CHAPTER ONE

INTRODUCTION

1.1. Background of the study

Nigeria is a nation that has been blessed with mineral resources ranging from solid minerals to crude oil deposits; right from the northern part of Nigeria to the southern part of Nigeria is littered with amazing natural deposits. Chief among these is the crude oil. Crude oil is largely deposited in the south southern part of Nigeria.Besides crude oil, Nigeria is blessed substantial deposit of natural gas. Although the consumption of natural gas increased steadily in the late 1970s and 1980s, and in 1990 constituted more than 20 percent of Nigeria’s total energy from commercial sources, the quantity of gas used was only a fraction of what was available. In 1988, with the largest natural gas reserves in Africa, Nigeria produced 21.2 billion cubic meters per day, with 2.9 billion cubic meters used by the National Electric Power Authority (NEPA) and other domestic customers, 2.6 billion cubic meters used by foreign oil companies, and 15.7 billion cubic meters (77 percent) wasted through flaring. Small amounts of gas were also consumed by petroleum producers to furnish power for their own operations and as fuel for some equipment. Domestically, there remained a large potential market for bottled liquid petroleum gas (LPG), which was produced primarily at the Kaduna refinery.In the early 1990s, Nigeria was undertaking a major project to market liquefied natural gas (LNG) (instead of flaring gas produced in the oil fields) by building a gas liquefaction plant on the Bonny River situated in Rivers state. Four companies signed an agreement in May 1989 to implement this plan: NNPC (60 percent share)), Shell (20 percent), Agip (10 percent), and Elf Aquitaine (10 percent), with plant construction scheduled to begin in 1991. Other aspects of the project involved Nigerian government construction of gas pipelines for distribution to domestic, residential, and commercial users and a supply of gas to the NNPC chemical complex at Port Harcourt. Much of the gas was intended for export, however, and the first LNG tanker was launched in October 1990s through the cooperative efforts of Nigeria and Japan.The importance of gas production to an economy cannot be over emphasized. One of the essential benefits of gas generation which determines how the economy of any nation would perform is power generation. Since the discovery of natural gas in Nigeria, power generation has its fair share of inconsistencies. One would have expected that the discovery of gas would have naturally led to the improvement in power generation. Some say it is as a result of the incompetency of government others say the government should be exempted. The truth remains that power generation using the natural gas has not been consistent enough to improve. We strongly believe that there may be a distinct relationship between gas production and power generation ion Nigeria.

1.2. Statement of the general problem

The problem of power generation has remained a persistent problem in Nigeria. A lot has been done to reviving the sector but the issue has persistent which has led us to examining the relationship between gas production in Nigeria and electricity generation.

1.3. Aims and objectives of the study

The following are the aims for embarking on this research work

• To examine the nature of the relationship between gas production and electricity generation in Nigeria.
• To identify the challenges of constant electricity generation in Nigeria.
• To be able to predict the level of electricity generation in the future from the data of the past years on gas production available to us.
• To recommend ways of ensuring adequate electricity generation in Nigeria.

1.4. Significance of the study

The outcome of this study would be of tremendous benefit to researchers, policy makers and the government in addressing the electricity generation issue in Nigeria.

1.5. Scope of the study

This research work is restricted to the evaluation of Nigerian gas production and electricity generation from natural gas from 1999-2014.

1.6. Research Questions

• Is there a relationship between gas production and electricity generation in Nigeria?
• If yes, what type of relationship exists between gas production and electricity generation in Nigeria?
• What are the challenges confronting constant electricity generation and supply in Nigeria.
• Can the level of electricity generation of the future years be adequately predicted from the past records of gas production and electricity generation in Nigeria?

1.7. Research hypotheses

Hypothesis 1

H0: there is no significant relationship between gas production and electricity generation in Nigeria.

H1: there is a significant relationship between gas production and electricity generation in Nigeria.

Hypothesis 2

H0: Gas production does not significantly influence the level of power generation and supply in Nigeria.

H1: Gas production significantly influences the level of power generation and supply in Nigeria.

1.8. Definition of terms

• Electricity:a form of energy resulting from the existence of charged particles (such as electrons or protons), either statically as an accumulation of charge or dynamically as a current.
• Natural gas:Natural gas is a naturally occurring hydrocarbon gas mixture consisting primarily of methane, but commonly including varying amounts of other higher alkanes, and sometimes a small percentage of carbon dioxide, nitrogen, and/or hydrogen sulfide.
• Generation:the production or creation of something.
• Natural resources: Mineral Resources can be defined as the concentration of material of economic interest in or on the earth’s crust, whereas Ore Reserves are the parts of a Mineral Resource that can at present be economically mined.
• Mineral:A mineral is a naturally occurring substance, representable by a chemical formula that is usually solid and inorganic, and has a crystal structure.
• Crude oil:Crude oil, commonly known as petroleum, is a liquid found within the Earth comprised of hydrocarbons, organic compounds and small amounts of metal. While hydrocarbons are usually the primary component of crude oil, their composition can vary from 50%-97% depending on the type of crude oil and how it is extracted.
• Gas flaring:the burning of natural gas that is associated with crude oil when it is pumped up from the ground. In petroleum-producing areas where insufficient investment was made in infrastructure to utilize natural gas, flaring is employed to dispose of this associated gas.