Johannes Lehne, the Deputy Head of Mission for Germany in Nigeria, revealed on Wednesday that the substantial $2.3 billion Siemens power initiative between Nigeria and Germany experienced prolonged inactivity until President Bola Tinubu's government took office and re-energized the project.
Lehne made these remarks during the second day of the Sub-Saharan Africa International Petroleum Exhibition and Conference (SAIPEC) in Lagos, which focused on "Celebrating a Decade of Energy, Oil, and Gas Innovation in Sub- Saharan Africa." He indicated that the bilateral collaboration in the power sector had stagnated before regaining momentum under the current administration.
The Siemens agreement, initially established during the tenure of former President Muhammadu Buhari, was designed as a government-to-government framework aimed at modernizing Nigeria's transmission and distribution networks, enhancing grid stability, and progressively increasing available power capacity. The plan included phased targets for Siemens to achieve 7,000 megawatts by 2021 and 11,000 MW by 2023, with an ultimate goal of 25,000 MW by 2025. These objectives were considered ambitious, especially given Nigeria's historical power supply challenges, and the project did not advance significantly for undisclosed reasons.
"The peculiar aspect was that this partnership remained dormant until the commencement of President Tinubu's term, during which we successfully revived it. We are involved in the power sector. We have a Presidential Power Initiative with President Tinubu focused on reactivating Nigeria's transmission system and ensuring electricity reaches everyone," Lehne stated.
He further elaborated that Germany's energy engagement with Nigeria extends beyond the Presidential Power Initiative, encompassing an Energy Support Programme that draws upon Germany's own experience in energy transition and diversification.
Lehne highlighted that from 2021 to 2024, Germany has increased its investments in renewable energy sources such as solar, wind, and geothermal power, as part of broader efforts to reduce reliance on hydrocarbons and lower carbon emissions. Nevertheless, he suggested that what is often termed "energy transition" in many countries is more accurately described as "energy addition," involving a diversified energy mix rather than a complete substitution of fossil fuels.
"There isn't a true energy transition happening; instead, there is energy addition and a different combination of energy sources, which every nation should contemplate to formulate an effective energy policy," he commented.
He also pointed out that natural gas remains crucial for Germany's energy security and will continue to be a vital industrial feedstock for the next two to three decades. The repercussions of the Russia-Ukraine crisis, he emphasized, demonstrated the risks associated with depending too heavily on a single supplier.
Consequently, Germany has diversified its energy import sources and rapidly established four LNG import terminals with a combined daily capacity of 80 to 84 gigawatt hours, complementing pipeline supplies.
"For Germany, diversifying energy sources globally is a key policy. We require various partners. It is imprudent to place all your resources in one venture," Lehne remarked, adding that Germany would be open to importing gas from Nigeria if it were available.
Germany, with a Gross Domestic Product (GDP) of approximately $5 trillion and limited domestic energy resources, heavily relies on imported oil and gas. Lehne indicated that strengthening relationships with resource-rich countries like Nigeria aligns with Germany's strategic objectives for long-term economic and energy security.
During the same session, Jennis Anyanwu, Deputy Director of Gas Utilisation at the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), noted that Nigeria's primary challenge is not a lack of gas resources but rather the effective conversion of its extensive reserves into economic benefits.
He confirmed that Nigeria possesses an estimated 210.54 trillion cubic feet (TCF) of proven gas reserves, positioning it as the leader in Africa. Including potential contingent resources, this figure could rise to around 650 TCF.
"The challenge Nigeria faces is not the scarcity of gas. There is an abundance of gas in the country, but the issues revolve around accessibility and its translation into tangible value for the populace and its contribution to the economy as anticipated," he explained.
Despite its substantial reserves, Anyanwu observed that Nigeria's gas production levels do not reflect its resource base. With current production at approximately 7.5 billion cubic feet per day, the country's output ranks significantly lower on a global scale.
"While we hold the number one position in Africa for gas reserves, we are not number one in production. Globally, we are around the 19th spot. This indicates a considerable disparity between our reserves and our actual production," he stated.
He further explained that about 54 percent of Nigeria's gas production is associated gas, meaning it is produced alongside crude oil. This suggests that gas development has historically been secondary to oil production economics rather than being pursued as a primary commodity.
"There has not been a concerted effort to exploit gas as a distinct commodity. Gas development does not happen merely because a resource exists. It materializes only when fiscal conditions, regulatory frameworks, and commercial arrangements are aligned with the unique economic realities of gas, which differ considerably from those of oil," he added.
According to Anyanwu, the Petroleum Industry Act (PIA) has significantly reduced the risks associated with gas investments by resolving long-standing fiscal uncertainties that were present under the previous Petroleum Act. He noted that under the former regime, fiscal terms for gas in Production Sharing Contracts (PSCs) were not clearly defined, which deterred final investment decisions (FIDs).
Moreover, the PIA has led to a reduction in royalty rates for gas development. Previously, onshore gas royalties were seven percent and offshore five percent, but the new legislation establishes a uniform five percent rate, with a further reduction to 2.5 percent for gas utilized domestically.
The panel, moderated by Paul Eardley-Taylor, Gas Sector Lead at Standard Bank, also included Dr. Isaac Doku, General Manager Corporate Affairs at West Africa Gas Pipeline Company Limited (WAGPC), and George Amara, Project Advisor at UTM FLNG, who represented the Chief Executive, Julius Rone.
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