Abstract
Nigeria is the 2nd biggest natural gas producer in Africa, with much of it exported as LNG, some re-injected while a small fraction serves the domestic market. The volume supplied to the domestic market plays an outsized role in the energy mix and economy of Nigeria with over 90% supplied to thermal power plants and industrial clusters. As huge upstream gas projects continue to take Final Investment Decision, pipeline takeaway capacity grows and demand increases, the dependence on natural gas and preponderance in the energy mix will likely persist. Natural gas is the present and future of Nigeria's energy needs.
The domestic gas industry is evolving but has been fraught with challenges. Oil and gas infrastructure are often disrupted and production shut-in, mostly triggered by infrastructure unavailablity, environmental concerns and prioritisation of hydro power generation during River Niger's white and black floods, all of which come at a cost to upstream producers. Gas producers are often compelled to curtail production of gas plants (associated and non-associated) to avoid environmental disasters and prohibitive gas flare penalties. Can underground gas storage (UGS) be an opportunity for gas producers to guarantee continued operations during disruptions and provide buffer for national strategic benefits?
This paper seeks to explore the potential technical and economic dynamics of underground natural gas storage in Nigeria in the context of extant technical regulations, seasonal demand variations, gas flare penalties and local operating environment. The paper presents types of underground storages and recommends the most suitable, considers options for optimal location of UGS in Nigeria and undertakes an economic evaluation of a UGS project. The findings are further presented alongside the critical technical, regulatory and fiscal factors that may facilitate future investments and growth of underground gas storage in Nigeria.
The Interplay between Production and Underground Storage Rights in Alberta
