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Unlocking Non-Associated Gas Reservoirs to Power Future Energy

Demands in Nigeria

Chukwu Emeke

, Emmanuel Favour Oluwadarasimi

, Adeyeye Isaac Uwanaobong

, Chioma Maduewesi

Emerald Energy Institute, University of Port Harcourt, Nigeria

University of Lagos, Nigeria

University of Nigeria, Nsukka, Nigeria

DOI : https://doi.org/10.51583/IJLTEMAS.2024.131106

Received: 11 November 2024; Accepted: 26 November 2024; Published: 02 December 2024

Abstract: Nigeria faces a significant energy crisis characterized by a substantial gap between energy supply and demand, driven

by rapid population growth, urbanization, and industrial expansion. With a projected electricity demand exceeding 50,000 MW

by 2030, the country must explore underutilized resources to meet its energy needs. Non-Associated Gas (NAG) reservoirs

present a viable solution, offering a cleaner and more stable fuel source than traditional fossil fuels. This paper examines the

historical context of Nigeria's gas policies, highlighting key legislation such as the Petroleum Act, the Associated Gas Re-

Injection Act, and the recent Petroleum Industry Act (PIA) of 2021. It discusses the challenges faced in gas utilization, including

infrastructure deficits and investment barriers, while emphasizing the economic, environmental, and social benefits of developing

NAG. The study also outlines recommendations for stakeholders to enhance investment in NAG infrastructure and create a

favourable regulatory environment. By leveraging NAG, Nigeria can not only address its immediate energy crisis but also

promote sustainable economic growth and improve energy security for its citizens.

Key Words: Non-associated, Reservoir, Energy, Domestic-Gas, Reserves, Policy, Deep-water.

I. Introduction

Energy is a building block for social and economic growth, and likewise the development of a nation hedges around it (Oyedepo,

2012). Approximately 600 million people in Africa lack access to electricity, with three out of five individuals in Sub-Saharan

Africa facing this challenge. Despite the continent's rich energy resources like solar, biomass, natural gas, oil, coal, and Uranium,

Africa has not yet achieved energy independence (Williams et al., 2019). Nigeria is one of the fastest-growing nations globally,

with an estimated population of 220 million and a growth rate of 2.6% per year. (Okakwu et al., 2019) Energy consumption has

been established to be a major determinant of economic growth according to the endogenous growth theory (Okoye et al., 2021).

Nigeria an oil-rich country, has been experiencing an energy crisis for a long time due to insufficient electricity generation, 85

million Nigerians don’t have access to grid electricity which represents 43% per cent of the country’s population and makes

Nigeria the country with the largest energy access deficit in the world (World Bank Group, 2021).

Nigeria has been able to achieve a power mix in recent times, initially dominated by hydro, gradually diversifying as solar PV and

natural gas increasingly make headways into the power system. 70% of power generation in Nigeria comes from Gas. Natural

Gas will be a jewel for the Nigerian energy sector in years to come. Power generation and domestic fuel have been identified as

major drivers in the domestic demand for Natural gas as it is believed that sufficient and stable power will revive other sectors

(Oluogun et al., 2021). Gas produced in Nigeria is either exported or used domestically for power generation, as feedstock for

gas-based industries (such as petrochemicals and fertilizer production), industrial heating, and as fuel for natural gas vehicles.

Liquefied Petroleum Gas (LPG) derived from gas processing is also used for cooking and power generation. (Emeke, 2022).

Nigeria’s gas reserve is estimated to hold a total of (209.26 TCF), with (102.59TCF) being associated gas (AG) and (106.67TCF)

as non-associated gas (NAG), thereby topping the chart of gas reserve holders in Africa and position 10 in the world (NUPRC,

2024). It holds more non associated gas in its reserve. In 2023, A total of 2.503 TCF of associated and non-associated gas was

produced with an estimated daily average production of 6.857 BCF/D and with the daily average of associated and non-associated

gas at 4.213BCF/D and 2.644BCF/D representing 61.4% and 38.6% respectively. (NUPRC, 2024). This fact shows that despite

having a larger estimated NA gas reserve, the total quantity produced in 2023 as compared to Associated gas falls short by 22.8%,

and this displays a significant underutilization of the non-associated gas reserve.

