Attachment_J.33_National_Energy_Policy_(Energy_Commission_of_Nigeria).pdf

FEDERAL REPUBLIC OF NIGERIA

NATIONAL ENERGY POLICY

[Draft Revised Edition]

ENERGY COMMISSION OF NIGERIA

ii

CONTENTS

Foreword iv

Acronyms vi

Chapter 1: Introduction 1

Chapter 2: Petroleum Policy 9

Crude Oil 9 Natural Gas 11 Shale Hydrocarbon Resources 14

Chapter 3: Coal and Tar Sands/Bitumen Policy 17 Coal 17 Tar Sands/Bitumen 19

Chapter 4: Nuclear Energy Policy 21

Chapter 5: Renewable Energy Policy 25 Hydropower 25 Solar 27 Wind 30 Hydrogen 31 Other Renewables 32

Chapter 6: Bio-Energy Policy 34 Biomass 34 Fuel-wood 36 Bio-Fuel 38

Chapter 7: Electricity Policy 41

Chapter 8: Policy on Energy Utilization 45 Industry 45 Agriculture 47 Transport 48 Households 51 Commercial/Services 52

Chapter 9: Energy Efficiency and Conservation Policy 54 Residential 56 Industrial 58 Transport 60

Commercial/Services 63 Building Designs- 65

Agriculture 66

Chapter 10: Environment and Climate Change Policy 68 iii

Chapter 11: Policy on Other Energy Issues 70 Research and Development 70 Bilateral, Regional and International Cooperation 71 Local Content 73 Manpower Development and Training 74

Gender Issues 75

Chapter 12: Policy on Energy Financing 77

Financing Requirements 77

Chapter 13: Planning and Policy Implementation 80 Energy Planning 80 Policy Implementation 82 Prioritization of Strategies into Short, Medium and Long Term 84 iv

FOREWORD

An overall National Energy Policy for any country is often sought after by investors for a guide on government’s overall policy direction. The first National Energy Policy for Nigeria was midwifed by the Energy Commission of Nigeria and approved by the Federal Executive

Council (FEC) in 2003; and was launched by Mr. President on 20th June, 2005. The NEP emphasizes the optimum utilization of the nation’s energy resources for sustainable national development with the active participation of the private sector.

Energy development and utilization is however dynamic. Since the National Energy Policy was approved in 2003, many changes have taken place in the national and international energy scenes necessitating its review. For instance, the much anticipated reforms in the

Nigerian petroleum sector is under consideration through the Petroleum Industry Bill (PIB);

while many neighboring and other African countries have discovered petroleum in commercial quantities, shale oil and shale gas are being explored in major oil and gas consuming countries. The electricity sector has achieved a significant level of liberalization and deregulation, while privatization of the hitherto publicly assumed electricity infrastructure is almost concluded. Moreover, greater attention is being given to the development of renewable energy and energy efficiency worldwide, for driving sustainable development.

It is therefore commendable that the Energy Commission of Nigeria, in the discharge of its statutory responsibility for the strategic planning and coordination of the nation’s policies in the field of energy in all its ramifications as well as serving as a centre for gathering and dissemination of information relating to national policies in the field of energy development and making recommendations for the exploitation of new energy sources to Government, consulted with stakeholders to identify obsolete policy statements, objectives and strategies in the 2003 NEP document and recommended new ones. The observations, contributions and recommendations by stakeholders have been incorporated into the 2003 National Energy

Policy to produce this draft.

The draft revised National Energy Policy, which emphasizes active participation of the private sector in the development of the energy sector in a sustainable manner, has thirteen chapters: Chapter 1: Introduction; Chapter 2: Petroleum Policy; Chapter 3: Coal and Tar Sand

Policy; Chapter 4: Nuclear Policy; Chapter 5: Renewable Energy Policy; Chapter 6: Bio-v

Energy Policy; Chapter 7: Electricity Policy; Chapter 8: Energy Utilization Policy; Chapter 9:

Energy Efficiency and Conservation Policy; Chapter 10: Environment and Climate Change

Policy; Chapter 11: Policy on Other Energy Issues; Chapter 12: Energy Financing Policy and

Chapter 13: Planning and Implementation Policy. Each Chapter of the National Energy

Policy contains policy statements, policy objectives and strategies as well as the short, medium and long-term implementation strategies.

This draft revised National Energy Policy provides the framework for sustainable energy development in Nigeria with the overall objective of providing clean, affordable, adequate and reliable energy with the active participation of the private sector.

