One of the main consequences of the Russian invasion of Ukraine is the need for Europe to find a new Gas supplier. Africa, which distinguishes itself as one of the future major hydrocarbon productors in a few years, could become the first European supplier.
Nigeria, endowed with the largest hydrocarbon reserves in the continent, is poised to become a key nation in the reconfiguration of global energy geopolitics. This promising future remains under threat due to the persistent security challenges Nigeria faces, such as recurring issues such as pipeline sabotage or oil theft.
The emergence of two rival gas pipeline projects, one led by Algeria and the other by Morocco, could reshape regional power dynamics, with consequences for the EU.
Unveiling the Crisis: The Vulnerability of Nigeria's Gas Pipeline Infrastructure
Recurrent Instability in Nigeria
According to studies conducted by the Stakeholder Democracy Network, between 5% and 20% of Nigeria's oil production is stolen every day. This significant loss highlights the challenges the country faces in securing its valuable resources and ensuring the benefits are fully realised by the nation. The official data of the government highlighted a loss of 250,000 barrels disappearing every day on production of approximately 1,4 billion barrels per day
The situation in the Delta of Niger
The federal Nigerian government is facing considerable financial setbacks due to extensive pipeline sabotage in the Niger Delta. Between 2018 and 2023, there have been 7,143 documented cases of pipeline vandalism, leading to the loss of $12.74 million worth of crude oil. These deliberate acts have resulted in the theft and loss of 208.639 million barrels of crude oil.
Oil theft predominantly manifests in two forms: the understatement of formal oil shipments and the diversion of oil from pipelines. The first method involves the deliberate understatement of the quantity of oil reported, thereby concealing the theft. The second method entails the illegal diversion of oil from pipelines, which is then transported to clandestine refineries, processed, and sold on the black market. These illicit activities have led to numerous operational disruptions, exacerbating the financial losses endured by the federal government. Over the same timeframe, the Nigerian government has expended billions of dollars to ensure the continued operation and repair of pipelines that have been adversely affected by the attacks.
Furthermore, Nigeria's security landscape is further complicated in the North by the persistent threat of the Islamist group Boko Haram.
Boko Haram insurrection in the North and its consequences
It is important to address the threat posed by the terrorist group Boko Haram, which has been active in the northern regions of the country since 2009. First, Boko Haram has directly attacked and sabotaged projects related to pipelines. In July 2017, the group carried out a devastating attack against a convoy of a Nigerian oil company exploring new deposits in the Lake Chad basin with a view to constructing pipelines. This attack resulted in at least 69 fatalities, including members of the security forces.
Moreover, between January and August 2016 alone, Boko Haram claimed responsibility for the sabotage of over 1,600 pipelines in Nigeria, severely disrupting oil activities. The persistent insecurity created by Boko Haram has also compelled the Nigerian government to indefinitely suspend promising oil and gas exploration activities in the Lake Chad basin. This potentially deprives Nigeria of future resources estimated at several billion barrels of oil and natural gas to be transported via pipelines.
Although the main infrastructure is concentrated in the Niger Delta, northeastern Nigeria has significant existing oil and gas pipelines threatened by Boko Haram's expansion. In January 2017, the group attacked a crude export pipeline in Maiduguri, forcing its shutdown for repairs. With its demonstrated capacity to target strategic energy assets and massively disrupt oil activities, Boko Haram therefore represents a major security threat to pipelines in the unstable Lake Chad basin. The future Trans Saharan gas pipeline could become the main target of terrorists in the future.
Regional Tensions
The Trans Saharan Gas Pipeline (TSGP)
The concept of a gas pipeline crossing the Sahara to connect Nigeria and Algeria to Europe originated in the 1970s. The project, however, began to materialise in 2001 when Algiers and Abuja signed a memorandum of understanding. In the following year, a protocol was signed by the national petroleum companies of the two nations: Sonatrach for Algeria and the Nigerian National Petroleum Corporation (NNPC). This initiative was further promoted by the New Partnership for Africa's Development (NEPAD).