Non-associated gas reserves are primarily developed to produce natural gas, and there may or may not be condensate production

with the gas, while associated gas is not primarily developed for gas production. Despite Nigeria holding a larger share of AG in

terms of production, the economic drivers for monetizing gas from these two basic sources are quite different and likely to lead to

different gas Utilization routes (PetroWiki, 2015). The Large AG relative to Non-associated Gas is attributed to the activities of

the multinational oil companies, whose primary goal is oil exploration and production (PWC 2020).

From Africa's Energy Outlook, it is stated that in Nigeria, the Demand for natural gas in 2023 reached around 18.7 billion

standard cubic meters and has been estimated to reach around 30 billion standard cubic meters by 2040 (Africa Energy Outlook

2019 Analysis - IEA, 2019). According to IEA, chemicals production will triple by 2040 with new gas-based methanol and

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ammonia plants, and the number of vehicles could grow from 14 to 37 million, despite the progress on access to clean cooking

services, almost three-quarters of the population might still lack access in 2030 but universal access can be achieved through

greater household access to gas networks and LPG in the main cities, and to improved cookstoves in rural areas. There is a huge

gap between current energy production and future energy demands and it is glaring that the development of non-associated gas

reserves plays a pivotal role in filling this gap, availability of associated gas is largely dependent on the continuous exploration

and production of oil.

In this context, Non-Associated Gas (NAG) emerges as a vital resource for meeting future energy needs. The Nigerian

government has recognized this potential by declaring 2021 to 2030 as the "Decade of Gas Development." This initiative aims to

strategically exploit the country's vast natural gas resources and integrate them into various sectors such as power generation,

agriculture, and transportation.

The development of NAG not only promises to alleviate current energy shortages but also offers a cleaner alternative to

traditional fossil fuels. As Nigeria pursues its goal of achieving net-zero carbon emissions by 2060, natural gas is positioned as a

transitional fuel that can support economic growth while reducing greenhouse gas emissions. Furthermore, ongoing divestments

by international oil companies present opportunities for local entities and investors to capitalize on underdeveloped NAG

reserves.

This paper aims to highlight the size of the energy demands in Nigeria and how investments in NAG reserves are critical in

unlocking it and ensuring energy security in Nigeria, by quantifying the current and projected energy demands, assessing the

potential of NAG reservoirs in meeting these demands, and identifying the investments required to unlock these resources.

II. Literature Review

Global Energy Demand Trend.

The ongoing spike in the global energy demand is projected to continue until 2040 (Energy - ISS African Futures, 2024). It is

estimated that 2 out of 10 (approximately 760 million) people in the world still live without access to electricity, while 2.6 billion

people engage in polluted and harmful means of cooking which are damaging to health (Panos et al., 2016).

The correlation that exists between HDI (Human Development Index) and per capita energy consumption serves as a powerful

and reliable indicator that sufficient energy can spur rapid development in nations at low-income levels. It was pointed out that a

whopping 8.62 barrels of oil equivalent (BOE, amounting to 100 gigajoules) per person will allow for this rapid development and

only six African countries (Libya, Mauritius, South Africa, Seychelles, Botswana, and Namibia) have per-capital demands above

the threshold of 8.62BOE in 2022 (Energy - ISS African Futures, 2024), thus, Nigeria inadequacy in meeting her energy demand

with oil given the population growth.

Globally, in a bid to resolve the ever-growing energy demand, which is estimated to be 17,487 Mtoe by 2040, Ahmad & Zhang,

2020, concluded that the global demand for gas will increase by more than 50% in 2040, while the demand oil and coal may only

increase by 15%, to strengthens the view that non-associated gas investments have to be explored particularly in Nigeria, given

that continued and sustainable investments in oil exploration are not guaranteed, particularly by the IOCs and NOCs who would

be looking to further strengthen their company's profile and gradually drifting from exploration of crude oil for climate change,

and among other reasons. Above all, Nigeria is on course to becoming a gas economy.

Nigeria Energy Landscape

Nigeria recently experienced intense divestment in its oil and gas sector, which led to a significant decrease in oil production

output (Ekong, 2023), since the all-time low in September 2022 with the lowest production volume of 0.94mbdp. There has been

a significant improvement with production reaching a two-year high of 1.43mbpd in January 2024 (Proshare, 2024), irrespective

of the recent setbacks in production volume which were attributed to Issues on the Trans Niger Pipeline and maintenance

activities by oil as well as the Niger delta youth restiveness (Chukwu, 2023).

