Stakeholders pick holes in newly approved gas policy

Stakeholders have picked holes in the National Gas Policy approved by the Federal Government, aimed at removing barriers to investment in, and development of the sector.

Industry operators are concerned about the Federal Government’s readiness to implement contentious issues around gas pricing and infrastructure development. They say these issues, among others, if not addressed, may lead to investors holding back funds for the development of the sector.

The stakeholders observe that the much needed investments may continue to elude the sector, as the gas policy which is supposed to serve as an intervention strategy, has left not a few operators confused, with its amorphous standing on upstream gas pricing framework.

Regardless of the promises that government, through the gas policy hopes to achieve, industry operators observe that the pricing structure and the nature of contracts remain significant obstacles to the development of natural gas in Nigeria, saying that there is a need for standardisation and harmonisation of the agreements .

Dada Thomas, President of the Nigerian Gas Association and managing director, Frontier Oil Limited, told BusinessDay that greater urgency is needed to accelerate work on the National Petroleum Fiscal Policy and to prepare and approve a fiscal policy which will be a win-win policy for the nation, operators, investors and consumers .

According to Thomas, “This can only happen if the fiscal policy is investor-friendly enough to attract investment into the gas sector to grow the industry”.

Thomas observes that the Gas Policy and the Fiscal Policy are complimentary, and when implemented, will provide a complete policy framework that will hopefully usher in a new platform for growing the Nigerian gas industry, to meet domestic and export demands.

He insists that to actualise a competitive gas industry, the domestic market must be made attractive to investors who need to invest huge capital upfront in gas processing and pipeline for distribution.

Wumi Iledare, director of the Emerald Energy Institute, University of Port Harcourt, Rivers State, on his part, says the Gas Policy document is commendable.

Iledare says, “I am not sure the government is very serious when it comes to the implementation of its policy. The problem with Nigeria is accountability and transparency in the appointment process of officers to implement government strategy.

Industry watchers further observe that Nigeria, with 188 trillion cubic feet gas reserves, has over the years struggled to develop its domestic gas market and to maintain its position as a major player in the global gas business, on account of an abnormal gas policy that frustrates investors efforts.

From all indications, the gas sector in Nigeria holds out significant economic potential to Nigeria, as the Federal Government, through the Ministry of Petroleum Resources, says it plans to enhance gas and other derivatives, to ensure they attract foreign exchange, rather than continue with a situation where oil is the main source of forex accruals for Nigeria.

In his own reaction, Ayodele Oni, an energy expert, said government’s plans are very feasible if there is sufficient and continuing commitment on the behalf of the current administration and subsequent ones.

Oni disclosed that it appears now that most people, irrespective of political allegiances, accept gas as the future. “Even in the long term, Nigeria must break away from its dependence of fossil fuels, and it would be wise to build renewable energy capacity in tandem with the development of gas infrastructure” He said.

He further observes that the major hindrance in the current gas framework, is at the upstream end of the market. “There needs to be an overhaul of the acreage system, to replace some of the current upstream operators with gas companies that have the expertise, financial ability and motivation to properly develop gas capacity in Nigeria” he added.

Industry watchers say that the only incentive for indigenous companies willing to continue to invest in gas for domestic use, is if government provides an enabling environment.

Improved gas prices, in the view of industry watchers, could help secure off-takers for produced gas, at higher prices, although the regulated price of electricity will still hinder the ability of power plant operators to raise the price of feedstock.

Dolapo Oni, Head, Energy Research, Ecobank Development Company (EDC) Nigeria Limited, observes that given the sheer demand for gas, the prospects are bright, but whether that gas can reach the desired market is a completely separate issue.

According to Oni, “There is an expected push for higher gas prices among producers supplying power plants, although export and non-commercialised gas is still going to dominate the industry”.

 

Olusola Bello, Frank Uzuegbunam, Kelechi Ewuzie