LAGOS – Stakeholders in the Nigeria’s oil and gas sector yesterday lamented that Nigeria was ill-prepared to turn its abundant gas reserves to economic fortunes for Nigerians.
They disclosed this at the 2019 Business Forum and 20th Annual General Meeting (AGM) of the Nigerian Gas Association (NGA), where they blamed the development on the absence of conducive environment, which allows regulated gas price regime to make the sector uncompetitive.
Speaking at the event, Paul McGrath, Chairman, Oil Producers Trade Section (OPTS), said that the implementation of measures that enable capturing the potential benefits of the gas industry would require deliberate and extensive collaborative effort between government and key stakeholders.
He said the country’s gas provides a unique opportunity to provide steady, widely-available, cost-effective and generally affordable power to everyone, and that a shift to gas-fueled power generation would represent significant savings opportunities over sources such as diesel, which is multiple times more expensive than gas at the current price of $2.5/million British thermal unit mmbtu.
He said this saving could then be redeployed by power consumers; individuals and businesses to other goods and services and to new investments.
He further disclosed that the Nigeria Liquefied Natural Gas LNG (NLNG) maintains 70-80 thousand jobs in the economy and contributes $1.3 billion each year in revenue to government, providing much needed revenue for the government to deploy for the benefit of Nigeria, such as development of infrastructure and diversifying the economy.
On the challenges and solutions to unlocking Nigeria’s gas potential, he stressed that to realise the full benefits of gas as a catalyst for economic growth and diversification, several challenges across the entire gas value chain need to be resolved.
“Building infrastructure requires a sustained joint effort of the stakeholders led by government. Active government support will help enable a stable investment climate, acceptable commercial terms and contractual risks. The above elements will help in attracting the required private investments which would strengthen existing off-takers and ultimately lead to emergence of new buyers and suppliers,” he advised.
He further expressed worry that hitherto, Nigeria’s domestic gas prices were kept at a regulated low price, which didn’t cover the cost required to fully develop its gas resources.
“Of the 162 trillion cubic feet of gas, TCF reported gas reserves, about 75 per cent will require the building of new infrastructure to deliver these gas resources to the domestic market. The current regulated gas price of $ 2.50/mmbtu falls short of the price required to attract investment for these new gas developments.
“The gas sector should transition into a liberalised market based on the ‘willing buyer, willing seller’ principle and ensure the existence of a competitive fiscal regime to support upstream gas development.”
He also noted that the commercial and financial structures of the gas-to-power commercial value chain remained weak with growing arrears and uncertainty in the payment system, which dis0incentivises gas investors.
Also speaking, Mrs. Maryam Shehu, Deputy General Manager, Gas Commercial, Total Exploration and Production, noted that gas had good credential as clean energy, but government had not positively responded to dealing with critical issues inhibiting investment in the sector.
Shehu also described gas pricing regime as a major factor discouraging private investment in the midstream sector.
In his remarks, Engr. Emeka Okwuosa, Managing Director of OilServe, identified infrastructure gap as limiting impact of gas as enabler to industrialisation, adding that efforts should be made to push volume of gas to support power generation to boost industrial growth and development.
Ed Ubong, Managing Director, Shell Nigeria Gas (SNG), advocated the need for willing buyer-willing seller option to attract investors as current price regime could not guarantee return on investment.