The Role Of Natural Gas In Nigeria's Energy Transition: A Legal Perspective

Introduction

Energy transition refers to the global shift from fossil fuels to renewable energy sources, aimed at reducing greenhouse gas emissions and tackling climate change. Nigeria has pledged to reach net-zero emissions by 2060 under its Energy Transition Plan and the Climate Change Act 2021. Within this policy framework, natural gas is positioned as a transition fuel, supporting energy security while lowering emissions. However, the true impact of natural gas in this transition will depend on the clarity, strength, and enforcement of Nigeria's legal and regulatory frameworks.

This article examines the role of natural gas in Nigeria's energy transition from a legal perspective.

Natural Gas in Nigeria's Energy Transition

Natural gas is produced by extracting hydrocarbons from underground reservoirs and processing them to remove impurities before distribution. It is considered cleaner and more efficient than coal and oil, supporting energy security while lowering emissions. Nigeria is developing various forms of natural gas utilisation to drive its energy transition.¹ Nigeria LNG Limited (NLNG) has positioned the country as a major global exporter of Liquefied Natural Gas (LNG),² while Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG) are increasingly promoted for domestic transport and household use.³ Piped Natural Gas (PNG) also plays a role, it is delivered through Nigeria's natural gas pipeline infrastructures, connecting production centers to power plants, industries, and domestic users.⁴ Given Nigeria's fossil-fuel-based infrastructure, natural gas offers a practical medium-term solution while renewable capacity develops. Each of these pathways, however, is governed by legal and regulatory frameworks that determine their efficiency and sustainability.⁵

Legal and Policy Framework Governing Natural Gas in Nigeria

These laws form the legal bedrock for positioning natural gas as a transition fuel in Nigeria.

1. Petroleum Industry Act 2021
   
   The Petroleum Industry Act (PIA) 2021, introduces significant reforms tailored to the natural gas sector. These includes new concessions recognising the exploitation of gas and not just oil, the creation of the Midstream and Downstream Gas Infrastructure Fund⁶ and a dedicated licensing framework⁷ for gas operations. On the fiscal side, the Act exempts gas from hydrocarbon tax,⁸ introduces reduced royalty rates of 5% on domestic gas and 2.5% produced and utilised in-country and permits deductions for gas reinjection wells costs.⁹ Importantly, the PIA also repeals and consolidates the Associated Gas Reinjection Act, strengthening the framework on gas flaring by imposing stricter penalties and limiting exemptions.¹⁰ In addition, it also establishes a pricing framework with floor prices for power, commercial, and gas-based industries, alongside more flexible domestic gas pricing.¹¹ Collectively, these measures strengthen Nigeria's competitiveness in the global gas market while reinforcing natural gas as a cornerstone of the country's clean energy transition.¹²
   
   
2. Nigeria LNG (Fiscal Incentives, Guarantees and Assurances) Act 2004 The Act provides for the legal and fiscal framework that secured the development of Nigeria LNG Limited (NLNG), Nigeria's leading liquefied natural gas exporter. By guaranteeing tax stability, duty exemptions, and fiscal incentives¹³ as well as protection against adverse policy shifts, it also created the certainty required for large-scale, long-term investment in LNG infrastructure.¹⁴ This stability has enabled NLNG to expand its capacity and position Nigeria as a significant global supplier of cleaner natural gas.
   
   
3. Environmental Impact Assessment Act (EIA Act)
   
   The Act requires that certain projects undergo a mandatory environmental review before approval.¹⁵ Among the activities covered are oil and gas field developments,¹⁶ including natural gas processing, storage, and transportation facilities. This places natural gas projects squarely within the scope of the Act, ensuring that environmental considerations are built into their planning and execution.
   
   
4. Climate Change Act 2021
   
   The Act sets Nigeria's path to net-zero emissions by 2060 through carbon budgets, sectoral targets, and oversight by the National Council on Climate Change.¹⁷ While it does not directly regulate natural gas, it places obligations on government ministries, departments, and agencies (MDAs) to integrate climate objectives into their mandates, including setting up dedicated climate desks and meeting annual carbon reduction targets.¹⁸ For regulators like the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), this means that natural gas operations ought to be framed within a low-carbon strategy.
   
