Feature Report: Africa and Energy: A Case Study of Four Countries

4 items of content in this feature report



Nigeria: A Major but Fragile Country Built on Oil

Nigeria, Africa’s most populous country with over 175 million inhabitants, regularly vies for first place with South Africa as the continent’s largest economy. But after growing by an average of 6% per year until 2013, in 2016 the economy contracted and the country slipped into a recession. One of the causes was a decline in oil production, coupled with a drop in world oil prices. Nigeria nevertheless continues to attract international investment1.

All of the world's major oil and gas companies have installations on Bonny Island in the Niger delta near Port Harcourt. ©PIUS UTOMI EKPEI / AFP

A huge country with a patchwork of ethnic groups, languages and religions and an unstable security situation in the Muslim north, Nigeria suffers from major regional development inequalities exacerbated by its federal structure. BiomassIn the energy sector, biomass is defined as all organic matter of plant or animal origin..., the dominant source in Nigeria’s energy mixThe range of energy sources of a region. (more than 86% of final energy consumption), meets almost all of the energy needs of the rural population. The immediate consequence is that Nigeria’s deforestation rate is the highest in the world.

Nigeria’s population is soaring, with the number of inhabitants expected to reach 440 million by 2050. This means that Nigeria could be on its way to becoming an automotive giant and a future hub for carmakers in Africa. The continent, whose car fleet has expanded by only 31% since 2005 – far behind Asia, Eastern Europe and Latin America – could experience a more spectacular rise in the coming years, driven by demographic and economic growth2.

Only 55% of the Nigerian population has access to electricity, according to the World Bank.

A Major Oil Producer

Nigeria currently derives its economic strength from the oil and gas sector, which accounts for 95% of its exports and provides a continuous source of income3. Relying heavily on international oil companies, the country continues to be the top oil producer in Africa (No. 12 worldwide), although Angola now follows close behind. In 2015, it produced 2.35 million barrels of crude per day, or roughly the same amount as Mexico or Venezuela. Despite a sharp contraction in 2016 due to market conditions, the outlook continues to be bright. Nigeria has the tenth-largest proven oil reserves in the world.

Over the past several years, oil production has been buoyed by offshoreRefers to sea-based oil exploration and production operations, as in "offshore license" or "offshore drilling". development. However, operations are often crippled by recurring security problems: pirate attacks off the coast of Nigeria or armed conflicts that have been going on for years in the extremely prolific Niger Delta by groups opposed to the government in Abuja. This situation, aggravated by numerous acts of vandalism in the Delta, makes it very difficult to transport petroleum products in the region.

Gas Production Challenges

Nigeria also possesses plentiful natural gas reserves – the eighth-largest in the world, more than Algeria – but is far from exploiting them to their full potential. One of the reasons for this is that oil production sites, like many others in Africa, resort to flaring, the practice of burning gas emissions associated with the extraction of oil from wells. This is often due to a lack of infrastructure for treatingTreating is all of the refining processes intended to remove unwanted compounds (contaminants)... the gas and transporting it to consumers, thereby making recovery unprofitable. The amount of gas flared in Africa is equivalent to half of its energy consumption, according to the World Bank. On the positive side, however, the organization has launched the “Zero Routine Flaring by 2030” initiative that has been endorsed by the world’s major international oil companies. Nigeria joined the initiative in April 2015 and has even set a national target date of 2020.

The other positive development in the Nigerian gas industry is the rapid growth of liquefied natural gas (LNG)LNG is composed almost entirely of methane. Liquefying the gas reduces its initial volume by a factor of around 600..., which is playing an increasingly prominent role in the global gas trade thanks to its flexible mode of transportation. Like Algeria, Nigeria was an early proponent of liquefactionConversion of a gas to a liquid. In industrial applications, gas is liquefied by cooling and/or pressurization.... It has an LNG facility on Bonny Island in the Niger Delta near Port Harcourt, and a project is underway to increase its production capacity.

Nigeria, which intends to develop natural gas, has committed to stopping flaring by 2020.

Insufficient Access to Electricity

Despite an abundance of existing or potential oil and gas resources, Nigeria’s energy supply is inefficient. Supply varies greatly from one area to another. Lagos, the largest city in Africa, has a population of over 20 million and continues to grow at a brisk pace. The Niger Delta, home of Port Harcourt, is a major oil region that contrasts sharply with the sprawling rural towns in the north and the east.

In terms of electricityForm of energy resulting from the movement of charged particles (electrons) through a conductor... generation, Nigeria has a theoretical capacity of 8,000 megawatts, which corresponds to its minimum requirements. Due to the dilapidated state of its gas-fired powerIn physics, power is the amount of energy supplied by a system per unit time. In simpler terms, power can be viewed as energy output... stations, however, and its inadequate transportation system, only about 50% of  this capacity is actually usable. Moreover, depending on the period, capacity can even drop below 2,500 megawatts, which is disconcertingly low for a country of more than 175 million people. By comparison, South Africa, which is three times less populated, has an installed capacityThe power generation capacity of a particular plant. It is usually expressed in megawatts (or sometimes even gigawatts)... of 45,000 megawatts. According to the World Bank, only 55% of the Nigerian population has access to electricity.

For this reason, Nigeria has become a haven for private power generators. They provide electricity to homes, entire housing developments, craftspeople, shops and companies, small and large. Generators have become a non-negligible sector of the economy supported by the pro-dieselDiesel is the name of an internal combustion engine that works by compression-ignition... lobby.

In 2014, power generation was more than 80% sourced by natural gas, with hydropower accounting for the rest. Over the years, however, the production of hydroelectric power has shrunk considerably, with a decline of nearly 50% in ten years mainly due to maintenance and management problems. The Nigerian authorities have set their sights on solar power, primarily for electrifying the villages. A number of international companies have undertaken projects in Nigeria, and Morocco, which has an active Africa policy, has offered its cooperation.