Currently, there are five (5) International Oil Companies (IOC) present in Nigeria, Chevron, Eni, ExxonMobil, Shell, and

TotalEnergies. These IOCs are responsible for 45% and 40% of oil production and gas production respectively (Adekoya 2022).

In 2023, 43 companies produced associated gas, which is 61.4% of the entire gas production for the year, 15 companies produced

NAG with a share of 38.6% out of the 47 companies reported in the annual gas production from the regulators. The top 5 NAG

producers include Shell, Chevron, TEPNG (TotalEnergies E&P Nigeria Limited), NEPL, NAOC, and Seplat, with NEPL and

Seplat as the only indigenous companies among the top 6 (NUPRC, 2023), following its recent ANOH plant which was set to be

delivered in Q1 2024 but is being revised due to a delay in the Nigerian Gas Infrastructure Company (NGIC) OB3 pipeline

construction delay which has been attributed to poor weather and Insecurity. This particular project is expected to have 58% of its

gas supply from Non-Associated Gas reserves driven by onshore developments like ANOH and Ubete, and other offshore

developments.

This further shows that improvement, especially in the production of Non-Associated Gas (NAG) reserves is crucial, considering

the large NAG reserve in Nigeria. Indigenous companies are encouraged to spring up to attain a cumulative production value that

exceeds that of the IOCs. Seplat has shown significant progress in the gas business recently and it is expected to meet the demand

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from NLNG Train 7 & Nigeria/Morocco Gas pipeline (Anyaogu, 2023). It is believed that through major projects like the NLNG

Train 7 and the NLNG Train 8, AKK pipeline between 2020 and 2030, a growth rate of 16.6 % annually is expected to compound

the annual growth rate of gas demands. It is a new dawn in the Nigerian gas business and there is room for everyone to be a part

of it. Using gas to power the transport sector also opens another window to expand the domestic gas demand envelope

(Emeke,2024)

Nigeria Gas Policy Landscape

The Petroleum Act (PA) which was the principal legislation enacted in 1967 was believed to hold no room for gas, as gas was

considered to be a mere byproduct of Crude oil (Dike & Osinachi-Nwandem, 2023). The first major gas legislation the Associated

Gas Re-Injection Act (AGRA) in 1979, was aimed at controlling gas flaring. However, this law was not as efficient as expected

due to the inability of NNPC to meet the cash obligation for building re-injection plants since NNPC was a joint operator with

these companies under the JV partnership arrangement (Dike & Osinachi-Nwandem, 2023).

In 1992, the Associated Gas Framework Agreement was enacted aimed at introducing fiscal incentives for the utilization of

natural gas, and subsequently incorporated into the Petroleum Profit Tax Act of 2004 (PPTA). In 2008, the National Domestic

Gas Supply and Pricing Regulation was enacted which divided the domestic gas market into 3 groups, namely; gas-to-power, gas-

as-feedstock, and gas-as-alternative fuel with their respective pricing regimes, this was aimed at increasing the use of Nigeria’s

energy mix (PWC 2020).

The Nigeria Gas Master Plan implemented in 2008 aimed at making Nigeria a major player in the international gas market,

through the export of LNG, as well as establishing a solid framework of gas infrastructure expansion within the domestic market,

which is yet to deliver on all its targets. According to the Ex-NNPC Group Executive Director, Dr. David Ige, Nigeria has not

grown gas for the last seven years, except for the domestic market which has grown only about 3% which is also surrounded by

infrastructure challenges such as pipelines which generally points to low level of investments in the field. Despite the PIA,

reserve accessibility is an issue that must be resolved, most of these gas reserves are stranded, taking cues from the United State

where reserve accessibility is never an issue is a way to start. Also, Infrastructure investment must consider market benefits, as

these benefits will drive its viability (Thisdaylive, 2024).

The emergence of the PIA enacted in 2021 under the National Gas Policy of 2017 made provision for gas as a major source of

energy, encouraging gas utilization and boosting the confidence of investors. The value attached to gas was further boosted by the

declaration of 2020-2030 as the ‘Decade of Gas’ in Nigeria. This is a result of Nigeria's commitment to the United Nations

Convention Framework on Climate Change (UNCFCC) 2015 in a bid to ensure energy security and sustainability. One take away

from this policy is the urgency to expand access to clean household cooking energy source in Nigeria as a way of reducing the

emission levels from traditional sources (Emeke, 2023).

