabia to say the government was seeking investment for it.

Another gas pipeline in the works is the $700m Oben-Obiafu-Obrikom (OB3) line which when completed will boost Nigeria’s gas capacity by 2 billion standard cubic feet of gas per day (2bscf/d). Two years after the initial completion schedule of July 2017, it remains under construction by the NNPC.

Turning amber: Refinery moves

Africa’s richest man Aliko Dangote is erecting the world’s largest single-train refining facility with a capacity of just 650,000 barrels per day just outside Lagos.

The Dangote refinery was scheduled to be completed in 2020.

Analysts warn that it could take up to two more years to finish.

A host of modular refineries – at least eight – are also due to come on stream at various times in 2020, as Nigeria inches towards minimal increases in its petroleum production.

Green-lit: Liquid Natural Gas progress

The new NLNG train terminal is finally moving.

Last month, the Nigeria Liquefied Natural Gas, the best-performing subsidiary of the Nigeria National Petroleum Corporation (NNPC) finally issued a letter of intent for the engineering, procurement and construction of the new train for the gas plant.

The final investment decision is expected any moment. A major breakthrough for Nigeria’s extractive industry, the seventh train will add 8,000 mt/year to the Bonny gas facility.

Why this is important: A string of incomplete projects could pose serious challenges for the extractive industry and Nigeria’s forex earnings come 2020 => as well as undermine the administration’s drive to finance broader infrastructure goals in rail and road building.

One interesting policy initiative: pushing for cheaper production costs – and less padding – in oil production.

Nigeria’s cost of oil production per barrel is $30, compared to $10 in Kuwait.

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