Nigeria’s gas production declined by 4.2 billion cubic metres in 2013

Oct 01, 2014 12:00 AM

In 2013, Nigeria’s natural gas production levels dropped by 9.8 percent or 4.2 billion cubic metres, from the 42.6 billion cubic metres marketed in 2012, according to OPEC’s 2014 Annual Statistical Bulletin.

Despite ranking behind Nigeria on the gas reserves list, Algeria and Egypt, with production of 79.6 and 57.6 billion cubic metres of natural gas respectively, out-sold Nigeria. In an analysis of 10 African gas producing nations, Nigeria ranked third in terms of 2013 marketed output with 38.4 billion standard cubic metres.

Algeria’s marketed output of 79.6 billion cubic metres was twice Nigeria’s. Algeria is the leading natural gas producer in Africa, the second-largest natural gas supplier to Europe, and is estimated to hold the third-largest amount of shale gas resources in the world, according to the United States Energy Information Administration (EIA).

In the ranking of world proven natural gas reserves by country, Nigeria is the largest in Africa with 5.1 trillion standard cubic metres (and the 7th largest globally), ahead of Algeria (second) and Egypt (third). Libya and Angola complete the top five.

The fall in natural gas production was not unconnected with the decline in crude oil output, which experienced a decrease of 10 per cent or 200,000 barrels per day. This is because the bulk of Nigeria’s gas being mined is associated, often treated as a by-product while drilling for oil. Therefore, the movement in gas output is often in tandem with the trend in oil production. Furthermore, gas produced is not often equal to gas sold, as a proportion of gross production is usually subjected to flaring, shrinkage and reinjection purposes. Consequently, of Nigeria’s gross production of 79.6 billion cubic metres, only 48 per cent was sold.

Out of the gross quantity produced, the country exported 64 per cent or 24.5 billion cubic metres making Nigeria the second highest gas exporter in Africa after Algeria, based on an analysis of data on 7 gas exporting countries provided by OPEC. However, Nigeria exported 15 per cent less gas than its previous year’s figure of 28.2 billion cubic metres. A huge chunk of the decline was on account of the reduced demand by the country’s traditional export supply markets such as the United States’ due to local development and drilling of shale rock formations for unconventional gas.

Overall, there was a relatively downward movement in output across African producing countries with the exception of Angola. This general decline is critical, considering the fact that gas consumption in Africa grew by 7.5 per cent in 2013 leading the global rise in consumption. Going forward, a rapid population increase, as well as rising rates of urbanisation and economic activity will lead to a surge in energy demand, according to Fatih Birol, Chief Economist at the International Energy Agency (IEA).

In fact, British Petroleum’s Energy Outlook reiterates that stance projecting that in 2035; Africa will have 21% (1.8 Billion) of the world’s population compared to 15 per cent today. The region will also account for 44 per cent of the global increase. The report further states that Africa currently exports a significant amount of its energy production (51 per cent), but growing domestic demand will reduce this ratio to 36 per cent by 2035.

Despite the general decline in Africa’s natural gas supply, Angola was the bright light on the horizon with significant production growth of 22 per cent in 2013. The country completed a US$10 billion natural gas processing facility and shipped its first LNG cargo to Petrobras, Brazil in 2013. The Angola plant has the capacity to produce 5.2 million tonnes per year of LNG, 63,000 barrels per day of natural gas liquids for export, and 125 million cubic feet of natural gas per day for domestic consumption. The country is one of the two newest members of OPEC (the other being Ecuador), joining the oil cartel in 2007. Angola is Africa’s second largest oil producer, behind Nigeria.

In terms of gas, however, with production of 925 million cubic metres in 2013, Angola is relatively new to the market. In nominal terms, its output is still way behind its Sub-Saharan counterparts, including Nigeria with marketed production of 38.4 billion cubic metres in the same period.

Meanwhile, among the four African OPEC member-countries, gross production in 2013 equalled 292.75 billion cubic metres, which was a decline of 3 percent from the previous year. This cumulative production accounted for 29 percent of OPEC’s output for the period. Nigeria with gross production of 79.6 billion cubic metres accounted for the highest drop when compared with its OPEC counterparts in Africa, with a decrease of 6.2 percent. Of OPEC Africa’s gross production, 47% or 137.4 billion cubic metres was marketed. This represented a fall of 7.1 percent from the previous year’s total of 147.9 billion cubic metres.

Again, Nigeria and also, Algeria was attributable for the bulk of the decline with decrease of 9.8 and 8.5 percent respectively. Algeria’s gas output has been on a steady downward slope since 2011. The country’s oil & gas industry has been plagued by delays in new production and infrastructure projects; militant attacks on existing installations and increased competing demand for electricity domestically.

Nevertheless, these two countries still account for the largest share of 86 per cent of natural gas produced among OPEC’s African members. In addition, Nigeria’s proportion of flared gas has been dropping since 2011, reducing by an average of 8 per cent in the last three years. Overall, optimism by energy economists for the continent’s gas sector is high, with new markets for gas supply and demand opening up. The BP report states that the region will remain an important source of global natural gas supply, accounting for 9 per cent of natural gas production in 2035.

OMOSOMI OMOMIA

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