The Honourable Minister Federal Ministry of Science & Technology vi

ACRONYMS

AFREC African Energy Commission

APPA African Petroleum Producers Association AU African Union bpd barrels per day

CBN Central Bank of Nigeria

CDM Clean Development Mechanism CFLs Compact Fluorescent Lamps

CO2 Carbon Dioxide

DPK Dual Purpose Kerosene

DSM Demand-Side Management

ECN Energy Commission of Nigeria

ECOWAS Economic Community of West African States EDCs Electricity Distribution Companies

ESCOs Energy Services Companies

FEC Federal Executive Council

GBDCS Green Building Standard and Certification System

GDP Gross Domestic Product GEF Global Environment Facility

GHGs Green House Gases

GWh Gigawatt-hour HHK Kerosene

IAEA International Atomic Energy Agency IPDF Infrastructure Project Development Facility

IPPs Independent Power Producers

KfW German Development Finance Group kg Kilograms km Kilometres km/h Kiometres/hour km2 Square kilometres kWh Kilowatt-hour LEDs Light Emitting Diodes

LPG Liquefied Petroleum Gas m/s metre per second vii mbpd million barrels per day Mcfpd million cubic feet per day

MDAs Ministries, Departments, Agencies

MEPS Minimum Energy Performance Standards

MJ Megajoules MJ/m2-day Megajoules per square meter per day MW Megawatts N Nigerian Naira

N2O Nitrogen Dioxide

NASENI National Agency for Science and Engineering Infrastructure

NASS National Assembly

NEP National Energy Policy

NEPA National Electric Power Authority NERC Nigerian Electricity Regulatory Commission

NIIMP National Integrated Infrastructure Master Plan

NNPC Nigerian National Petroleum Corporation

NNRA Nigerian Nuclear Regulatory Agency

OPEC Organization of Petroleum Exporting Countries PAYC Pay As You Consume

PHCN Power Holding Company of Nigeria

PIB Petroleum Industry Bill

PMS Premium Motor Spirit (Petrol)

PPP Public Private Partnership

PPPRA Petroleum Product Pricing and Regulatory Agency

PV Photovoltaic R & D Research and Development R, D & D Research, Development and Demonstration R, D & T Research, Development and Training RE Renewable Energy

S&L Standards and Labels

SERC Sokoto Energy Research Centre

SMEs Small and Medium Scale Enterprises tce Tonnes of Coal Equivalent TFEC Total Final Energy Consumption viii toe Tonnes of Oil Equivalent tscf Trillion standard cubic feet

UN United Nations US$ United States Dollars

WEC World Energy Council

YTB Year-To-Date

Introduction

CHAPTER ONE

INTRODUCTION

Energy has a major impact on every aspect of our socio-economic life. It plays a vital role in the economic, social and political development of our nation. Inadequate supply of energy restricts socio-economic activities, limits economic growth and adversely affects the quality of life. Improvements in standards of living are manifested in increased food production, increased industrial output, the provision of efficient transportation, adequate shelter, healthcare and other human services. These will require increased energy consumption. Thus, our future energy requirements will continue to grow with increase in living standards, industrialization and a host of other socio-economic factors.

It is pertinent to note that the impact of energy goes beyond national boundaries. Energy supply can be used as an instrument of foreign policy in the promotion of international cooperation and development.

Need for a National Energy Policy The level of energy utilization in an economy, coupled with the efficiency of conversion of energy resources to useful energy, are directly indicative of the level of development of the economy. In order to ensure optimal, adequate, reliable and secure supply of energy to, and its efficient utilization in the country, it is essential to put in place a co-ordinated, coherent and comprehensive energy policy. The policy will serve as a blue print for the sustainable development, supply and utilization of energy resources within the economy, and for the use of such resources in international trade and co-operation.

There are sub-sectoral policies in the separate energy sub-sectors, namely, electricity, oil and gas and solid minerals. There are also energy related policies developed in sub-sectors, whose activities are strongly dependent on those in the energy sector. These include transportation, agriculture, science and technology and environment, among others. The sub-sectoral policies, however, reflect the individual sub-sectoral perspectives. It is necessary to have an integrated energy policy, which provides a guide for future energy related sub-sectoral policy developments, in order to avoid policy conflicts that may, otherwise, arise. An overall national energy policy is also normally needed and requested by foreign investors, who wish to invest in the nation’s economy.

The Energy Commission of Nigeria, in furtherance of its mandate, midwifed the production of a Draft National Energy Policy in 1993. This was later reviewed in 1996 by an Inter-ministerial Committee, under the Chairmanship of the Ministry of Science and Technology.

The document was yet to be approved by the Federal Executive Council, when in 1999, some significant changes had occurred in the orientation of the economy, especially as regards increased private sector participation. This necessitated another review of the 1996 document, which ended in 2003. The result of that review was approved by the Federal Executive

Council (FEC) in 2003. However, over ten years after the NEP was produced and approved, changes have taken place in the national and international energy scenes necessitating its review.

For instance, the much anticipated reforms in the Nigerian petroleum sector is under consideration through the Petroleum Industry Bill (PIB); while many neighbouring countries have discovered crude oil in commercial quantities, and shale oil and shale gas are being explored in major oil and gas consuming countries. The electricity sector has achieved a significant level of deregulation, while privatization of the sector is almost completed.

Moreover, greater attention is being given to the development of renewable energy and energy efficiency worldwide, for driving sustainable development. Also, national economic development is usually quantified by the GDP; however, Nigeria’s GDP was rebased about ten (10) years since NEP was approved.

The review entailed the assessment of the existing NEP’s overall performance; identification and analysis of gaps and inadequacies existing in the NEP; update of the information and data in the NEP; comparison of the NEP with energy-related sub-sectoral policies as well as with international best practices and global developments in energy matters.

