Buhari considering recommendation to deregulate gas prices, boost supply

As part of the submission to President Buhari on the roadmap for his government, the oil and gas sub-committee of the Transition Committee recommended the deregulation of gas prices and the acceleration of domestic gas supply to 250mmscf per day within the first 100 days of the administration.

According to the document sighted by BusinessDay, domestic gas supply can be ramped up immediately, through boosting the current gas processing capacity in the Nigerian Petroleum Development Company’s (NPDC) 2tcf Oredo field, where gas wells have been drilled and can produce additional 135mmscf per day. In addition, Pan Ocean Ogharefe gas plant which is in close proximity to the Oredo field, can also be boosted to optimise its capacity. The plant has a capacity of 200mscf per day but is currently under utilised at 30mmscf per day production.

On medium to long term objectives, the oil and gas sub-committee wants the Buhari government to launch an accelerated programme to develop Non-Associated Gas fields in the Western Niger Delta, to fill the current 200 – 300mmscf per day excess processing capacity available in the region.

The medium term plan of 12 to 24 months should ensure additional gas deliveries from OML 42, OML 34, OML 30, OML 26, OML 135 and 75.

The long term plan should aim at ensuring additional gas deliveries from OML72, Erha, Bonga and Asa North.

Industry players are optimistic that the deregulation of natural gas pricing which has been one of the fundamental issues stunting the growth of the gas sector will make a positive impact on the economy.   

“If we get our gas pricing right, people will invest in gas and there will be infrastructure, and that is what is holding Nigeria back from industrial explosion.

“If the new Buhari administration directs attention to gas and we take gas to every part of Nigeria, there is nothing this country cannot achieve. If this administration wants to succeed, gas is the first thing”, said Joe Ezeigbo, chief executive of Falcon Corporation, in an exclusive interview with BusinessDay.

Ezeigbo said Nigeria has been treating gas as a useless commodity because the gas was found was while drilling for oil.  “There is this temptation to think that there is no cost to the associated gas, therefore it is a waste. We were therefore willing to flare it because of the over-bloated money we were getting from oil.

“ So Nigerians felt the gas was useless. Because it was useless, the pricing was even less than $1; from 10 cents to 20 cents to 50 cents, until recently, when it hit about $2.50 per 1,000 standard cubic feet (scf) for the power sector customers and for industrial use, it is about $7.30 per 1000scf”, said Ezeigbo.

“We have to recognise that gas projects are long term, high cost and gestations period for recovering of cost is usually 10, 15, 25 years. If that is the case, for you to undertake a 10 – 15 years project, you have to secure the fixed cost, you have to secure the profits, then the project becomes bankable and then you secure the final off-takers”, said Emeka Ene, chairman of Society For Engineers (SPE), Nigeria Council.

FRANK UZUEGBUNAM