The impact of the PIA is already becoming evident, as at the end of 2023, reports showed that out of the forty-three (43) FDP

(Field Development Plan) applications processed in 2023, Thirty-one (31) FDP was approved, which is about 55% increase in

FDP approvals relative to the year 2022. Also, seven (7) gas well proposals were received of which five (5) were approved with

three (3) belonging to Shell and the remaining two awarded to NAOC and Seplat respectively. These wells are expected to

produce a daily average of 280.15MMscf/d and have a total estimated volume of 730.52 Bscf of gas (NUPRC 2023).

In addition to the policies in Nigeria, President Bola Ahmed Tinubu signed three Executive Orders on February 28, 2024. This

action is part of the Nigerian government's effort to enhance the investment environment in NAG and improve its overall standing

(KPMG 2024).

1. Oil and Gas Companies (Tax Incentives, Exemptions, Remissions, etc.) Order, 2024

2. Presidential Directive on Local Content Compliance Requirements, 2024

3. Presidential Directive on Reducing Costs in the Petroleum Sector.

Despite the Presidential Executive Order (PEO) seeming to receive public affirmation, it is not without certain criticism.

According to Prof Iledare, there were certain misalignments in the PIA, which perhaps led to the agitation for the PEO 2024 for

NAG, such misalignment as the loophole created by the differentiation of natural gas royalty by market, i.e. domestic or

international, the special treatment of the deep offshore terrain concerning the oil royalty scheme based on two tranches rather

than three, and the truncation of the dual tax system called Nigeria Hydrocarbon Tax (NHT) which was designed to protect the

company income tax act(CITA) However, he believes that targeting NAG with PEO 2024 instead of amending the PIA 2021 is,

perhaps, ill-advised judging from the state of the economy of the Federation.( https://www.thevaluechainng.com)

Gas Utilization in Nigeria

Nigeria currently ranks as the most populous country in Africa and sixth in the world, with an approximate population of over

230 million (Worldometer, 2024). This further establishes the fact that the domestic gas market is readily available. In 2023,

2.503 TCF of gas was produced, and about 2.316 TCF (92.54%) was utilized, with the highest percentage going to export sales

(36.5%), followed by domestic sales (28.8%), gas re-injection (23.6%), fuel gas (6.2%) and gas lift (4.9%) (NUPRC 2023).

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Table 1.1 Gas Utilization Profile for the year 2023 (Source: NUPRC, 2023).

Gas Utilization Category

Volume (MMScf)

% Utilization

Fuel Gas

143,604.09

6.2%

Gas Lift

113,589.66

4.9%

Gas Re-Injection

545,995.89

23.6%

Domestic Sales

666,384.76

28.8%

Export Sales

846,471.85

36.5%

Total

2,316,046.25

92.54%

According to the National Domestic Gas Supply and Pricing Regulations (2008), the domestic gas market was divided into three

divisions from a gas pricing strategy perspective. The National Domestic Gas Supply and Pricing Regulations categorize the

domestic gas market into three sectors. The Strategy Domestic Sector which focuses on sectors that have a significant direct

multiplier effect on the economy, i.e. Gas-to-Power, aiming for low-cost gas access to drive economic growth, although power

generation remains constrained by supply and infrastructure challenges, with a peak generation of 5313 MW compared to a

demand of 19,798 MW (Agusto & Co Store, 2023). The Strategic Industrial Sector targets industries that utilize gas as a

feedstock, promoting local production and exports while fostering job creation and competitiveness in the global market. Finally,

the Commercial Sectors use gas as an alternative fuel, offering a direct revenue stream due to their capacity to absorb higher

prices compared to competing fuels like LPFO. Together, these sectors highlight the diverse roles of gas in enhancing Nigeria's

economy.

