Nigeria’s quest to convert from an oil economy to one powered by gas will require the right pricing framework and progressive regulation to encourage operators to innovate, build capacity to supply the domestic gas market and make long-term commitments.
The total value of Nigeria’s proven gas reserves is over $540 billion, more than the country’s GDP as of today. Yet, in a world where gas is emerging as the commodity of the future, Nigeria lags due to its inability to articulate a vision for energy security around gas.
In response to this problem, Nigeria declared 2021 to 2030 the decade of gas which will allow the country to strategically focus on its vast natural gas resources and function as a bridge between the dominant fossil fuel of today and the renewable energy of tomorrow.
For many experts, starting 2021 as a decade of gas has a nice ring to it but marketing alone will not cut it, without addressing other issues in terms of pricing, regulations, and commitment to contracts.
Mike Sangster, chairman of the Oil Producers Trade Section, representing Total, Chevron, Exxon Mobil, and Shell says for Nigeria to achieve a decade of gas, it needs an attractive or competitive fiscal regime that will encourage investors.
“We would love to invest in renewables but we need a bankable power purchase agreement,” Sangster said at Nigeria’s International Petroleum Summit (NIPS).
For Ed Ubong, the newly inaugurated president of the Nigeria Gas Association (NGA), Nigeria has abundant gas resources which, if harnessed, will meet the energy demand of over 350 million people and the industrial needs in the West African sub-region.
“Investors want to see a clear fiscal framework,” Ubong said at the event.
Yusuf Usman, chief operating officer (Gas & Power) at Nigerian National Petroleum Corporation said it is impossible to talk about a decade of gas without talking about fixing Nigeria’s power which consumes about 70 percent domestic market.
He noted that Nigeria needs to have a liberalised market system that will create the right environment for a more efficient price system.
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“Any power that is not paid for by the consumer is paid by the government who is already overburdened with fixing infrastructural challenges,” Usman said.
Bayo Ojulari, managing director of Shell Nigeria Exploration & Production Co. Ltd (SNEPCo) said other smaller countries with simpler regulations are moving at a faster pace than Nigeria.
“Nigeria needs to make sure the commitments we make to investors are honoured, which is the best way to build credibility,” he added.
Timipre Sylva, Nigeria’s minister of State for Petroleum Resources, admitted Nigeria’s oil and gas sector clearly went in the wrong direction in the 1950s, however, he assured investors the Petroleum Industry Bill (PIB) will solve all of the uncertainty in the sector.
“The PIB will be passed in April or in a few months from now,” he said.
The new PIB currently before the National Assembly proposes the creation of Nigerian National Petroleum Corporation Limited under Section 53 as a successor to the NNPC, while Section 64 (d) of the bill gives the new company rights to natural gas under production sharing contracts which were entered into before the bill was passed.
“The ministry has charged NNPC to conclude all Petroleum Sharing Contracts (PSC) agreements on projects within two months, to unlock more gas into the market,” Sylva said at the event.
The bill additionally authorises the authority to create a Midstream Gas Infrastructure Fund for making equity investments of government-owned participating or shareholder interests in infrastructure related to midstream gas operations.
Industry professionals hope that the activities of the Fund would not only increase private investment but also boost domestic consumption of natural gas in Nigeria in projects partly financed by private investments.
Other stakeholders at the event believed the government sector has to be bold about solving challenges such as unreliable gas supply, poor gas infrastructure, 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.
Nigeria has the largest gas reserves in Africa and the ninth-largest in the world but only about 25 percent of the reserves are being produced. The country’s total gas reserves stood at 203.16 trillion cubic feet as of January 1, 2020, up from 202Tcf in 2019, according to the Department of Petroleum Resources (DPR).
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