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How PIB can unlock $540bn Nigeria gas find

Despite years of delay, the Petroleum Industry Bill (PIB) still being debated by the National Assembly can transform Nigeria from an oil-dependent country to gas a giant like Australia or Qatar, with the unlocking of private capital to boost its gas reserves valued at $540 billion.

Nigeria hosts Africa’s largest gas reserves of more than 203 trillion cubic feet with an estimated value of $540 billion, based on March 28 gas prices of $2.55 per thousand cubic feet.

However, less than 20 percent of these reserves are being produced, with most of the products flared or burned along with oil because the country lacks both the right regulations and infrastructures to process it.

The big-ticket projects needed to unstrap Nigeria’s gas reserves have become mere assets on paper as they remain under firm control of government bureaucrats who analysts say are without deep insights to leverage them for economy boost unless the PIB is activated.

These fortune-changing projects could create thousands of new jobs, spur domestic gas demand, generate electricity, create opportunities for revenue diversification for the Nigerian government, strengthen the country’s revenue base and turn Nigeria into a dominant geopolitical player in Africa, using its gas resources, just like Australia, Russia or Qatar.

Projects in need of clearer gas regulation

More than 18 years after they were inaugurated, Nigeria’s Brass LNG project, and the Olokola LNG project worth approximately $30 billion is yet to progress beyond the drawing board despite billion-dollar spending.

The $12 billion Trans-Saharan Gas Pipeline Project (TSGP), expected to help Nigeria achieve zero gas flaring by 2020 remains an illusion, 19 years after it was conceived.

Read Also: Pass PIB in April to end fuel subsidy and systemic corruption

The Shell Petroleum Development Company of Nigeria Limited (SPDC) is also working with Nigerian National Petroleum Corporation (NNPC) on developing four of the government’s seven gas supply projects.

SPDC is participating in the development of the 6.4 Tcf Unitised Gas fields (Samabri-Biseni, Akri-Oguta, Ubie-Oshi and Afuo-Ogbainbri) all of which are still in early stages and decisions have not been taken.

If all four projects were completed, together Shell say “they might deliver more than three billion standard cubic feet of gas per day for domestic use and export.”

One of these projects is the Assa North/Ohaji South Gas Development Project in Imo State where construction began in 2019.

The project, with a capacity for 300 million standard cubic feet of gas per day, has the potential to be one of the largest domestic gas projects in the country when completed.

“The development will help the federal government deliver on its ambition to provide enough gas for domestic consumption, power generation and gas-based ammonia and urea fertilizers for farmers,” Shell’s 2020 publication said.

Another project still in the dark is the ExxonMobil and Qua Iboe Power Plant Limited (QIPP) plan to invest a combined $1.6 billion in the development of gas and power projects in Akwa Ibom State.

The initiative would see QIPP invest $1.1 billion in the building of a gas power plant with ExxonMobil investing $500 million in a gas project in the area.

Also, there are other gas pipelines projects such as Obiafu-Obrikom-Oben Gas Pipeline, the planned extension of the West Africa Gas Pipeline (WAGP) to Cote d’Ivoire, Escravos-Lagos Pipeline (ELP), East-West Offshore Gas Gathering System (EWOGGS), Ajaokuta-Kaduna-Kano (AKK) Pipeline project and the Trans Saharan Gas Pipeline.

Obiafu-Obrikom-Oben Gas Pipeline, also called the OB3 Pipeline or the East-West Pipeline, is a proposed natural gas pipeline running from the Obiafu-Obrikom gas plant near Omuku, Rivers State, to the Oben node in Edo State which is also expected to increase domestic gas supply from 42.5 mcm (1.5 bcf) to 56.6 mcm (2 bcf) per day.

The WAGP is a natural gas pipeline to supply gas from Nigeria’s Escravos region of Niger Delta area to Benin, Togo and Ghana. It has an initial capacity of 200 million cubic feet a day (mcfd), which is expandable to 600mcfd.

Also, there is the Escravos-Lagos Pipeline (ELP), a natural gas pipeline which supplies gas from Escravos region of the Niger Delta area to Lagos. The 36-inch, 342-kilometre gas pipeline project is expected to double the capacity of the existing ELPS, thereby improving gas supply to Ogun State and environs and guaranteeing a significant improvement in power supply across the country.

