The Energy sector comprises the oil and gas as well as the power sub-sectors. It is one of the most important sectors to Nigeria because of its multiplier effect across all sectors of the economy, its contribution to government revenues, and its potential to spur significant economic growth. Nigeria has an abundance of most of the energy sources (fossil fuels, hydro, solar, tidal, geothermal and biomass) which if properly harnessed can meet the country’s energy needs in the short to medium term.
Oil and Gas Infrastructure
As at 2012, Nigeria’s oil reserves at present stand at 36.6 billion barrels while the gas reserves stand at 182.8 trillion cubic feet. Crude oil production delivers an average of 2.5 million barrels per day (mbpd). Nigeria installed refining capacity is 445,000 bpd, but the actual output of the refineries is as low as 45,000 bpd, which is insufficient to meet national demand and necessitates imports. Current capacity utilization at just above 30 per cent is significantly below international benchmarks, which typically operate at 95 per cent of installed capacity.
The Nigerian National Petroleum Corporation (NNPC) owns a 5,120 km network of pipelines from its refineries. The storage facilities owned by the NNPC include 258 tanks in 22 depots, with a combined holding capacity of 2.6 billion litres of PMS. Other storage and transportation networks are owned by the Depots and Petroleum Marketers Association as well as the major petroleum companies and independent petroleum marketers across the country.
The country’s plan is to open up the sector to investment, thereby increasing national reserves to 40 billion barrels at a production rate of 4mbpd by 2020. NNPC has begun a significant turnaround maintenance (TAM) plan to revamp its deteriorated refineries. There are also plans to construct additional refineries in Lagos, Bayelsa and Kogi states. However, construction is yet to commence on any new refineries.
The average refining capacity utilisation of the 4 refineries has fluctuated from 47.55 per cent of installed capacity (2002) to 20.82 per cent (2006) to 26.37 per cent (2011). This fluctuation reflects challenges in the sector, especially the need to improve maintenance so as to operate refineries at optimum capacity. Furthermore, transport and storage infrastructure in the oil and gas sector is capital intensive, and investment in Nigeria has been slow compared to other countries with similar potential.
- Generation: Nigeria has installed electricity generation capacity of about 7,000 MW, but capacity utilization currently ranges between 3,500MW and 4,500 MW and in June 2013 was as low as 2,200 MW. 70 per cent of Nigeria’s current installed capacity is gas-fired, with the remaining 30 per cent coming from hydro. The country’s total exploitable large-scale hydropower potential is estimated to be over 12,000 MW. Nigeria is estimated to have sufficient gas reserves to generate over 50,000 MW, but currently only has installed capacity of 5,000 MW. Recent reforms in the power sector have seen increased participation of private sector players. 55 licenses have been issued to private sector entities since 2000. Of this number, 20 small private electric power generation plants are operational, while 9 are under construction. With the privatization of the PHCN and NIPP assets, there will be quite a few generation companies operating in Nigeria.
The biggest challenge faced in generation is insufficient investment over the past decade and low availability of fuel. Although the NIPP plants have been built, this level of investment is insufficient compared to the overall need. Furthermore, although Nigeria has significant fuel supplies, especially gas, limited supplies are available for power generation.
The power sector is undergoing privatisation in both Generation and Distribution. The first round of privatisation is nearly complete. 10 of the 11 Distribution companies and 5 of the 6 generation (only thermal and hydro will remain in government control) companies have been privatized. This should increase much needed investment in generation assets. Additionally, a further 10 generation plants built under the National Integrated Power Project (NIPP), a fast-track scheme launched in 2004 to build government-funded, gas-powered plants during the implementation of the 2005 Electric Power Sector Reform Act, have just begun the process of being privatised. The plants, which have reached varying levels of completion and have a total design capacity of 5,454 MW, are owned by the Niger Delta Power Holding Company (NDPHC) and are located in the gas-producing southern states.
- Transmission – Nigeria’s transmission network splits into 2 types, i.e., a 330 kV network and a 132 kV network. For each network, there are 2 elements of basic transmission infrastructure: transmission lines and transmission substations. As at 2009, Nigeria possessed 5,524 km of 330 kV transmission lines and 6,802 km of 132 kV lines. There are 32 330/132 kV substations spread across the country with total installed transformation capacity of 7,688 MVA (equivalent to 6,535 MW). The available capacity of the 330/132 kV transmission network is about 96 per cent of installed capacity.
Nigeria currently faces losses in energy transmission (including distribution) of as much as 30 per cent due to deteriorating transmission lines as a result of the need for better maintenance. Furthermore, the current transmission grid begins to face significant technical constraints and issues once it goes above 5 to 5.5 GW capacity. Transmission is a critical bottleneck to achieving generation above this level. This will need to be increased as an immediate priority. There is critical short- term need for investment and capability building to deliver immediate network improvements and the maintenance programme to strengthen the grid. Getting the basics right, completing high- priority projects and delivering significantly more stable network capacity should be the focus in the short term.
Ongoing projects by the Federal Government and NIPP are expected to increase the length of transmission lines by 6,577 km of 330 kV lines and 1,514 km of 132 kV lines, and to also increase the capacity of 330/132 kV and 132/33 kV transformers by 6,940 MVA and 4,663 MVA respectively. The proposed construction of 10 new 330/132 kV substations and 7 new 132/33 kV substations, as well as the expansion/reinforcement of 32 existing 330 kV and 13 existing 132 kV substations will also boost the transmission capacity of on-grid power in the short term.
- Distribution – distribution infrastructure is made up of distribution lines and substations of varying capacities. The total length of 33 kV, 11 kV and 0.416 kV distribution lines as at 2009 was 37,173 km, 29,055 km and 70,799 km respectively. There were 102 132/33/11 kV substations with a combined installed transformation capacity of 9,130 MVA (7,761 MW). The available capacity of these distribution networks averaged 94.1 per cent of installed capacity (8,448 MVA).