The National Domestic Gas Supply and Pricing Regulations of 2008 have been bolstered by the introduction of the Gas Pricing,

Domestic Demand and Delivery Regulations, as authorized by Section 33 of the Petroleum Industry Act, 2021. These new

regulations aim to establish a framework for regulating marketable natural gas prices specifically for strategic sectors outlined in

the Act. Additionally, they seek to identify unregulated markets and provide necessary provisions for those sectors. This

framework is designed to enhance market efficiency and ensure fair pricing within the domestic gas sector. (“Gas Pricing,

Domestic Demand and Delivery Regulations,” 2021)

Figure 1: Nigeria Gas Value Chain (Source: PWC Analysis, 2020)

III. Methodology

This study used a mixed-methods approach to quantify Nigeria's existing and forecast energy demands. This technique combined

qualitative and quantitative data, allowing for a thorough examination of the several elements shaping Nigeria's energy landscape.

To lay a solid foundation, secondary data were gathered from current literature, reports, and studies, with a focus on Okunbanjo et

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al. (2020), Oyedepo (2012), and Sambo et al. (2008). This broad literature analysis contributed to a better understanding of

current energy demand estimates and the contextual elements that influence these demands.

Building on the foundational data, the study used models created by the Energy Commission of Nigeria (ECN), notably the

Model for the Analysis of Energy Demand (MAED). This model was used to generate forecasts of future electricity demand

under various economic conditions. The study used a scenario analysis methodology to examine four different economic growth

scenarios: Reference, High Growth, Optimistic 1, and Optimistic 2. The study efficiently summarized energy demand estimates

using descriptive statistics, allowing for a more precise assessment of projected power consumption trends.

The methodology used probabilistic growth modelling to analyse the prospective contributions of Nigeria's Non-Associated Gas

(NAG) reserves to fulfilling future energy demands. This entailed using a triangular distribution model to estimate the expansion

of NAG reserves, drawing on information from papers by Omotosho and Akinpelu (2017) and other government sources. Monte

Carlo simulations were also used to offer a statistical study of NAG reserve growth, resulting in a range of estimations that

account for data variability and uncertainties. This combined technique of probabilistic modelling and simulation improved

forecast accuracy while also allowing for a more nuanced understanding of the reserves' possible impact on Nigeria's energy

future.

IV. Results and Discussion

Quantifying the Current and Projected Energy Demands

Energy demand in Nigeria is an important component that shows the consumption of energy caused by human activity. Currently,

yearly energy demand is anticipated to be 17,520 MW, with a peak generating capability of around 5,300 MW (Okunbanjo et al.,

2020). This enormous disparity underlines the country's difficulty in satisfying its energy needs in the face of a constantly rising

population and economy. The necessity for stable energy sources to enable development emphasizes the urgency of addressing

this discrepancy.

Nigeria's current energy landscape is defined by a population that is expected to expand from 115 million in 2000 to 281 million

by 2030, representing an average annual growth rate of 2.86% (Oyedepo, 2012). This demographic transition is a primary driver

of energy consumption, according to research conducted by Sambo et al. (2008), who note that, while population growth is

important, economic activity and structure are the most important variables. As the economy grows, population growth and

economic development will have a greater influence on energy consumption patterns, demanding strategic planning to bridge the

growing demand generation gap.

Electricity is the most frequently used and desirable energy source worldwide (K.A. Khan et al., 2018). It is a fundamental

prerequisite for economic development, national development, achieving the Sustainable Development Goals (SDGs), and

maintaining a sufficient level of living. To more properly evaluate Nigeria's future energy demands, models established by the

Energy Commission of Nigeria (ECN) were used, which were based on power consumption, notably the Model for the Analysis

of Energy Consumption (MAED). The investigation looked at four economic scenarios:

1. Reference Scenario: 7% GDP growth

2. High Growth Scenario: 10% GDP growth

3. Optimistic Scenario 1: 11.5% GDP growth

4. Optimistic Scenario 2: 13% GDP growth

Table 1.1 Electricity Demand Projections Per Scenario (MW) (Source: Sambo et al. 2009)

Electricity Demand Projections Per Scenario (MW)

Scenario (GDP Growth %)

2,010

2015

2020

2025

2030

Reference (7%)

15,730

28,360

50,820

77,450

119,200

High Growth (10%)

15,920

30,210

58,180

107,220

192,000

Optimistic 1 (11.5%)

16,000

31,240

70,760

137,370

250,000

Optimistic 2 (13%)

33,250

64,200

107,600

172,900

297,900

The predictions show a significant growth in electricity demand. For example, the reference scenario estimates power demand at

50,820 MW in 2020, whereas the optimistic scenario with a 13% GDP growth might reach 107,600 MW in the same year, more

than 50% higher than the reference scenario. This association between economic growth and energy consumption emphasizes the

importance of Nigeria fully utilizing its energy producing capability to support both economic development and rising electricity

demand.

