• Sunday, July 14, 2024
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Powering economic growth through gas

Powering economic growth through gas

Gas can catalyse economic growth. Nigeria has more potential in gas than oil. It has natural gas in abundance – 202 trillion cubic feet (TCF) of proven gas and 600 TCF of unproven gas, the largest in Africa and the ninth largest in the world. The reserves in gas are estimated to be three times the value of its crude oil. Yet just over one-quarter of those reserves are produced or used.

Nigeria’s gas potential offers opportunities in the upstream, midstream and downstream of the value chain. The future of the country, it’s aspirations for industrialisation and socio-economic development depend on harnessing this potential. Oil majors and independents as well as other players along the value chain are keen on the evolution of gas as the world prepares for a world after oil.

Yet there are barriers to tapping this potential.

Nigeria, though energy-poor, has the capacity to generate 12GW of electricity but less than half is available. An ineffectual power infrastructure is hampering economic and social development. Nigeria spends N5.74bn daily as interest on money borrowed from foreign and local lenders. The economy is forecasted to grow by a marginal 2 per cent if oil prices remain around $60 a barrel.

Our laws, like the domestic supply obligation which puts a cap on the price of gas sold locally, are outdated and obsolete.

Investors eye Africa’s gas. The continent is considered the dominant investment destination for gas in 2019. As much as $103 billion could be invested in Greenfield gas projects in Africa – one-third of the total planned globally.

Other than the $12 billion investment plan to expand Nigeria LNG which could see production increase from 22 million to 30 million tonnes per year; Nigeria isn’t on the radar. To attract more investments in the oil and gas sector, responsible for a significant portion of government revenue, must be reformed.

A review of electricity tariffs based on market prices that reflect the costs of inputs must factor the price of gas, among other variables. Gas is central to electricity generation as 50 percent of power generated in Nigeria is from gas-fired plants. Attempts to reduce gas flaring through a commercialisation programme coincide with efforts to ramp electricity production in Nigeria.

Unlocking and harnessing gas potential in order to increase power supply to homes and factories is a priority of the federal government. Nigeria’s huge gas potential could support the aspirations of government to raise living standards through sustainable economic growth and diversification

In addition to gas-to-power, demand for petrochemicals, fertilisers, and infrastructure for the gas value chain are among the potentials of gas as a catalyst of economic development.

Experts say what is missing is “smart regulation” to move Nigeria from being an oil-dependent economy to a gas-driven one; regulations that encourage long term investment.

Regulatory reforms must be bold about solving challenges such as gas pricing, unreliable gas supply, poor gas infrastructure, and power sector liquidity issue, ineffective regulation of the energy value chain, and concentration and control of gas resources within a limited set of license holders in the country. The reforms must be focused on catalysing regular power supply, keeping the lights on in factories and other gas-based industries, making it easier for entrepreneurs to thrive and generate jobs.

While Nigeria seems to be dilly-dallying, Trinidad and Tobago is a good example of a country that has accomplished much with its gas resources. With a small population of 1.4 million and only 11Tcf of proven gas reserves, the country has developed a globally competitive petrochemicals industry. Today, Trinidad and Tobago is the world’s largest exporter of ammonia and second-largest exporter of methanol.