Socio-Economic Background The nation's overall economy, as measured by the real Gross Domestic Product (GDP), has grown by about 6.30% annually between 2000 and 2009. In recent years and after rebasing, the nominal GDP increased from N54.2 trillion in 2010 to N80.2 trillion in the year 2013 On a per capita basis, nominal GDP fluctuated between N38,737.90 and N165,633.90, with an average of N105,583.70, between 2000 and the year 2009. Over the period 2000 to 2009, the per capita nominal GDP has, however, generally grown at an annual average rate of 18%.

The population was estimated to be 140.42 million people (2006 Census), with a growth rate of about 3.20% and a rural population of over 60% of the total.

The structure of the economy has changed significantly since independence in 1960.

Agriculture was the most important sector of the economy, whose contribution to the GDP was above 54%. The contribution of the agricultural sector to the real GDP remained over 40% between 2000 and 2009 with an average contribution of 41.10% within the period.

Correspondingly, agricultural exports, which were the main sources of foreign exchange earnings, declined and, the dollar value of food and live animals imports increased. On the other hand, industry's (crude oil production, mining and quarrying and manufacturing) contribution to GDP increased from about 13% in 1960 to an all time high of 30.50% in the year 2003 and then declined to about 20.60% in the year 2009.A closer examination of industry’s contribution to total GDP at 1990 constant basic prices reveals that between 2000 and 2009, industry contributed an average of 27.50% with petroleum accounting for 23.40%, mining and quarrying 0.37% and manufacturing 3.90%. What industry has gained is primarily due to increase in petroleum production, whose contribution in industry stood at 85% on the average.

Energy and the Economy Nigeria is blessed with abundant primary energy resources. These include reserves of crude oil and natural gas, coal, tar sands and renewable energy resources such as hydro, fuelwood, solar, wind and biomass. However, since the late 1960s, the economy has been solely dependent on the exploitation of oil to meet its development expenditures. In 2000, oil revenue alone accounted for about 98.50% of exports and 83.50% of total government revenues. However, its contribution to GDP was only 32.50%. By year 2009, the contribution of petroleum to total exports remain high at 95.80%, while its contribution to GDP dropped to 16.10%. Between 2000 and 2009, petroleum accounted for 79.60% of total government gross revenue on average. However, its contribution has generally been declining over the period. The contribution of energy to GDP, proxied by petroleum, has been declining from 15.50% in 2010 to 13.70% in 2013.

The total modern energy consumed in 2000 was 31.9 million tce at 1985 = 100 and 18.3 million tce in 2009 at 1990=100. This declined to 15.8 million tce at 1990=100 in 2012. The dominant source of modern energy is petroleum, accounting for 80% of commercial energy consumption between 2010 and 2012. Natural gas production, which is mostly in association with oil production, is appreciable. Its contribution to commercial energy consumption, on the other hand, had increased from 6% in 2009 to 15% in 2012 Natural gas and hydro are the dominant energy sources for grid connected electricity generation, with natural gas contributing about 80%. Less than 20% of the natural gas produced is being flared by the end of 2012. Up to the early 1960s coal production was significant and dominated the commercial energy supply. It was also the predominant source of energy for rail transportation and electricity generation. However, partly due to fuel substitution to oil and gas, coal production and utilization dropped to an insignificant level. In 2009, coal's share of the total commercial energy consumption was insignificant and it maintained that proportion up to 2013.

With respect to the renewable energy resources, hydro power plants entered the Nigerian energy scene in the early 20th century. Presently hydro is the second largest energy resource for electricity generation in the country, contributing about 20% of the total installed grid-connected electricity generating capacity.

Fuelwood is the dominant source of energy in the domestic sector. It is also used in other sectors of the economy, such as cottage industries. The share of fuelwood and charcoal in total energy consumption is estimated at over 60%. This is largely due to inability of low income consumers to pay for, as well as inaccessibility of, substitutes such as kerosene, cooking gas and electricity. Over the years the fuelwood supply/demand imbalance in some parts of the country has adversely affected the economic well-being of the people. On the national level, increasing fuelwood consumption contributes to deforestation with consequent desertification and soil erosion.

Solar energy intensity is generally high in the country. Solar energy is widely used in the country for drying, most especially of agricultural products. But it is normally lumped with the informal sector, which is not adequately captured in the national accounts. Nevertheless, there has been significant increase in the solar photovoltaic systems especially for lighting, water pumping and communications. Solar energy has great potential for the provision of power for rural development.

Energy Security Over-dependence on oil has slowed down the development of alternative fuels.

Diversification to achieve a wider energy supply mix will ensure greater energy security for the nation. The domestic demand for petroleum products is growing rapidly. The development of alternative fuels from locally available energy resources should therefore be vigorously pursued.

The rural populace, whose needs are often basic, depend to a large extent on traditional sources of energy, mainly fuelwood, charcoal, plant residues and animal wastes. This class of fuels currently constitutes about 40% of total energy consumption in the country. Fuelwood supply/demand imbalance in some parts of the country is now a real threat to the energy security of the rural communities. Hence, special attention needs to be paid to the diversification of the energy supply mix in the rural areas.