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Figure 2.1 The energy demand projections for the four economic growth scenarios. (Akorede et al., 2016)

Assessment of the Potential of NAG Reservoirs in Meeting These Demands

According to a paper by Omotosho and Akinpelu (2017) from the University of Ibadan, Nigeria's total gas reserves are estimated

to be at 186 trillion cubic feet. Approximately 54%, or roughly 100 Tcf, are available for short- to medium-term use. The

remaining reserves are constrained by infrastructure limits and legal barriers, such as OPEC output quotas. Significantly,

Nigeria's non-associated gas (NAG) deposits, primarily in the Niger Delta, constitute an underutilized resource that, if properly

harnessed, could significantly meet the country's energy demands.

Projected Expansion of NAG Reserves

Omotosho and Akinpelu's (2017) analysis predict significant development potential for Nigeria's NAG reserves, which are

currently estimated at 18.8 Tcf. Using a probabilistic growth model based on triangular distribution, the study predicts that NAG

reserves will increase significantly by 2050. The model includes minimal, most likely, and optimistic growth rates of 2.5%, 5%,

and 7.5%, respectively, in line with Nigeria's Gas Master Plan development targets. Monte Carlo simulations of these growth

rates show that NAG reserves might increase by a further 78.39 to 89.80 Tcf with a 90% confidence interval, depending on

supported infrastructure and economic incentives.

Figure 2.2 Monte Carlo Simulation Results for NAG Reserves Growth in 2050

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Meeting Nigeria’s Future Energy Demand with NAG Reserves

By combining deterministic AG models and probabilistic NAG projections, the study predicts that total gas reserves would reach

roughly 267 Tcf by 2030 and potentially 278 Tcf by 2050. This expanded reserve base is consistent with Nigeria's ambitions for

gas-to-power projects, which include unlocking 3.1 billion cubic feet per day of gas to attract $14 billion in foreign direct

investment, creating over 2 million jobs, and increasing federal government revenue by $12 billion (Agbonifo, 2015), as well as

other industrial and residential gas utilisation plans.

However, getting into these assets requires significant infrastructure construction, such as pipelines, gas processing facilities, and

export terminals, as well as a transformation in the regulatory and economic landscape to promote long-term investment in NAG

fields. The Nigeria Gas company (NGC) is poised to increase the efficiency of gas distribution along its grid with the plan to

install additional compression stations. More importantly, is the ongoing Ajaokuta-kaduna- Kano gas pipeline (AKK) nearing

completion meant to unlock the gas demand envelope in the Northan part of Nigeria. This gas backbone infrastructure will

stimulate economic growth along with improving gas export to the west African industrial hub.

Identifying the Investments Required to Unlock These Resources

To unlock Nigeria's gas resources and use them for energy development, the Nigerian government has implemented strategic

investments and reforms via executive orders signed by the President on July 6, 2023. These initiatives are intended to improve

the investment climate, attract both domestic and international investors, and ensure effective gas utilization to meet Nigeria's

energy requirements. The primary investments needed to achieve these objectives are as follows:

Tax Credits for Non-Associated Gas (NAG) Greenfield Developments

The Tax Incentives Order establishes tax benefits expressly for NAG greenfield investments in onshore and shallow water zones,

with beginning production deadlines in 2029. This policy encourages enterprises to create new gas projects by providing gas tax

credits. The credit is based on the field's hydrocarbon liquids (HCL) content and is determined at a rate of $1.00 per thousand

cubic feet or 30% of the fiscal gas price (whichever is lower) if the HCL content is 30 barrels or less per million standard cubic

feet. Fields having an HCL content of up to 100 barrels per million cubic feet are eligible for a $0.50 per thousand cubic feet tax

credit, which equals 30% of the fiscal gas price. These tax credits, which are valid for up to ten years, will be converted to tax

allowances after the initial period, promoting long-term investments in gas extraction.

