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Adewale Sanyaolu
Stakeholders have again raised the alarm over the inability of the country to maximise the huge potentials inherent in the country’s abundant gas resources.
With an estimated N800 million being lost daily to gas flaring, sector operators have called for a liberalised market and financial structures in the power sector.
The move, according to the operators, would form part of measures to aid domestic utilisation and encourage in- vestments needed to fast-track deployment of infrastructure for the commodity.
The development ac- cording to them was stifling fresh investments into the sector while existing operators are not encouraged to either expand their investment portfolio of consider new ones. Chronicling some of the constraints militating against the growth of the gas sector at the 2019 Nigerian Gas Association (NGA) 2019 Business Forum with the topic: ‘‘Evaluating the Place of Gas As A Prioritised Enabler of Nigeria’s Economic Diversification’’, the experts posited that poor infrastructure largely visible by insufficient pipeline network remained a disservice to the growth of the sector.
They also said the cur- rent Domestic Supply Obligation (DSO) procedure that allocates arbitrary pricing on gas supplied by the upstream gas producers without considering the viability of such pricing does not work and is a disincentive to gas producers investing in the gas infrastructure required to utilise Nigeria’s vast gas reserves.
They submitted that, for the country’s 199 trillion cubic feet (tcf) proven gas reserves to be tapped, realize its full benefits as a catalyst for economic growth and diversification, several challenges across the entire gas value chain need to be resolved.
Chairman, Oil Producers’ Trade Section (OPTS), Mr.Paul Mcgrath, stated that, it was no longer news that infrastructure along the gas and power value chain remains inadequate. Particularly, he said Nigeria lacks sufficient pipelines to de- liver gas from the fields where it is produced to the current and potential off-takers ( power plants, manufacturers, amongst others).
In addition, he noted that the transmission and distribution systems lack the capacity to de- liver the generated electricity to businesses and other consumers.
‘‘Building infrastructure requires a sustained joint effort of the stake- holders led by government. Active government support will help enable a stable investment climate, acceptable commercial terms and
contractual risks. The above elements will help in attracting the required private investments which would strengthen existing off-takers and ultimately lead to emergence of new buyers and suppliers.
On gas pricing, he lamented that,to date, Nigeria’s domestic gas prices are kept at a regulated low price, which does not cover the cost required to fully develop its gas resources.
‘‘Of the 162 TCF re- ported gas reserves, about 75 per cent will require the building of new infrastructure to de- liver these gas resources to the domestic market.
The current regulated gas price of $2.50/mmbtu falls short of the price required to attract in- vestment for these new gas developments.
The gas sector should transit into a liberalised market based on the ‘willing buyer, willing seller’ principle and en- sure the existence of a competitive fiscal regime to support upstream gas development.
He disclosed that the commercial and financial structures of the gas- to-power commercial value chain remain weak with growing arrears and uncertainty in the payment system which disincentivizes gas investors.
He insisted that a conducive business environment is essential towards achieving a diversified economy with the critical elements of a conducive business environment being; security of lives and property, improved efficiency of regulatory bodies and stability of laws and policies.
‘‘OPTS believes that improving the regulatory, judicial and legislative framework in line with global standards (dispute resolution, contract sanctity) would promote investor confidence and significantly improve Nigeria’s ease of doing business towards growing and diversifying the economy.’’
He posited that, gas has a leading role as a key enabler to the diversification and growth of Nigeria’s broader economy through adequate power
generation, provision of feedstock for value-add- ing manufacturing, and increased FGN revenue from LNG, stating that the development of Nigeria’s vast gas resources and strengthening of the gas value chain should be a national priority.
‘‘To fast-track the development of these resources, government policy needs to focus on developing adequate infrastructure, providing enabling commercial terms, settling and preventing future debts related to gas and power supply, and improving the business environment. OPTS is well positioned to collaborate with the government and other stakeholders in this regard.’’
NGA, other stake- holders react President of NGA, Mrs. Audrey Joe-Ezigbo, noted that the gas sec- tor can aid Nigeria’s diversification agenda if government is deliberate about the gas-to-power initiative, especially for industries.
Joe-Ezigbo, said the key measures that were expected to be adopted in Nigeria are market reforms that aim to improve competition and attract gas investments in the upstream and mid- stream sectors; the facilitation of permits and administrative processes for gas project developments; and pricing or mandated fuel switching to natural gas.
Total Upstream’s Assistant General Man- ager, Gas, Mrs. Maryam Shehu, said with huge investments going into the gas sector annually, if there was no increase in the consumption, the nation might experience gas glut.
She worried that the government has not positively responded to deal- ing with critical issues inhibiting investment in the sector.
Shehu also described the gas pricing regime as a major factor discouraging private investment in the midstream sector.
The Group Executive Director, BUA Group, Kabiru Rabiu, represented by Abiodun Abe of BUA Steel, urged government to discourage the flaring of gas, considering the huge domestic demand in critical industries that can foster industrialisation.
For his part, Also, Group Chief Executive Officer,Oilser Limited, Mr. Emeka Okwuosa, said that infrastructure gap was limiting the impact of gas as an enabler to industrialisation.
Okwuosa said efforts should be made to push the volume of gas to sup- port power generation to spur industrial growth and development.
But the Senior Special Assistant to the President on ERGP implementation (Power and Gas), Daniel Ikuenobe, noted that conversation is ongoing on the pricing of gas and sought collaboration with operators to address concerns in gas deployment for domestic use.