Even when there exist adequate and diversified energy supply options in the country, the problem of unreliability of supply constitutes a huge drain on the national economy. This leads to energy insecurity and had constituted a major characteristic of the energy crisis experienced by the country over the last decade, especially with regards to the supply of electricity and petroleum products. Therefore, attention must be given to adequate production levels and a reliable distribution network for all fuel types to ensure steady economic growth.

Energy Sector Reform With the exception of the upstream oil and gas sub-sectors, and to a smaller extent the electricity sub-sector, government had been largely responsible for the ownership and operation of the energy sector industries. In particular, investment capital had been sourced from public funds, while the industries had relied on the sense of public interest, within management, as the motivation for responsible and transparent management of the industries.

The funds required for the maintenance and refurbishment of the energy supply infrastructure, and for the expansion of capacity, are enormous. In the face of increasing demands on government for investments in other areas of the economy such as transport, health, education and security, government had been unable to provide the funds needed by the energy sector. Efficient and transparent management of the industries had also not been achieved. Consequently, established facilities had progressively deteriorated while new capacity had not been added, inspite of increasing demand. Furthermore, the funding and management deficiencies had given rise to inadequate and unreliable supply, especially of electricity and petroleum products, insecurity of the energy supply system and loss of productivity.

It is believed that increased private sector participation in the energy sector will attract new investments to the sector, while the profit motive will assist in solving much of the management problems experienced under public ownership. This restructuring of the sector will involve both deregulation and privatization.

In consequence of the above, government has embarked on a reform of the power sector. The direction of the reform is towards private sector leadership of investments in, and operation of, the power sector industries. The privatization of the sector is near completion. The six successor generation companies to the government owned power utility, PHCN, have been fully privatized with all the thermal plants transferred to the private companies that succeeded in their bidding process, while the hydro-plants have been transferred to the concessionaires for long-term periods following successful bidding exercise. The eleven successor distribution companies have also been privatized but with a small percentage of their shares retained by government, while the successor transmission company will be under private management only.

The upstream oil and gas sector is fully deregulated. In the downstream sector, petroleum products distribution is also deregulated. However, the prices of PMS and HHK are controlled by the PPPRA. A Petroleum Industry Bill (PIB), whose objectives include bringing all existing petroleum laws under one legislation, establishing clear rules, procedures and institutions for the administration of the petroleum industry in Nigeria is currently under consideration by the National Assembly.

Institutional Framework Given the vital role of energy in national development and its impact on every aspect of our life, energy planning must be viewed as an integral part of national development planning such that energy development decisions are not taken as isolated sectoral plans, but rather, closely linked and reconciled with those of the rest of the economy.

A necessary condition for the optimal development of the energy sector is the effective coordination of the various energy sub-sectors because of their interrelatedness. It is also necessary to coordinate the energy related activities of the non-energy sectors of the economy. In this respect, revision of the NEP at the instance of the Energy Commission of Nigeria (ECN) as the government organ for the strategic planning and coordination of national policies on energy is a strategic development. This development must however be complemented by promoting cooperation in the implementation of the national energy policies and plans between the Energy Commission and relevant Ministries, Departments and Agencies (MDAs), Independent Power Producers (IPPs), Electricity Distribution Companies (EDCs), other private energy companies, etc. It is important to realize that in order to increase the efficiency and effectiveness of energy delivery in the country, there is a need to develop the technological capabilities of these energy sector companies to cope with the challenges of future energy development.

There should also exist at state and local government levels, units responsible for energy matters. These would provide necessary links for the formulation of national energy policies, plans and programmes as well as for the execution of some of the programmes.

The successful implementation of the energy policy will require the active participation of the private sector. Therefore, the inputs of the organized private sector and the public are essential in the formulation of policy and implementation of strategies.

Policy Overview The national energy policy recognizes the multi-dimensional nature of energy and therefore addresses diverse issues such as research and development, energy pricing and financing, legislation, energy efficiency, environment etc. The overall thrust of the energy policy is the optimal utilization of the nation's energy resources for sustainable development with the active participation of the private sector.

Objectives of Energy Policy The policy objectives and implementation strategies have been carefully defined with the fundamental guiding premises that energy is crucial to national development goals and that government has a prime role in creating the enabling environment for meeting the energy challenges facing the nation. Furthermore, the dependence on oil can be reduced through the diversification of the nation's energy resources, aggressive research, development and demonstration (R D& D), human resources development, etc. Consequently the overall energy policy objectives may be summarized as follows:

i. To ensure the development of the nation's energy resources, with diversified energy resources option, for the achievement of national energy security and an efficient energy delivery system with an optimal energy resource mix.

ii. To guarantee increased contribution of energy productive activities to national income.

iii. To guarantee adequate, reliable and sustainable supply of energy at appropriate costs and in an environmentally friendly manner, to the various sectors of the economy, for national development.

iv. To guarantee an efficient and cost effective consumption pattern of energy resources.

