Six years under Buhari, Nigeria turning the corner on gas

In a government where wins are few and far between, the Buhari government’s policies to deepen gas use, though not without flaws, is setting the foundation for a thriving gas-powered economy.

The Buhari administration has drawn up a National Gas Policy which forms the blueprint for public policy. The government has not only declared a decade of gas but is backing it up with policy design, implementation guidelines and strategic partnerships that could unlock the economic potentials in a gas-rich country but obsessed with oil.

“Under this government, we have seen some focus on gas which has led to policies and programmes that has encouraged gas development,” said Oga Adejo-Ogiri, principal consultant, Vappax Advisory, a Lagos-based energy sector consultancy.

However, an overarching impulse that leans heavily towards statist control and distrust for private capital has dulled the effect of public policy aimed at commercialising gas.

This is why with proven reserves of over two trillion cubic feet (2tcf) of gas, Nigeria ranks number 9 globally, yet ranks 28th in terms of natural gas producers.

The Federal Government through the National Gas Expansion Programme (NGEP), designed to expand domestic gas supply and stimulate demand in-country, seeks to tackle challenges with Nigeria’s gas sector including poor fiscal terms, lack of market-reflective prices and poor infrastructure, as well as providing opportunities for local companies.

Read Also: Six years on, Buhari has failed woefully as president of Nigeria

Under the NGEP, four areas identified as crucial: Autogas [Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG) and Liquefied Natural Gas (LNG)] for automobiles and other prime movers; domestic Liquefied Petroleum Gas (LPG) expansion; Compressed Natural Gas (CNG) for Power/Electricity and Gas Based Industries (GBI) Revitalisation.

Though implementation has been spotty, it has nonetheless recorded modest wins. A committee was set up to review the gas pricing framework, a key constraint against deepening commercial gas locally.

Last year, the National Gas Transportation Network Code (NGTNC) – a contractual framework between the gas transportation network operator and gas shippers specifying guidelines -went live.

It could increase local gas delivery to the domestic market by making access to gas transport infrastructure easier if the scope of the network code is expanded to fully cover the domestic gas market in line with provisions already specified by the industry regulator, the Department of Petroleum Resources (DPR)

The Nigeria Gas Flare Commercialization Programme(NGFCP), set up to monetise gas, oil companies routinely flare out in search of oil has been developed but its goals are yet to be realised.

Perhaps the biggest win from this government turn towards gas is the financial close and signing of the contract for the NLNG Train 7, which will grow Nigeria’s production capacity by about 35 percent.

Another win is the commissioning, in December 2020, of the new NPDC Integrated Gas Handling

The facility in Edo State, the largest onshore LPG plant in the country, with a processing capacity of 100 million standard cubic feet of gas daily, producing 330 tonnes of LPG, 345 tonnes of propane and 2,600 barrels of condensate, daily.

The government’s support to partners has facilitated the commencement of the 300MMscfd capacity ANOH gas processing plant in Imo State, a joint venture between Seplat and the Nigerian Gas Company, a wholly-owned subsidiary of Nigerian National Petroleum Corporation.

In the LPG space, the successful launch of the National LPG Expansion Programme backed by the removal of Value Added Tax (VAT) from the domestic pricing of LPG) has incentivised investments into the sector and has birthed a deeper adoption of LPG in Nigeria.

“However, in view of the energy transition and the need to maximise the exploitation of our gas resources before they could potentially become stranded, we need more attractive fiscal terms in the PIB to attract the much-needed investments into the gas sector,” said Adejo-Ogiri.

Operators say Nigeria must enhance the fiscal marked by controlled pricing, concessional gas tariffs for sections of the market that are critical to achieving overall economic growth.

Lack of resolution of the legacy debts, payment guarantees and other commercial impediments constrain the use of gas in power generation.

“There was consensus that the gas supply industry must be anchored on a willing-seller willing-buyer framework to unlock further investments in gas exploration and delivery infrastructure,” the NGA said in a communique at a recent webinar.

They also called for the total removal of royalties on gas supplied and consumed in the domestic environment to encourage more supplies that catalyse more significant development in the overall domestic economy.

“Nigeria must begin to walk its talk and fast track the enthronement of market-driven reforms to enable gas-intensive demand drivers like power sector, Autogas, gas-based industries and cooking gas,” said Nuhu Yakubu, in a paper at a recent conference.