Germany’s Quest for Nigerian Gas: Balancing Energy Security and Economic Growth

German Chancellor, Olaf Scholz was at the State House on Sunday, October 29 on a courtesy visit to President Bola Ahmed Tinubu.

The discussions between both leaders had been centred around investments and collaboration; one of which was natural gas.

Scholz indicated an interest in Nigeria’s natural gas resources.

According to him, it would be a good idea for more Nigerian states with natural gas to target the export market because it is better to use the capacities where they are.

The recent visit of the German Chancellor to Nigeria was eagerly anticipated due to the critical situation caused by disruptions in gas supply, primarily because of the Russian 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 ThePressNG 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:

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.