v. To accelerate the process of acquisition and diffusion of technology and managerial expertise in the energy sector and indigenous participation in energy sector industries, for stability and self-reliance.

vi. To promote increased investments and development of the energy sector industries with private sector leadership.

vii. To ensure a comprehensive, integrated and well-informed energy sector plans and programmes for effective development.

viii. To foster international co-operation in energy trade and projects development in both the African region and the world at large.

ix. To successfully use the nation's abundant energy resources to promote international co-operation.

x. To promote research and development in, and adoption of, sustainable low carbon and clean energy technologies to mitigate environmental pollution and climate change.

xi. To promote gender sensitivity and special attention to rural energy needs.

xii. To promote efficiency, conservation and carbon management best practices in the nation’s energy supply chain.

xiii. To ensure comprehensive and up-to-date availability of energy sector data and information.

xiv. To ensure effective coordination of national energy planning, programmes and policy implementation.

Petroleum Policy

CHAPTER TWO

PETROLEUM POLICY

Crude Oil Crude oil was discovered in commercial quantities in Nigeria in 1956 while oil production started in 1958. The nation had a proven reserve estimate of about 37 billion barrels of predominantly low sulphur light crude, as at December 2012. The annual oil production peaked at about 845 million barrels in 1979. There was a decline in production to 451 million barrels in 1983 after a major market collapse that began in 1981 and lasted till 1987.

Thereafter, it rose again to 776 million barrels in 1998. However, the average production in 2012 was about 1.89 million barrels per day.

Nigeria has four refineries with a total installed capacity of 445,000 barrels per day.

However, capacity utilization is low. Consequently, annual consumption of petroleum products is not fully met by internal production and has to be supplemented by imports.

Currently, efforts are being made to increase capacity through private sector participation.

The nation is clearly over dependent on crude oil for its foreign exchange, which currently contributes about 80%; hence, the economy is vulnerable to the unstable nature of the international oil market. Therefore, there is a need to promote the expansion of the processing sub-sector to allow for the export of value-added petroleum products. Furthermore, it is desirable to diversify the domestic energy mix away from ever-increasing consumption of petroleum products in order to avert any possible conflict between domestic and export requirements.

Oil will continue to play a major role in the nation's economy, hence the need to expand the reserve base through continuous investment in exploration and production activities.

Policies

i. The nation shall engage extensively in exploration and production of crude oil exploration and associated liquid petroleum.

ii. The nation shall place emphasis on internal self-sufficiency in processing and export of petroleum products.

iii. The nation shall encourage the participation of indigenous and foreign companies in both upstream and downstream activities of the oil industry.

iv. The nation shall encourage the adoption of environmentally-friendly oil exploration, exploitation, handling and storage methods.

v. The nation shall complete deregulation and privatization of the oil industry.

vi. The nation shall aggressively pursue research and development studies and human capacity development to derive maximum economic benefit from its oil resources.

Objectives

i. To increase the reserves and the production capacity.

ii. To derive maximum economic benefits from the nation’s liquid petroleum resources.

iii. To ensure that refining to consumption ratio is greater than one (1), so as to ensure domestic self-reliance in the production of petroleum products for domestic consumption.

iv. To ensure adequate and reliable supply and distribution of petroleum products to meet the demand of the domestic market.

v. To accelerate the process of technology acquisition and diffusion in the oil industry.

vi. To enhance indigenous capability in the industry in the interest of national security.

vii. To promote the efficient management and environmentally-friendly operation in line with global best practices.

viii. To attract increased private sector capital inflow to the oil industry.

ix. To mainstream and/or integrate climate change adoption in oil both upstream and downstream activities of the oil industry.

x. To foster the use of best available practices/technology to minimize impacts of oil activity on the project communities/location most vulnerable to environmental/climate change threat.

xi. To minimize adverse environmental impacts of oil activities on the project communities and locations.

xii. To encourage the full participation of indigenous and foreign companies in both upstream and downstream activities of the oil industry.

Strategies

i. Investing in and intensifying crude oil exploration and production in all Nigerian sedimentary basins and ensuring that acreages put up for bidding rounds are properly pre-estimated with minimal speculations.

Short-Term

ii. Investing in exploration, production and refining activities in other countries to promote national development and energy security.

iii. Maximizing and expanding the refining capacity in the country to cater fully for local consumption and export of petroleum products.

iv. Expanding and promoting research and development activities in the country.

v. Taking appropriate measures to ensure that Nigerians are adequately involved in all sections of the oil industry.

vi. Providing appropriate incentives to attract investments and ensure reasonable returns.

vii. Encouraging local engineering design and fabrication of equipment and spares in

Nigeria.

viii. Ensuring the use of locally available materials, for oil exploration, production and processing including refining.

ix. Updating laws and regulations constantly to create the enabling environment for increased private sector participation in the oil industry, especially in the downstream sub-sector.

x. Improving the living standards of people in oil producing communities through the provision of socio-economic infrastructure.

xi. Reviewing, improving and continuation of short-term strategies.

