• Friday, March 29, 2024
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There is high investment appetite for Nigeria’s gas sector – Mama

CHIJIOKE MAMA

CHIJIOKE MAMA, founder of Meiracopp Nigeria Limited (MNL) and a doctoral researcher in Business Management tells BusinessDay’s ISAAC ANYAOGU that the outlook for Nigeria’s gas sector brightens with new projects including Assah North gas project, Egbaoma gas processing and Gas flare commercialization program.

With the above 3 projects in the news this q1 2019 what is the outlook for the gas sector?

For me, I like to look beyond the sector-specific gains of these laudable gas projects in themselves.  Because it is gas, I am equally excited about the larger economic benefits of a well-developed gas sector for the Nigerian economy, which is what projects like this herald. 

Development of any modern economy requires a number of critical inputs including a robust gas sector, functional steel sector and a functional technology ecosystem. Assa North/Ohaji South (ANOR) gas project is one of the 7 critical gas projects being pursued by NNPC. Its recent Final Investment Decision (FID) by the Shell (JV) is very exciting, since the project has domestic supply focus for the produced gas. We are talking about 300 mmscf/day supply capacity within a 4.3 tcf gas reserves.

This gas will be available for gas-to-power initiatives, as well as, gas to industrial. When you consider the domestic gas supply challenges of several existing power plants and how gas supply constraint is generally considered a deterrent for further investment in thermal generation systems; then you see what the new supply capacity within ANOR and other projects would mean for the economy when completed.  There are countless other potential benefits. 

What do these projects say about the viability of the Nigerian gas sector?

Definitely! I think last year’s commissioning of the USD 500 million Greenville LNG project in Rumuji Rivers state was a major indicator of the attractiveness of the Nigerian gas sector. Again, this is an LNG project with a primary domestic focus.

It is optimized to increase natural gas supply to domestic users, including those remotely located from the Niger Delta, through the use of virtual pipelines. This is not “a planned project” it’s already working.

So you add that to the huge local and international interest that the Nigerian Gas Flare commercialization Program (NGFCP) has received in the ongoing bid process, what you then see is a clearly high investment appetite for the gas sector in Nigeria. So yes!  The sector is increasingly becoming attractive.

Remember that NNPC is still pushing the rest of the 7 critical gas projects. It can be said categorically that the sector is attractive and full of opportunities. 

Beyond gas-to power opportunities what other opportunities do these projects herald?

Beyond Gas-to-Power one common denominator for all these projects is the push it will provide for the Liquefied Petroleum Gas market in Nigeria (LPG), in addition to other forms of petrochemicals. But LPG is notable for several reasons, one of which is the import campaign that rides on poor domestic production capacity and its consequent effect on scarce Forex in Nigeria.  Increased capacity for local LPG production is directly in line with the National Gas Policy aspirations; which wants to grow LPG consumption from 500 million kg per annum to 5 billion kg by 2022.

This national aspiration requires robust domestic LPG production capacity which is directly achievable through these gas projects. Take the Gas flare commercialization program for example; it is projected to unlock 600,000 MT of LPG for the domestic market through different Gas to Chemical projects within the program.  This should also be the case with the new Egbaoma Gas processing plant, so there is a clear growth opportunity for the LPG value chain.

Where is the sector headed in the long term?

Remember that over and above all these projects is the Trans-Saharan Gas Pipeline project which will traverse the length of this country when completed, providing a critical supply infrastructure and major gas supply nodes along its way. This will incentivize both gas-to-power and gas for industrial projects in its path. Tied to that is the improved economics and viability of compressed Natural Gas (CNG) supplies through virtual pipelines, since compression stations can be sited in certain strategic locations to virtually feed remote gas consumers.

In spite of the optimism, are there not challenges that confront players in the gas sector?

There are obviously several challenges, chief of which are regulatory uncertainties relating to the governance of the entire petroleum sector, others include some levels of ambiguity around natural gas prices, I mean multiple prices and the regulatory control thereof.

In the past, the entire laws and policies within the Nigerian petroleum sector is technically skewed in favor of oil, causing an unhealthy attention to oil and neglect of gas resource. That too has just begun to change but the relics can still be seen. Insecurity of assets and infrastructure especially gas pipelines are among the other challenges.

For the LPG value chain, actors in this space are constrained by poor domestic cylinder manufacturing capacity and poor consumer awareness both of which can and should receive meaningful government support.

Are we likely to see these challenges disappearing soon? 

This is expected given the current trajectory. If the National Gas Policy (NGP) is religiously pursued as its already being done, a good part of these hurdles will disappear in the long term.  Market and regulatory conditions are bound to improve as more production, processing and transport capacity are added in the gas sector.

The National Gas Policy recognize this stage of the market as transitional and thus a number of hurdles are envisaged, as the market moves towards the establishment of the wholesale market where prices for example will be fully determined by market force.