Nigeria has to change its engagement with gas

Ten years ago when Nigeria developed a gas master plan, the objective was to ramp up domestic utilisation of gas at a time power plants were constructed mainly without adequate provision for feedstock.

It is time for the country to change its engagement with gas. Gas is increasingly becoming a strategic resource in the world, and countries like Qatar, Russia and Algeria are seeing economic boost from better utilisation of gas locally.

With significant proven gas reserves of 187 Trillion Cubic Feet (TCF), Nigeria is ranked the world’s ninth-biggest holder of proven gas reserves. The International Gas Union (IGU) also ranks Nigeria 4th among Liquefied Natural Gas (LNG) exporting countries. The challenge, however, is how to get more of the commodity used at home.

The most urgent task before the government, therefore, is to give legal backing to the National Gas Policy developed by the Ministry of Petroleum Resources by making it an Act of parliament. By so doing, gas will become for the country not just a source of income but also of energy.

Gas as an energy source will require enactment of fiscal terms which encourage investment and production. This will lead to higher tax receipts from the full value chain, as well as ramp up domestic utilisation, firing up power plants and industries critical for economic development, says Austin Avuru, CEO of Seplat. It will also improve refinery utilisation rates, helping to reduce the scandalous sums spent on import of petroleum products.

Moreover, focus has to shift from export to local utilisation. Major gas projects in Nigeria have been export-oriented, including the NLNG, Brass LNG, West African Gas Pipeline (WAGP), and Mobil GTL. This has to change.

But first, there are critical obstacles that ought to be surmounted. Nigeria has to start issuing gas licences to encourage deliberate exploration for gas rather than striking gas while searching for oil. Militancy in the Niger Delta also has to be resolved to halt destruction of critical pipelines.

A regulator for the sector is needed to establish market rules and proper gas terms. Policies like the Domestic Gas Supply Obligation (DGSO), which mandates producers to sell to power plants and fixed price for gas sold to industries, have passed their sell-by date. Transactions must occur on market terms and gas pricing should be indexed to the local market.

ISAAC ANYAOGU

The writer can be reached via isaac.anyaogu@ businessdayonline.com or +2347037817378