The ability to secure financing to unlock gas investments is critical to put into use Nigeria’s 202 Trillion Cubic Feet (TCF) of gas reserves which could power industries and act as economic enabler post-COVID-19, energy experts have said.
The experts who spoke during a panel session on economic diversification and reigniting the energy sector at the BusinessDay digital dialogues with the theme ‘A National Conversation: Mapping Nigeria’s Response to COVID-19’, noted that Nigeria’s energy security lies in enacting the right regulatory and fiscal frameworks to attract investments, build requisite infrastructure to harness gas resources.
Rolake Akinkugbe-Filani, managing director of EnergyInc Advisors, said Nigeria should look for creative ways to finance gas projects in an era when the credit space for hydrocarbon on the global space is currently squeezed out by other transitional energy like renewable energy.
“We need a single-digit long-term financing in local currency which our market is still, unfortunately, playing catch-up with,” Akinkugbe-Filani said.
Akinkugbe-Filani said local currency fund can be secured with clearer regulation and there needs to be more synergy with other sectors, most especially the health sector.
Due to the impact of the coronavirus pandemic, Austin Avuru, CEO of Seplat, said Nigeria is gradually shifting from oil and gas being just a rental revenue to fund the budget to gas being an enabler of economic development.
“We have made over $1.5 billion investment in the gas market which we don’t regret, because it’s profitable business for us but it has to be expanded and linked to the electricity market which will lead to 3 Billion Cubic Feet (BCF) of domestic consumption unlike the less than 1 BCF we currently do,” Avuru said.
Though natural gas has the potential to diversify and grow the Nigerian economy, successive governments have treated gas as a nuisance to overcome on the way to extract oil. Now that oil is unravelling, marked by depressed demands amidst runway production, Nigeria is playing catch-up.
Onyeche Tifase, CEO of Siemens Nigeria, said that there is a massive power deficit in Nigeria even though the bulk of the power is generated from gas. Therefore, the journey towards diversification starts from having stable electricity which will lead to a more export-driven economy.
“Nigeria should be targeting electricity distribution of 200 gigawatts; we need to develop gas infrastructure in order to transmit electricity to the end consumers,” Tifase said.
Timipre Sylva, minister of state for petroleum resources, declared 2020 as Nigeria’s Year of Gas, an indication that the neglected commodity will feature prominently in the government’s plans, but the government is yet to fully back it up with the right fiscal and regulatory terms, analysts say.
“The year of gas has been on for the last seven years with nothing tangible to show on it,” Henry Adigun, team lead of Facility for Oil Sector Transformation in Nigeria (FOSTER), said.
Top on the list of the industry concern is the inability to liberalise gas pricing and de-couple gas from the floundering power sector which hemorrhages money on account of an ineffectual market.
Gas is heavily linked to the power sector, so Nigeria’s weak electricity market which loses on average about N40 billion every month due to tariffs that do not guarantee commercial returns and DisCos’ inability to fully collect bills means that gas projects cannot proceed.
Several projects, including the 614km-long Ajaokuta-Kaduna-Kano (AKK) pipeline, which began seven years after it was first proposed, the $20bn Brass LNG project in Bayelsa State, the $9.8bn Olokola LNG in Ogu, and the 5,000km Nigeria-Morocco offshore gas pipeline, have a long wait.
“The erosion of capital in the power sector due to the absence of a credible market and poor tariffs are some of its biggest challenges,” said Eyo Ekpo, CEO of Excerdite Consulting Limited.
Ekpo excoriated market participants for flouting rules governing the market, the lack of governance, and poor leadership from the sector regulator.
The two-day BusinessDay national conversation offered an opportunity for both the private and public sectors as well as the populace to discuss solutions to the country’s economic challenges worsened by the coronavirus pandemic.