Midstream Capital and Gas Utilization Investment Allowance

To encourage more investment in midstream gas projects, a gas utilization investment allowance is available for capital

expenditure on new and continuing midstream oil and gas industry projects. Companies that invest in infrastructure, such as gas

processing plants and transportation equipment, are entitled for a 25% allowance on real expenditures, which increases project

affordability. This allowance is only applied once the Companies Income Tax Act's tax-free period expires, incentivizing prompt

capital investment in Nigeria's midstream sector. The Federal Inland Revenue Service (FIRS) and the Nigerian Midstream and

Downstream Petroleum Regulatory Authority (NMDPRA) are in charge of implementing this allowance and ensuring its

appropriate implementation to increase gas availability for residential usage.

Incentives for Deepwater Oil and Gas Projects

Recognising the capital-intensive nature of deepwater oil and gas extraction, the presidential orders call for competitive fiscal

incentives to make these projects financially viable. These incentives are designed to ensure that deepwater investments provide a

positive internal rate of return (IRR), balancing investor profitability with Nigeria's strategic energy objectives. While these

incentives are being finalized, the Ministry of Finance Incorporated and the Ministry of Petroleum Incorporated are directed to

work with the Nigerian National Petroleum Corporation Limited (NNPC) to establish commercial support mechanisms for new

and existing deepwater investments. This technique promotes exploration in Nigeria's deepwater areas, diversifying gas supply

sources and meeting domestic and export gas demand.

Reduction of Contracting Costs and Timelines

Simplifying contractual procedures is crucial to reducing costs and expediting project timelines, according to the Presidential

Directive on Contractual Reforms. The rule increases to $10 million the minimum amount required for approval of Production

Sharing Contracts (PSCs) and Joint Operating Agreements (JOAs). By reducing approval-related delays, this modification

enables quicker project development. Furthermore, it is the duty of Nigerian Upstream Investment Management Services Limited

(NUIMS) and Nigerian National Petroleum Corporation Limited (NNPC) to ensure that contract approvals are issued promptly at

every level, from prequalification to final clearance, within 15 days. This change brings Nigeria's contracting practices into

compliance with international norms while lowering operating costs and expediting project timelines.

Local Content Compliance and Capacity Building

The Local Content Directive requires that all Nigerian Content Plans (NCPs) conform with the actual capacities of in-country

enterprises, fostering genuine local content while maintaining investment feasibility. The Nigerian Content Development and

Monitoring Board (NCDMB) would review enterprises' operational capacity for certain operations, ensuring that contractors meet

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local content standards. This order stimulates investment in local industries, promotes skill development, and decreases reliance

on foreign services by establishing a strong domestic supply chain. Furthermore, by ensuring that local companies make genuine

contributions to project outcomes, the government presents Nigeria as a more self-sufficient actor in the oil and gas industry,

capable of financing large-scale gas development projects.

These executive orders provide a comprehensive strategy for establishing an investment-friendly climate and tackling financial

and regulatory difficulties in Nigeria's oil and gas sector. Nigeria intends to harness its massive gas reserves and establish a

sustainable energy future by focusing on tax incentives, contract efficiency, and local content development.

Economic Impact and Job Creation

According to estimations, domestic exploitation of Nigeria's recoverable proven gas reserves may generate a Gross Value Add

(GVA) of around $18.3 billion annually, demonstrating the substantial economic impact of the country's gas potential (PWC,

2020). Numerous economic contributions, including direct, indirect, and induced value additions, are included in this statistic.

The immediate advantages of gas production and consumption operations are reflected in the direct economic value addition,

which comes to about $10.5 billion. The estimated US3.4 billion in indirect contributions come from the activities of the gas

industry affecting other sectors, such as manufacturing and services. Additionally, a $4.4 billion induced value addition

demonstrates the financial gains from spending money earned in the gas sector. This complex economic impact highlights how

vital the gas industry may be to bolstering Nigeria's overall economy, particularly in a setting, where moving away from reliance

on oil is becoming more and more significant.

Furthermore, a significant part of Nigeria's economic impact from gas is the creation of jobs. It is anticipated that optimizing

domestic gas use will maintain around 6.5 million Full-Time Equivalent (FTE) jobs annually. In order to address Nigeria's high

unemployment rates, especially among the youth, who comprise a significant fraction of the population, this job development is

essential. In addition to auxiliary industries like manufacturing and services that support the gas value chain, the growth of the gas

industry may directly lead to job opportunities in gas exploration, production, distribution, and consumption.

