Gas exploration and production
Natural gas is a major source of energy and Nigeria’s gas reserves are estimated at up to ten times as large as its crude oil reserves. Nigeria contains an estimated 124 trillion cubic feet (Tcf) of proven natural gas reserves (10th largest in the world) with upside estimates of associated and non-associated gas being as high as 300 Tcf which the NNPC hopes to reach in the new millenium. Associate gas production is concentrated on fields located onshore and in swampy areas of the Niger River Delta.

Gas flaring and utilisation
Around 3,000 million standard cubic feet of gas is produced annually. Due to a lack of gas utilization infrastructure, Nigeria flares 75% of the gas it produces and re-injects 12% to enhance oil recovery. Although high, this is significantly below the over 98% flared in 1971. Nigeria has set the year 2010 as its target for achieving zero flaring of natural gas.

With the aim of increasing gas utilisation, the NNPC set up a company, the Nigerian Gas Company Ltd in 1988, with the specific task of developing, harnessing and marketing natural gas from the domestic market. A number of projects are being developed to increase the utilisation of gas and to reduce gas flaring. In 1999, the Nigerian government set in place incentives to make the utilisation of gas more attractive and to check the waste in the Nigerian gas sector through flaring. The incentives will include approval of alternative funding for gas projects, a comprehensive energy policy and tax concessions. Other incentives promised to investors in the gas sector were a higher capital allowance, investment tax credits and lower royalty in comparison with oil as well as effective monitoring of oil companies` pledge to eliminate gas flaring in the country by 2008.

As a result of these directives and incentives, together with mounting pressure by environmentalists, all the major oil producing companies are executing projects aimed at substantially reducing the amount of gas flared in the course of their operations. Several of the oil JVs have plans for using the gas currently flared and are committed towards utilising 100% of associated gas for commercial or productive purposes by 2010. In 1999, Mobil declared its intention of cutting gas flaring to 10% by 2004.

The Nigeria Gas Company (NGC) has in place more than 1,000 km of pipeline with seven gas systems and fourteen compressor stations. About 75% of NGC’s sales are to four thermal power stations run by the Nigerian Electrical Power Authority. The major internationals have set up a number of gas projects.

The most ambitious of these is the Bonny Island LNG facility which is estimated to cost $3.8 billion. Nigeria Liquified Natural Gas Corporation (NLNG) comprised of the NNPC (49%), Shell (25.6%), Elf (15%) and Agip (10.4%) is developing the project. Initially the facility will be supplied from dedicated gasfields but NLNG intends to use at least 50% associated gas which is currently flared. The first two trains are complete and the third train was commissioned in 1999 for completion at the end of 2000. With three trains operational it will be possible to run the entire LNG facility on associated gas.

The first exports of gas from the facility began in October 1999, with the first shipments to Spain, Italy and Turkey, under long term purchase agreements.

The Escravos gas project (EGP) is a joint venture between NNPC (60%) and Chevron (40%). Phase I has been completed at a cost of $570 million and produces 165 Mmcf/d of associated gas from the Okan and Mefa fields. Phase II is under construction and was expected to come on line at the end of 1999, with phase III (under engineering) expected to start up in 2004.

In June 1999, Chevron and Sasol signed a JV to construct a gas-to-liquids (GTL) plant which is expected to use Sasol technology and be sited close to Chevron’s EGP facilities in the Niger Delta region.

The West African Gas Pipeline (WAGP) will be used to supply Benin, Togo and Ghana. The project was first mooted in 1995. A feasibility study was completed in 1999 with the World Bank stating that the countries could save about $500 million in primary energy costs over 20 years. In November 1999, the US Export Import Bank expressed interest in maintenance financing of the WAGP.

Shell, Elf Petroleum Nigeria, and Mobil all have joint ventures with NNPC to improve gas utilisation. Shell’s Odidi project is expected to come online at the end of 2000, and harness flare-gas. Elf is to invest $100 million in the second phase of its Obite gas project. Mobil is in a joint venture with NNPC in the Oso NGL project located offshore Nigeria. The Oso project reached its full capacity in 1999.

Phillips Consulting is a world-class management consulting firm who specialise in assisting foreign companies to do business in Africa.

The CWC group is hosting the Nigeria Oil & Gas 2005 Conference.

Shaun Bakamoso

Greetings. I'm Shaun Bakamoso, and I'm thrilled to be your guide through the dynamic world of business news in South Africa here at With a passion for staying informed and a keen interest in the ever-evolving landscape of business, I've dedicated myself to providing you with timely, insightful, and comprehensive coverage of the latest developments impacting the South African economy. / Instagram