Medium-Term

xii. Ensuring that acreages put up for bidding rounds are properly pre-estimated with minimal speculations.

xiii. Ensuring adequate geographical coverage of oil refining and petroleum products distribution network.

xiv. Ensuring the availability of adequate strategic reserves of storage capacity for refined products for at least 90 days of forward consumption.

xv. Reviewing, improving and continuation of medium-term strategies.

Long-Term

Natural Gas

Nigeria's proven natural gas reserves, estimated at about 187 trillion standard cubic feet (tscf) as at 2012, are known to be substantially larger than its oil resources Gas discoveries in Nigeria are incidental to oil exploration and production activities. Gas flare was progressively curtailed from about 50% in 2001 to about 20% by December 2012.

In view of the increasing domestic oil consumption, an economically optimal strategy to replace oil with gas and gas derivatives will enhance the availability of more oil for export.

This will also promote the conservation of the oil reserves. Apart from the economic advantage, fuel substitution from oil to gas is more environmentally friendly because gas is a cleaner fuel than oil.

Given the current reserves and rate of exploitation, the Nigerian oil is expected to last for 42 years while Natural Gas is expected to last 60 years. It is therefore, strategically important to undertake major investments in the gas sector in order to prepare adequately for gas as a substitute for oil both for domestic needs and foreign exchange earnings.

The continued flaring of natural gas has resulted in a substantial waste of energy resources, in addition to contributing to atmospheric pollution. It is therefore imperative to take effective measures to eliminate routine gas flaring.

Policies

i. The nation's gas resources shall be harnessed and optimally integrated into the national economy, energy mix and industrial processes.

ii. The nation shall intensify in gas exploration and development.

iii. The nation shall put in place the necessary infrastructure and incentives for indigenous and foreign investors.

iv. The nation shall put in place necessary infrastructure and incentives for adequate geographical coverage of the gas transmission and distribution network.

v. The nation shall promote a competitive and efficient domestic market for natural gas and establish indigenous-based natural gas facilities.

vi. The nation shall aggressively pursue research and development and human capacity development to derive maximum economic benefit from its gas resources.

i. To determine the level of gas reserves available to the nation.

ii. To eliminate the flaring of associated gas by 2015.

iii. To expand the utilization of natural gas as industrial and domestic fuel, as well as for power generation.

iv. To increase the use of natural gas as industrial feedstock for petrochemical, pharmaceutical and fertilizer plants, etc.

v. To use gas to diversify the foreign exchange earnings base of the nation.

vi. To accelerate the process of technology acquisition and diffusion in the gas industry.

vii. To encourage indigenous entrepreneurial capability in the gas industry including the development of end-use devices.

viii. To ensure reliability of energy supply to all parts of the country.

ix. To support private sector participation in natural gas infrastructure for rapid development of energy intensive industries.

x. To promote efficiency and reliable supply of natural gas.

xi. To mainstream and/or integrate climate change adoption in both upstream and downstream activities of the gas industry.

xii. To minimize adverse environmental impacts of gas activities on the project communities and locations.

Strategies

i. Embarking on deliberate exploration and development of gas reserves in all parts of the country.

ii. Encouraging the oil-producing companies to gather and utilize associated gas in order to eliminate flaring by 2015.

iii. Imposing appropriate and effective penalties to discourage gas flaring.

iv. Encouraging the establishment of the necessary infrastructure for the effective gathering, transmission and distribution of gas nationwide.

v. Providing incentives to encourage industrial and domestic consumers to use gas or to convert to gas.

vi. Providing incentives to encourage the introduction and use of LPG appliances in areas not accessible to natural gas so as to encourage the consumer preference for gas.

vii. Establishing suitable infrastructure for the export of natural gas.

viii. Expanding and promoting gas related research and development outfits in the country.

ix. Formulating suitable urban and regional planning regulations needed for the effective distribution of natural gas to, and its utilization by, domestic and industrial consumers.

x. Providing necessary incentives to indigenous and foreign entrepreneurs to facilitate their participation in the gas industry.

xi. Ensuring that the price of natural gas is cost-effective.

xii. Reviewing, improving and continuation of short-term strategies.

xiii. Developing gas reserves in all parts of the country.

xiv. Implementing suitable urban and regional planning regulations needed for the effective distribution of natural gas to, and its utilization by, domestic and industrial consumers.

xv. Reviewing, improving and continuation of medium-term strategies.

Shale Hydrocarbon Resources

Nigeria is endowed greatly in conventional petroleum, nonetheless, fossil fuel is a wasting asset, and hence any future discoveries of shale oil/gas should be welcome for reserves addition apart from expanding the national energy mix. Besides, since conventional petroleum is not presently found in most inland basins, any discovery of commercial quantities of the shale hydrocarbon resources in the associated states will no doubt boost their economy apart from its overall salutary effect on the nation, as a whole.

Oil shale is an organic-rich fine-grained sedimentary rock from which both liquid and gaseous hydrocarbons called shale oil and shale gas, respectively, can be produced. Shale oil and shale gas are unconventional petroleum and are substitutes for conventional crude oil and natural gas, respectively. However, extracting shale oil/gas from oil shale is more costly than the production of their conventional counterparts both financially and in terms of its environmental impact. Deposits of oil shale sedimentary rocks occur around the world, including deposits all around the country. Estimates of global deposits shale oil range from

2.8 to 3.3 trillion barrels.