   
5. Policy Framework on Natural Gas and the Energy Transition
   
   Nigeria's policy framework also reinforces the central role of natural gas in the clean energy transition. The government's Decade of Gas Initiative (2021–2030)¹⁹ explicitly positions gas as the “transition fuel” for power generation, industrial use, transport, and exports, with a focus on expanding infrastructure and domestic utilisation. This policy direction is further embedded in the Energy Transition Plan (2022),²⁰  which outlines Nigeria's pathway to net-zero emissions by 2060 and identifies natural gas as the bridge between current dependence on fossil fuels and future reliance on renewables. Together, these policies reinforce the Petroleum Industry Act 2021, by aligning legal reforms with Nigeria's broader energy plans and climate commitments.

Legal Issues in Gas and Transition

1. Regulatory Overlap and Weak Coordination
   
   The Petroleum Industry Act (PIA) 2021, provides a new governance structure for Nigeria's petroleum sector, the division of responsibilities between the NUPRC (upstream) and the NMDPRA (midstream and downstream) has sometimes created overlap for integrated projects. Although a presidential directive sought to resolve this by giving the NUPRC precedence in such cases²¹, proposed amendments to the PIA now seek to formalise joint oversight²², raising fresh concerns about regulatory clarity and efficiency. In an energy transition context, unclear regulatory roles slow project approvals and discourage private investment that is essential for gas infrastructure expansion.
   
   
2. Gas Flaring and Environmental Compliance Gaps
   
   Under the Petroleum Industry Act 2021²³ and the NUPRC (Gas Flaring, Venting and Methane Emissions) Regulations 2023,²⁴ operators are prohibited from routine gas flaring and are subject to penalties for non-compliance. The Act mandates that such penalty payments be applied towards environmental remediation and host community relief.²⁵ However, enforcement remains weak, and despite these legal safeguards, World Bank satellite data indicate that Nigeria continues to rank among the world's top gas-flaring nations²⁶. Similarly, the NUPRC guidelines²⁷ require companies to report their greenhouse gas and methane emissions, but reporting and verification remain inconsistent. Satellite data often show higher emissions than company self-reports, revealing gaps in transparency and oversight.²⁸
   
   
3. Domestic Gas Delivery Obligations and Market Implementation Gaps
   
   The Petroleum Industry Act 2021²⁹ introduced domestic gas delivery obligations to ensure supply to local industries and power plants. However, recent NUPRC data show that only about 77% of these obligations were met in 2024, largely due to infrastructure deficits, unreliable local users, and pricing constraints. Export markets continue to dominate gas utilisation, while domestic supply remains limited by weak enforcement and inadequate investment incentives. Industry leaders have therefore called for stronger regulatory stability and fiscal clarity to build confidence and attract long-term capital into Nigeria's gas value chain.³⁰

Conclusion and Recommendations

Natural gas is central to Nigeria's transition to a cleaner and more secure energy future, but the success of the Petroleum Industry Act 2021 and related reforms depends on effective implementation. Strengthening regulatory coordination, enforcing flaring and domestic delivery obligations, and ensuring transparent emissions reporting are essential to turn policy into measurable results. Nigeria's existing legal and fiscal framework should be applied consistently to support gas infrastructure investment, stable pricing, and reliable domestic supply. New projects must also integrate carbon management, environmental accountability, and host community engagement. Ultimately, Nigeria's success in leveraging natural gas as a transition fuel will depend on the proper implementation and enforcement of the laws governing its use.

Footnotes

1. Evelyn Dan Epelle, “Is Africa's energy transition gas dependent? Lessons from Nigeria'' in https://illuminem.com/illuminemvoices/is-africas-energy-transition-gas-dependent-lessons-from-nigeria Accessed (22nd September 2025).

2. Nigeria LNG Limited, https://www.nlng.com/operations/marketing/index.html Accessed (22nd September 2025).

3.  Eklavya Gupte and  Newsdesk-Nigeria “Nigeria to push CNG as alternative transport fuel, reduce reliance on gasoline “in https://www.spglobal.com/commodity-insights/en/news-research/latest-news/crude-oil/120120-nigeria-to-push-cng-as-alternative-transport-fuel-reduce-reliance-on-gasoline?utm Accessed (22^nd September 2025).