Finally, in July 2009, the project received definitive approval with the signing of an agreement between Nigeria, Niger, and Algeria. The proposed gas pipeline is anticipated to extend over an approximate distance of 4,400 kilometres. Of this total length, 1,037 kilometres are projected to traverse Nigerian territory, while 841 kilometres will pass through Niger, and the remaining 2,310 kilometres will cross Algeria. Regarding its transportation capacity, the Trans-Saharan Gas Pipeline (TSGP) is envisaged to possess an annual capacity ranging from 20 to 30 billion cubic metres of natural gas. If we look at the financing, we can see a constant revaluation. It was first estimated at 10 billion dollars in 2009. But In 2012 its price was revised upwards to 12 billion dollars. Today it is estimated to be 13 billion dollars, which means a real uncertainty about the final cost.
Nigeria-Morocco gas Pipeline (NGPM)
In contrast, the Nigeria-Morocco gas pipeline, an underwater pipeline, is designed to connect West African countries to Morocco and Europe. Announced in 2016, the project began to take shape in 2018 with the signing of an agreement between the two countries. This agreement stipulated that the costs, amounting to nearly $25 billion, would be shared equally between the Nigerian National Petroleum Corporation (NNPC) and the National Office of Hydrocarbons and Mines (ONHYM) of Morocco. However, from 2020 onwards, the project expanded in scope, becoming a regional cooperation initiative, particularly with the involvement of the Economic Community of West African States (ECOWAS). In 2022, the Islamic Development Bank and the OPEC Fund for International Development announced their participation in financing the second feasibility study of the project. Furthermore, in June 2023, the signing of a Memorandum of Understanding with Guinea, Côte d'Ivoire, Liberia, and Benin confirmed the commitment of these countries to join the project.
The Nigeria-Morocco Gas Pipeline: A Game Changer in North African Geopolitics
This pipeline affair has become a pivotal issue in the ongoing confrontation between Algiers and Rabat. For many years Algiers has been the main gas producer in the Maghreb. Historically, Algeria has been a major exporter, with several gas pipelines in operation across the Mediterranean Sea linking it with Italy, Spain and its Moroccan neighbour. In 2021 Algerian government decided to suspend the Maghreb-Europe pipeline, depriving Morocco of gas. The Nigeria-Morocco pipeline is a major opportunity for Rabah. It aims not only to supply Morocco with gas but also to establish a novel route for gas transportation to Europe, thereby circumventing Algeria. It is important to mention that as opposed to TSGP the infrastructures of the Nigeria-Morocco Gas pipeline are situated in an area relatively safe since the eradication of piracy. That is why this Moroccan initiative is perceived by Algiers as a direct threat to its economic and geopolitical interests. With its initiative, Morocco aims to reduce Algeria's influence in Europe by capturing significant shares of the energy market. By doing so, Rabat strengthens its ties with ECOWAS countries, which could have repercussions on other issues, notably the Western Sahara dispute.
In the European context, Morocco’s strategic moves in the energy sector are set to diminish Algeria’s long-standing dominance, thereby altering the dynamics of the regional energy market. By positioning itself as a key energy provider, Morocco seeks to establish a foothold that not only benefits its economy but also shifts the balance of influence in its favour. Simultaneously, in West Africa, Morocco's growing cooperation with ECOWAS member states signifies a deliberate effort to build robust alliances. This network of strengthened relations is poised to impact various geopolitical matters, most notably the Western Sahara conflict. As Rabat cultivates these alliances, the increased political and economic support from West African nations could potentially influence the stance of international bodies and stakeholders on the contentious issue.
In-Depth Examination: Geopolitical Consequences of Nigeria's Pipeline Compromises
Impacts on the future of Nigerian growth
Protected pipeline is crucial for Nigeria State’s survival:
The future of Nigeria's economic growth is inextricably linked to oil exportation, underscoring the paramount importance of securing its pipelines. Oil constitutes 80% of the state’s budget in Nigeria. The NEITI's 2021 Oil and Gas Industry Report, published in September, highlighted the sector's substantial influence on Nigeria's economy. According to the report, the oil and gas industry was responsible for 72.26% of the nation’s total exports and government foreign exchange earnings. Moreover, it contributed 40.55% to government revenue and generated 19,171 employment opportunities within the country. Consequently, to ensure the stability of the federal state, Abuja must significantly enhance the security of its energy infrastructure, particularly the pipelines. The protection of these pipelines is not merely an economic necessity but a critical factor for the survival and stability of the nation.
