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 eorts 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.

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