Nigeria’s huge gas finds with an estimated value of $720 billion have been left trapped and unproductive for decades, on account of lethargy by a government that is unable to create the policy environment to turn this huge resource into prosperity dividend for the country and its people.
The discovered gas resources, located in the south-south geographical part of the country, have become mere assets on paper, and they continue to be in the firm control of government bureaucrats whom analysts say are without a clue how to unlock them to energise the economy.
Exxon Mobil, Shell and other oil explorers, active in Nigeria since the 1960’s have discovered about 182 trillion cubic feet (Tcf) proven reserves of mostly associated gas, according to Nigerian National Petroleum Corporation (NNPC) data.
Associated gas is referred to as reserves discovered while exploring and drilling for oil, with industry analysts projecting that there is still about 600 Tcf of yet undiscovered gas potential in total.
The proven gas reserves of 182 Tcf would be worth about $720 billion, equal to 140 percent of Nigeria’s annual economic output, based on Friday’s prices of $4.00 per thousand cubic feet, according to BusinessDay calculations.
Stakeholders say poor fiscal terms; the low government dictated gas prices and lack of infrastructure, are the major impediments to investments that would unleash gas into Nigeria’s domestic economy, helping to boost industry, jobs and growth rates.
“The government has to get out of ownership of major gas assets which are currently lying fallow,” an official of a major international oil company said.
“Trying to develop some of these assets means coming up against NNPC/NAPIMS to pony up 55 percent of the necessary capital expenditure (CAPEX), which they do not have.”
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Some of the huge gas finds worth billions of dollars, which remain undeveloped by the Nigerian government and some international oil companies who own the assets, include Bosi, which is reported to contain as much as 5-7 tcf of gas; the Nnwa/Doro structure, reportedly carrying 6-9 tcf of gas; the Ngolo trap (OPL 219) and Assa-North.
Some of the fields were discovered as far back as in the 1990s and have been plugged after successful production test were carried out.
Speaking at the 2014 Society of Petroleum Engineering, Conference and Exhibition held in Lagos, Elisabeth Proust, managing director, Total Exploration and Production Nigeria Limited, said that “lack of adequate joint venture funding is limiting growth in gas development and production” adding that resolving JV funding could increase gas production by 2.8 billion cubic feet per day, by 2020.
While the non-associated gas discoveries remain fallow, associated gas flares remain unabated.
According to a February 2014 released data by the NNPC, the volume of gas flared was about 23.2 per cent of the total gas produced within the period.
The NNPC said total gas produced in the period was 215.93 billion SCF, dropping by 5.19 per cent or 11.81 billion SCF from 227.74 billion recorded in January 2014.
Of the total amount of gas produced, only 165.83 billion SCF of gas was utilised, representing 76.8 per cent of the total gas produced.
At least $3 billion in revenue is lost annually, due to the flaring, according to the Ministry of Petroleum Resources.
For every $1 billion improvement in earnings from gas, the exchange rate should appreciate about 1 percent, the Bank of Israel has estimated.
That country (Israel), unlike Nigeria, has in less than four years, moved to monetise huge gas resources discovered in the offshore Mediterranean Sea.
In September 2014 partners in Israel’s Leviathan gas discovery, including Houston-based Noble Energy Inc., announced a preliminary deal worth more than $15 billion based on benchmark European prices of $10/$11 per unit, to supply 1.6 trillion cubic feet of gas over 15 years to Jordan’s National Electric Power Co.
The Israeli shekel has appreciated about +3.66 percent versus the dollar in the past two years, while the naira has lost – 8.7 percent versus the greenback for the period, Bloomberg data shows.
“Nigeria needs to create a more stable regulatory, competitive, fiscals and a conducive business environment,” Proust said.
FRANK UZUEGBUNAM & PATRICK ATUANYA