Impact on the private sector
If Nigeria needs to maintain and develop the oil sector companies are leaving. Due to persistent security concerns and operational challenges, numerous international corporations, including Shell, have been compelled to reduce their onshore activities in Nigeria. In 2021, Shell announced its intention to divest from its onshore assets in the country, which includes its joint venture, the Shell Petroleum Development Company of Nigeria Limited (SPDC), in which TotalEnergies, another giant of energy holds a 10% stake. Over the years, SPDC has encountered hundreds of onshore oil spills attributable to theft, sabotage, and operational issues, resulting in costly repairs and high-profile legal proceedings. Other energy majors are inspired by Shell’s operation.
Energy Trade Deficit
Notwithstanding the anticipated increase in oil and gas production in the forthcoming years, addressing Nigeria's energy trade deficit would necessitate a comprehensive restructuring of its refining output. The nation's refining capacity, predicated on four extant refineries, has remained constant at approximately 445,000 barrels per day. However, the inadequate maintenance of these facilities has resulted in production levels that fall short of meeting the country's requirements. To illustrate, in mid-2019, the refining output stood at a mere 5.5% of the national capacity.
Effects on the European Union
The European Union is deeply concerned about the security issues surrounding Nigeria's gas and oil infrastructures, as these challenges threaten Africa's potential to become a major oil supplier for Europe. Currently, 10% of the gas purchased by the European Union originates from Africa. However, African gas production is forecasted to double by 2030, rising from approximately 1.3 million barrels of oil equivalent per day in 2019 to 2.7 million barrels per day by 2030. In the context of the complicated ongoing conflict in Ukraine, African gas presents a significant opportunity for Europe. For instance, in the immediate aftermath of Russia's offensive in Ukraine, Italy secured an agreement to increase Algerian gas imports by approximately 40%.
If Africa in general is determined to become a new gas and oil champion two rival projects who share the same goal are facing in the continent. Both are led by the main African hydrocarbon-producing countries. First, there is the Trans-Saharan Gas Pipeline, born from Algerian-Nigerian cooperation, which connects Nigeria to Spain and Italy crossing Niger and Algeria. Its rival the Nigeria-Morocco Gas Pipeline (NMGP) a bilateral agreement which became in 2020 a regional initiative with the participation of the ECOWAS.
Strategic Path Forward: Mitigating Risks and Strengthening Nigeria's Pipeline Security
To begin, the Nigerian government, potentially in collaboration with ECOWAS, should allocate funds for a comprehensive study that would serve as the foundation for a strategic plan aimed at diversifying the nation's economy by fostering the development of new sectors, thereby reducing the dependency on hydrocarbons. To this end, the government should convene a multidisciplinary team comprising experts from various fields, including academics, consultants, senior civil servants, and executives from leading Nigerian enterprises. By diversifying its economy, Nigeria would enhance its resilience against the misappropriation of its hydrocarbon production.
Furthermore, the European Union ought to prioritise the financing of the Nigeria-Morocco Gas Pipeline (NMGP) project. Establishing a partnership with multiple supplier countries presents significant advantages, as it substantially mitigates the risk of supply disruptions. Should diplomatic relations with one of the exporting states deteriorate, European countries would still benefit from the deliveries of the other members involved in the project. Moreover, within the context of the ongoing conflict in Ukraine and the Western support extended to Kyiv, it is more prudent for European member states to prioritise the NMGP over its competitor. Algeria's close ties with Moscow, particularly in the military domain, pose a strategic concern that cannot be overlooked. In addition, strong economic relationships with Morocco could facilitate negotiation in other diplomatic dossiers, for example the substantial European concern about immigration. Also, It could be a wonderful opportunity for Western African countries and their European neighbours to lay the foundations for a new economic relationship beneficial for both sides of the Mediterranean Sea in economic and ecological terms. The relatively short distance between Europe and West Africa is a significant advantage in developing new economic partnerships at the time of global warming. Besides for the EU, it is always a good idea to get closer to emerging countries with significant economic and political potential.
Finally, if it is in Europe's best interest to favour the NMGP, it is imperative not to entirely neglect its rival. Adopting a balanced approach ensures enhanced security and flexibility in energy security.
Comments