Falling oil prices will not spur investment in gas unless …Experts

Falling oil price in the international market and the subsequent naira devaluation will not spur investment in the gas sector unless government responds with the right policy framework to drive  it, analysts say.

While acknowledging that recent reforms in the sector such as licensing of more independent power projects (IPP) and the Gas Master Plan have increased potential demand for gas, the analysts urged government to move fast and resolve all the pending final investment decisions (FIDs) for all the liquefied natural gas (LNG) projects such as NLNG Train 7, Brass LNG, and OKLNG, among others.

They are of the opinion that the existing window of opportunities derivable from these projects  in the global LNG market are closing fast, due to recent projects from East Africa, Australia and Qatar among others.

With Nigeria holding the largest proven reserves of natural gas in Africa, estimated at 179 trillion cubic feet and the ninth largest in the world, the analysts say resolving the issue of infrastructural deficiency, will make the industry competitive and attractive.

The development, they further argued, had continued to make major gas projects in the country to become export oriented only.

“I do not think declining crude oil prices will necessarily encourage gas investment, but if government responds to it and creates the necessary environment, all the infrastructural challenges we are talking about will be resolved.

“If we do not respond, investors will look elsewhere. I hope that with declining crude oil price, government will make the right decisions and focus on the critical things and let the energy market be responsive to market dynamics”, said Charles Osezua, chairman and chief executive of Owel-Linkso Group.

Osezua said he hopes that government will allow competitiveness in the energy sector. “When you have a competitive energy sector where you have willing buyer and willing seller, where you do not have to fight with the issues of subsidy, I think then we will see the development”, he added.

Power generating capacity is estimated to increase  eight-fold from the current 4,000MW to about 32,000MW by 2020 and this will require about 7 billion cubic feet of gas to drive.

Experts believe gas could provide a good buffer for Nigeria in times like these, with the falling crude oil price. Babatunde Omotowa, managing director and chief executive of NLNG, in a presentation at the Centre for Petroleum Institute earlier this year, said  NLNG Train 7 will generate additional 8 million tonnes, $12 billion in foreign direct investment (FDI), 18,000 construction jobs, additional ships, additional liquefied petroleum gas (LPG), additional revenue through tax and dividends and contribution to gas flares out.

Brass LNG has a capacity of 10MT, while OKLNG has a capacity of 12.8MT. With the 8MT of the NLNG Train 7, that is about 30MT per annum lying waste. The operational six Trains of NLNG produce 22MT per annum and generate about $12 billion per year. Thus, Nigeria has the potential to produce extra 30MT per annum, which will generate additional $15 billion revenue annually, plus extra 75,000 construction jobs from the three pending LNG projects.

FRANK UZUEGBUNAM