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On the Nigerian Gas Network Code: Off to a good start

With the launch of the Nigerian Gas Transportation Network Code at the opening ceremony of the 3rd edition of Nigeria International Petroleum Summit (NIPS 2020) in Abuja on February 10, the Nigerian Government has signaled a commitment to see through its proclamation that 2020 is the year of gas.

We commend the Federal Government for this important breakthrough. The Nigerian Gas Transportation Network Code will ensure that only the right quality of gas goes through the pipeline network, guarantee pipeline integrity, open access and common understanding of metering.

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This Network Code is both critical to growing the domestic gas market and promoting export. The code will also provide a uniform platform in terms of guidelines for agreements between buyers and sellers which will ensure transparency and eliminate existing bottlenecks according to Timipre Sylva, minister of state for Petroleum Resources.

The absence of this framework has hindered local gas use. The natural gas reserves volume of the operated deep-water acreages in Nigeria is about 21 percent of the country’s total reserves of liquid hydrocarbons according to the DPR. Yet the acreages accounted for about 36.08 percent of Nigeria’s total production in 2018. The absence of a uniform code for gas transport hinders investments.

Now investors would be assured of best practice in gas transportation and could encourage them to actively look at the domestic gas market. The bulk of Nigeria’s gas production is for exports, this will need to change if Nigeria must become industrialised. This policy is a step in that direction.

 The Network Code could help harmonize gas balancing arrangements to support the completion and the functioning of the Nigerian gas market, the security of supply and appropriate access to the relevant information, in order to facilitate trade and to move forward towards greater market integration.

As far as intentions go, this is a fine policy that is long overdue. A lack of transparency in the industry has led to unfair and often discriminatory access to gas transportation network and has deterred investments.

However we must warn that this Network Code is not the solution to all of Nigeria’s gas policy problems. Policy formation in the gas sector has been inconsistent, inadequate and often dated.

Nigeria lacks a comprehensive legal and fiscal regime for its natural gas. Despite having over 200 trillion-cubic feet (TCF) of gas, Nigeria treats its gas as an irritant on the way to finding oil. The Nigerian Petroleum Sector is too oil-focused and gas is largely subordinated to oil for legislative and regulatory purposes. The current dip in oil prices should wake us up to the reality that oil will not save us.

In 2008, Nigerian created a Gas Master Plan, a framework for gas infrastructure development but it is now not only obsolete but retrogressive. This realisation led to the formation of the 2017 National Gas Policy but this too continues to suffer the fate of the earlier policy – it lacks legal teeth to operationalise it. This has to change if we are serious about attracting gas investments.

Therefore, to make this year truly our year of gas as the minister said, the government will need to recognise gas as a commodity in its own right. This involves creating a petroleum law and regulations designed for gas and inclusion of downstream gas in legislations and streamlining current laws that are overlapping.

The legal and regulatory framework of the industry does not contemplate the midstream and downstream gas sectors as such it does not address the licensing, regulations and the fiscal regime which would govern the activities in the sector. This has to be the priority of the government if it is serious about developing gas.

We call on the Federal Government to begin to recognise gas as a fuel in its own right. It should start by separating the terms – no more oil/gas but simply gas and oil. The gas upstream sector should be separated from the midstream. Regulation must engender competition, pricing should be liberalised, the fiscal regime created, and ownership of gas infrastructure separated from ownership and operations of gas trading. This is when the Federal Government can truly say it serious about gas.

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