The PIB proposal

The PIB has several proposals which could alter Nigeria’s straggly oil and gas industry. For instance, a large part of the new regulation would be borne by the Midstream and Downstream Regulatory Authority which would be created by Section 52 of the Bill.

The responsibility of the new regulator would be to provide oversight over technical, operational, and commercial activities and ensure the safe, efficient, and sustainable infrastructural development of midstream and downstream businesses.

The proposed body would also implement the Nigerian Gas Transportation Network Code by developing open-access rules for the transportation of petroleum liquids and natural gas.

The bill creates the Nigerian National Petroleum Corporation Limited under Section 53 as a successor to the NNPC While Section 64 (d) gives the new company rights to natural gas under production sharing contracts which were entered into before the bill was passed into law.

The bill additionally authorizes the Authority to create a Midstream Gas Infrastructure Fund for making equity investments of Government-owned participating or shareholder interests in infrastructure related to midstream gas operations.

Industry professionals hope that the activities of the Fund would not only increase private investment but also boost domestic consumption of natural gas in Nigeria in projects partly financed by private investments.

Section 52 (16) goes further to shield the Fund from the reach of the Fiscal Responsibility Act, Infrastructure Concession Regulatory Commission Act, and the Public Procurement Act.

A notable feature of the Bill is the penalizing of gas flaring except in the case of an emergency, where doing so would constitute a safe practice under acceptable regulations, and where it was done in consideration of an exemption granted by the Commission.

Concerning natural gas licensees, PIB proposed installing metering equipment to measure the amount of gas being flared at a facility and by virtue of Section 108, submit a natural gas flare elimination and monetization plan within 12 months of the Bill’s effective date.

Section 132, 135, 138, 142, 148, 153 provide for the grant of licenses for bulk gas storage, gas transportation, gas transportation network operator, wholesale gas supply, retail gas supply, gas distribution, and gas aggregation.

The Bill also lays down a new pricing formula in the Fourth Schedule which will regulate prices for gas-based industries.

Few gaps

Although the PIB has clear regulations for gas, a closer look shows a few gaps that could prove knotty in the future.

For example, a large part of the bill fails to make a distinction between the different types of gas: Liquefied Petroleum Gas (LPG), Liquefied Natural Gas (LNG) and condensed petroleum gas (CNG). While section 167 and 168 of the bill relates to LNG, the wordings are not explicit enough within the sections to clarify the meaning of the generic term ‘gas’.

“The reference to gas in the Bill sometimes leads to confusion over which particular gas type is being referenced,” a report titled “Petroleum Products Pricing Regulatory Agency (PPPRA) and the Nigerian Gas Market: Avoiding a Robinhood.”

Experts’ take

With expectations concerning the passage of the PIB rising in 2021, most experts say with the right approach and implementation, the new PIB before the senate president of the Ninth Assembly, Ahmad Lawan can transit Nigeria from an oil giant to a gas giant.

Gas value chain experts if Nigeria were to be fully exploiting its gas resources, it could potentially be adding as much as $17 billion annually or as much as 6 percent to its less than $500 billion economy, helping to uplift millions of its citizens, many of whom live in extreme poverty.

Ademuyiwa Adegun, an Abuja-based gas commercial advisor with said the PIB will not only attract more investment in Nigeria’s gas sector but also address issues concerning gas flaring which remains a major fundamental problem in the sector.

“The law is a step in the right direction which will allow Nigeria to attract more royalty in the gas sector,” Adegun said.

Yinka Akinbowale, an energy lawyer with Sofidam Energy Resources Limited said passing the PIB will unlock more opportunities for Nigeria economy if properly implemented.

A research report by a non-governmental organization established to support those affected by activities in the extractive sector and weak governance, Stakeholders Democracy Network (SDN) said stronger implementation and enforcement is required should this version of the PIB be passed.

Although, SDN raised concern about section 104, clause 1b of the PIB which retains the possibility for the regulator to offer exemptions from gas flare penalties at its discretion.

While Nigeria seems to be dilly-dallying, Trinidad and Tobago holds example of a country that has accomplished much with its gas resources. With a small population of 1.4 million and only 11 Tcf of proven gas reserves, the country has developed a globally competitive petrochemicals industry.

Today, Trinidad and Tobago is the world’s largest exporter of ammonia and second-largest exporter of methanol leading to this industry contributing significantly to the country’s GDP.

*Support for this report was provided by the Premium Times Centre for Investigative Journalism (PTCIJ) through its Natural Resource and Extractive Programme.

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