Figure 2.3 Economic Impact of Domestic Gas Utilization (Source: PWC Analysis, 2020)

Environmental advantage

Nigeria through her policy instrument is currently implementing her flare gas commercialization programs which has

significantly reduced her flare gas exposure. With growing demand for domestic gas and ongoing infrastructural development,

Gas flaring will be minimizing leaving us with a cleaner environment. Energy transition using natural gas as its major source of

fuel compared to the traditional crude oil will be more friendly to the environment on the long run. The environment gains if

Nigeria develops her massive gas resources rather than continuing with crude oil production.

INTERNATIONAL JOURNAL OF LATEST TECHNOLOGY IN ENGINEERING, 
MANAGEMENT & APPLIED SCIENCE (IJLTEMAS) 
ISSN 2278-2540 | DOI: 10.51583/IJLTEMAS | Volume XIII, Issue XI, November 2024 
www.ijltemas.in                                                                                                                                Page 59              
 
V. Conclusion and Recommendation 
It will take a systematic strategy to meet Nigeria's growing energy needs, including a detailed analysis of current and projected 
requirements, the exploitation of non-associated gas (NAG) reserves, and the acquisition of focused investments to release these 
resources. Nigeria currently needs a larger and more reliable energy supply  because its annual energy consumption of 17,520 
MW is significantly more than its peak output capacity of 5,300 MW. As the nation's population and economic activities increase, 
this disparity is expected to widen. Depending on GDP growth, projections indicate that energy requirements will range from 
119,200  MW  to  297,900  MW  by  2030.  These  projections  emphasize  how  important  it  is  to  upgrade  Nigeria's  energy 
infrastructure and capacity to meet the country's rising demand. 
Making full use of Nigeria's NAG reserves is essential to addressing this energy deficit. Omotosho and Akinpelu (2017) state that 
the nation's NAG reserves, currently estimated at 18.8 Tcf, have a great deal of room to increase and might reach 78.39 to 89.80 
Tcf by 2050. When paired with infrastructure investments, this reserve expansion is highly compatible with Nigeria's objectives 
of  boosting  gas-to-power  capacity,  drawing  in  foreign  direct  investment,  generating  employment,  and  gradually  shifting  the 
country's economy  away  from  its reliance on oil. By utilizing these reserves,  Nigeria's energy  landscape  might be  drastically 
changed. By 2030, total reserves could reach 267 Tcf, supporting both export and domestic markets. 
Realising  this  potential  takes  a  significant  investment.  The  Nigerian  government's  recent  executive  directives  and  strategic 
objectives  give  a  framework  for  creating  a  favourable  investment  climate.  Tax  credits  for  NAG  greenfield  developments, 
midstream  capital  investment  allowances,  deepwater  project  incentives,  contracting  changes,  and  local  content  standards  are 
among the most important incentives. These policies aim to attract foreign direct investment, improve local capacity, and shorten 
project deadlines, all while creating a projected 6.5 million jobs and delivering $18.3 billion in Gross Value Add (GVA) from 
domestic gas utilisation (PWC 2020). Nigeria is well-positioned to change its energy industry by taking a comprehensive strategy 
to assess energy demand, developing NAG reserves sustainably, and promoting investment. This plan is critical for closing the 
energy demand-supply gap, promoting sustainable economic growth, and assuring the energy security required to power Nigeria's 
future. 
A collaborative effort among stakeholders including the government, investors, and industry players is essential to realize this 
vision. Public-private partnerships (PPP) can facilitate the necessary investments in infrastructure such as gas processing plants, 
pipelines, and power  generation  facilities. Additionally,  Foreign Direct Investments (FDI) can  bring expertise and funding to 
accelerate the development of Nigeria's gas sector. This can be achieved by creating a conducive investment environment through 
pragmatic  policies  that  prioritize  the  interests  of  all  stakeholders,  free  from  political  power  struggles.  By  ensuring  that 
stakeholders’ mutual interests align  effectively  over time, it is possible to avoid negative  consequences or  inefficiencies in the 
long run regarding the utilization of natural gas resources. 
Therefore, unlocking Nigeria's NAG reservoirs offers a pathway to a more secure and sustainable energy future. All stakeholders 
must  come  together  to  create  a  favourable  investment  climate  that  encourages  the  exploration  and  utilization  of  these  vital 
resources. By doing so, Nigeria can not only enhance its energy security but also drive economic growth and improve the quality 
of life for its citizens.  
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