Admittedly, the nation is endowed greatly in conventional petroleum, nonetheless, fossil fuel is a wasting asset, and hence any future discoveries of shale oil/gas should be welcome for reserves addition apart from expanding the national energy mix. Besides, since conventional petroleum is not presently found in most inland basins, any discovery of commercial quantities of the resource in the associated states will no doubt boost their economy apart from it overall salutary effect on the nation, as a whole.

Policies

i. The nation shall encourage co-ordinated baseline studies and research on shale hydrocarbon resources.

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ii. The nation shall put in place the mechanism for development of appropriate legal, fiscal, environmental and other regulations for the guidance and operation of the shale gas/oil industry.

iii. The nation shall encourage indigenous and foreign companies to participate in exploration and exploitation of shale oil/gas when the necessary laws and regulations have been put in place.

i. To encourage geological studies of Nigerian sedimentary basins for shale hydrocarbon resources.

ii. To increase the national oil and gas reserves base and production capacity.

iii. To expand the national energy mix.

iv. To put in place the appropriate regulatory framework for safe and orderly operation of shale gas/oil industry in accordance with global best practices.

v. To encourage technology acquisition and capacity development for local content value addition.

vi. To gather relevant information on shale gas/oil prospectively in all sedimentary basins in the country.

Strategies

i. Encouraging and promoting research and development by both public and private institutions for focused studies and geological mapping of shale gas/oil–rich zones in all the sedimentary basins.

ii. Setting in motion appropriate legal and regulatory framework for creating enabling environment for exploration and exploitation of shale hydrocarbons in line with international best practices.

iii. Ensuring zero environmental degradation, including pollution of ground-water resources from the chemicals or other consumables and materials utilized in shale oil/gas production.

iv. Reviewing, improving and continuation of short-term strategies.

v. Delimiting, charting and leasing prospective blocks of sedimentary basins for shale gas exploration and exploitation by indigenous and foreign entrepreneurs as well as the national oil petroleum corporation.

vi. Making adequate provision to improve the living standards of people in shale gas/oil producing areas through provision of appropriate socio-economic infrastructure and other amenities.

vii. Reviewing, improving and continuation of medium-term strategies.

viii. Leasing prospective blocks of sedimentary basins for shale gas exploration and exploitation by indigenous and foreign entrepreneurs as well as the national oil petroleum corporation.

ix. Encouraging domestication of the technology for production, processing and utilization of shale hydrocarbon resources.

Coal and Tar Sands/Bitumen Policy

CHAPTER THREE

COAL AND TAR SANDS/BITUMEN POLICY

Coal

Available data show that coal of sub-bituminous grade occurs in about 33 coal fields spread in over 16 States of the Federation. The proven coal reserves so far in the country are about

650 million tonnes while the inferred reserves are about 2.75 billion tonnes, consisting approximately of 49% sub-bituminous, 39% bituminous and 12% lignitic coals.

Coal mining in Nigeria started in 1906 and recorded an output of 24,500 tonnes in 1916.

Production rose to a peak of 905,000 tonnes between 1958 and 1959 with a contribution of over 70% to commercial energy consumption in the country. Following the discovery of crude oil in commercial quantities in 1958 and the conversion of railway engines from coal to diesel, production of coal fell from the beginning of the sixties to only 52,700 tonnes in 1983.

This excludes the civil war years and the period of 1970 and 1971 during the reconstruction years, when there was little or no production. Production rose to about 14,390 tonnes in 2000.

In 2001, coal contributed approximately 0.02% to commercial energy consumption in the country, as compared to 31.9% for oil, 61.9% for natural gas and 6.2% for hydropower.

Nigerian coal has been found suitable for boiler fuel, production of high calorific gas, domestic heating, briquettes, formed coke and the manufacture of a wide range of chemicals including waxes, resins, adhesives and dyes. Their characteristic properties (low sulphur and ash content and, low thermoplastic properties), make these sub-bituminous coals ideal for coal-fired electric power plant. Some Nigerian coals can also be used to produce formed-coke of metallurgical quality. These potentials of coal need to be effectively harnessed into the country's energy delivery system and export commodity mix through the development of a vibrant coal industry.

From the onset of coal production in Nigeria, the Nigerian Coal Corporation was the only institution active in the coal industry. In 1990, the Federal Government approved the full commercialization of the Corporation. Joint venture arrangements with foreign partners for the exploitation of some of the coal deposits are ongoing. However, there is still the need for increased private sector, as well as indigenous, participation in the activities of the coal industry.

i. The nation shall pursue vigorously a comprehensive programme of resuscitation of the coal industry.

ii. The nation shall carry out extensive exploration activities to maintain a high level of coal reserves.

iii. The nation shall actively promote private sector as well as local content input in the coal industry.

iv. The nation’s exploitation and utilization of coal shall be in line with global best practices.

v. The nation shall explore the techno-economic feasibility of new coal technology such as coal gasification and coal-to-liquid conversion.

vi. The nation shall ensure adequate supply of coal to meet the energy requirements of the country in a cost effective and sustainable manner.

i. To promote production of coal to meet domestic needs and for export.

ii. To promote effective utilization of coal to complement the nation's energy needs and as industrial feedstock.

iii. To attract increased investment into, and promote local content input, in the industry.

iv. To utilize coal in the form of coal briquette.

v. To increase the contribution of coal by 30% to the national energy mix by 2020.

vi. To minimize environmental pollution arising from the utilization of coal.

vii. To support increased environmental monitoring, including air quality monitoring for existing and/or proposed mines and power stations in the country.

viii. To establish an emissions performance standard to prevent construction of coal-fired power station in the country that fails to meet emissions performance standard.