4. Nigerian National Petroleum Corporation (NNPC). (2017). Nigeria Gas Master Plan (NGMP). In https://aldg.org.ng/wp-content/uploads/2021/05/NIGERIA-GAS-MASTER-PLAN.pdf Accessed (22nd September 2025).

5. Evelyn Dan Epelle, “Is Africa's energy transition gas dependent? Lessons from Nigeria'' in https://illuminem.com/illuminemvoices/is-africas-energy-transition-gas-dependent-lessons-from-niger ia Accessed(22nd September, 2025).

6. petroleum Industry Act 2021, S. 52.

7. Ibid, Ss. 129 -155.

8. Ibid, S. 260.

9. Ibid, S. 108 (g).

10. Ibid, S. 104.

11. Ibid, Ss. 167-168.

12. Nigeria Energy, “The role of Gas in Nigeria's Energy Transition, in https://www.nigeria-energy.com/content/dam/markets/emea/nigeria-energy/en/2023/docs/NE24-Role-of-Gas-Nigeria-Energy-Transition.pdf (Accessed 29th September 2025).

13. The Nigeria LNG (Fiscal Incentives, Guarantees and Assurances) Act 2004, Ss. 2, 6 &7.

14. The Nigeria LNG (Fiscal Incentives, Guarantees and Assurances) Act 2004, second schedule.

15. The Environmental Impact Assessment Act 2004, S.13.

16. Environmental Impact Assessment Act 2004, Mandatory Study List, Schedule to the Act.

17. Climate Change Act 2021, Ss. 1, 2 & 20.

18. Climate Change Act 2021, S.22.

19. Federal Government of Nigeria, Decade of Gas Initiative (2021), at: https://decadeofgas.com.ng Accessed (30^th September 2025).

20. Federal Government of Nigeria, Nigeria Energy Transition Plan (2022), at: https://www.energytransition.gov.ng Accessed (30^th September 2025).

21. KPMG (2023) “The President Clarifies Oversight Responsibility for Crude Oil Export Terminals and Integrated Petroleum Facilities, issue No 10.3, 1.

22. Nigerian President Advances Oil Bill Placing NNPCL under Control of Finance Ministry, Upstream Regulator” Intelli News (7 October 2024) in https://www.intellinews.com/nigerian-president-advances-oil-bill-placing-nnpcl-under-control-of-finance-ministry-upstream-regulator-401485 (Accessed 7 October 2025).

23. Petroleum Industry Act 2021, S.104.

24. Gas Flaring, Venting and Methane Emissions (Prevention of Waste and Pollution) Regulations 2023, Ss. 14 & 21.

25. Petroleum Industry Act 2021, S.104(4).

26. World Bank. (2025). Global Gas Flaring Tracker Report 2025. Washington, D.C.: World Bank. In https://thedocs.worldbank.org/en/doc/bd2432bbb0e514986f382f61b14b2608-0400072025/original/Global-Gas-Flaring-Tracker-Report-July-2025.pdf (Accessed 9^th October 2025).

27. Guidelines For Management of Fugitive Methane and Greenhouse Gases Emissions in the Upstream Oil And Gas, Appendix A: Reporting Requirements.

28. CrossRiverWatch. (2025, July 7). Nigeria's First Oil Emissions Report Reveals Gaps as Only 15 Of 62 Firms Disclose Data. in https://crossriverwatch.com/2025/07/insight-nigerias-first-oil-emissions-report-reveals-gaps-as-only-15-of-62-firms-disclose-data (Accessed 9^th October 2025).

29. Petroleum Industry Act 2021, S. 110.

30. Emmanuel Addeh, THISDAYLIVE (2025). “Nigeria's Upstream Oil Sector Delivers 77% Domestic Gas Obligation Amid Infrastructure Gap.” In https://www.thisdaylive.com/2025/07/08/nigerias-upstream-oil-sector-delivers-77-domestic-gas-obligation-amid-infrastructure-gap (Accessed 9^th October 2025).

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