Strategies

i. Intensifying the drive for coal exploration and production activities.

ii. Providing adequate incentives to indigenous and foreign entrepreneurs so as to attract investments in coal exploration and production.

iii. Organizing awareness programmes for the use of smokeless coal briquettes as an alternative to fuelwood.

iv. Providing adequate incentives for the large scale production of coal stoves at affordable prices.

v. Encouraging research and development in the production, processing and utilization of coal.

vi. Reviewing, improving and continuation of short-term strategies.

vii. Undertaking more detailed geological exploration for coal deposits in the country.

viii. Providing adequate incentives to indigenous and foreign entrepreneurs for the establishment of coal-based industries.

ix. Developing adequate infrastructure for handling and transportation of coal within and out of the country.

x. Introducing clean coal technologies into coal utilization.

xi. Reviewing, improving and continuation of medium-term strategies.

xii. Re-introducing the use of coal for power generation.

Tar Sands/Bitumen

Nigeria is endowed with large quantities of tar sands/bitumen. Preliminary investigation has indicated a resource size of 31 billion barrels of oil equivalent. The heavy crude from the tar sands can be a major feedstock for the Kaduna Refinery, which at present relies on imported raw materials with similar properties.

Bitumen, which is derived from tar sands, is used in road construction, electrical, chemical, petrochemical and other industries. If properly harnessed, the tar sand resources in the country would contribute immensely to the nation's energy resource base. In this regard, government has set up the Bitumen Blocs Committee to supervise the sale of bitumen blocs.

i. The nation shall promote tar sands/bitumen exploration and exploitation.

ii. The nation shall actively promote private sector as well as local content input through small scale ventures in the exploitation of the tar sands/bitumen resources.

iii. The nation shall encourage the adoption of environmentally friendly approach for exploration and exploitation of Tar sands.

i. To extract heavy oil from the tar sands/bitumen for refineries.

ii. To conserve foreign exchange used in importing heavy crude oil and also produce heavy crude for export.

iii. To acquire the technology for developing and harnessing the tar sands/bitumen.

iv. To ensure adequate financing, efficient operation and management of the sub-sector.

v. To encourage the local content input in the sub-sector from the early stages of its development.

vi. To minimize adverse environmental impacts associated with Tar Sands/Bitumen exploration.

i. Undertaking detailed geological exploration activities for tar sands/bitumen deposits

ii. Providing appropriate incentives to facilitate investment in the exploration and exploitation of tar sands/bitumen resources.

iii. Establishing an appropriate regulatory framework for the tar sands/bitumen sub-sector.

iv. Providing an appropriate financing facility to support indigenous investments in tar sands/bitumen development.

v. De-emphasizing the importation of heavy crude oil as a way of encouraging the utilization of heavy oils from tar sands/bitumen.

vi. Reviewing, improving and continuation of short-term strategies.

vii. Establishing heavy oil upgrading facilities near the tar sands/bitumen deposits.

viii. Intensifying research and development in the production of lubricants and other heavy oil products from tar sands/bitumen.

ix. Establishing infrastructural facilities for the acquisition of the technology for harnessing tar sands/bitumen.

x. Reviewing, improving and continuation of medium-term strategies.

Nuclear Energy Policy

CHAPTER FOUR

NUCLEAR ENERGY POLICY

Nuclear energy has found broad application in various socio-economic developments of nations and it is indeed one of the major sources of base load electricity generation in the world today. The technology for harnessing nuclear energy demands great responsibility and expertise. Therefore it requires careful planning of the manpower development and material resources.

Coordinated approach to research, training and development in the areas of nuclear science and technology in Nigeria started in 1976 when the Acts establishing Nigeria Atomic Energy

Commission was enacted, which gave rise to the establishment of two nuclear energy research centres in 1977. Another nuclear science and technology centre was also established in 1993 and new ones have recently been added. Consequently, trained personnel in the area are concentrated in these centres. However, there is an urgent need to accelerate the manpower development programme in view of the diverse peaceful applications of nuclear energy.

Crucial to any nuclear programme is the availability of nuclear minerals such as uranium and thorium. In 1947, pyrochlore containing uranium was found in appreciable quantities on the

Jos- Plateau and its environs. By 1979, about 617,000 km2 of land area had been covered by aerial radiometric surveys and another 90,000 km2 had been covered by other surveys.

Recently, a few other studies carried out indicate that these nuclear minerals are…