Actualising the plans to drive investment in gas development
When the Federal government through the ministry of petroleum resources says it plans to enhance gas development and other derivatives, industry close watchers saw this as one of the numerous pronouncements by government.
Gbite Adeniji, Senior Technical Adviser on Upstream and Gas to Ibe Kachikwu, minister of state for petroleum was quoted as saying that the gas revolution will focus on establishment of robust infrastructure, gas-based industries, LPG and CNG penetration. He added that as the 9th largest gas reserves holder in the world, Nigeria can become a gas-based economy in not too distant future
Industry players maintain that while it is not difficult to decipher that ultilisation of gas has assumed a new dimension for both economic and technological development, achieving the desired result in local gas supply or the lack of it will remain a very sensitive issue with government involvement in unrealistic prices.
According to industry analysts, the solution is simple and not in any way complicated; a local gas market without government interference in pricing will definitely be attractive to investors.
Experts say government determination to control things is hindering this development as a cost reflective gas price has been elusive.
Industry operators insist that the desire of local gas companies is for government to provide incentives for investors to build refilling plants and terminals.
They are optimistic that this will set the tune for a sustainable commercial framework underpinned by “credible and enforceable gas contracts, and a price regime that is commercially driven and recognises the long term affordability across different buyers.
The government raised the price of gas from $1.80 per MMBTU to $2.50 per MMBTU in August 2014, but more than 50 percent of Nigeria’s 6 billion scf daily productions are still exported as LNG and another 2billion scf is either flared or re-injected into oil wells. Less than 2billion scf is being used domestically for industrial and power generation use.
Improved gas prices in the views of industry close watchers could help secure off takers for produced gas at higher price although the regulated price of electricity will still hinder the ability of power plants operators to raise the price of feedstock.
“Given the sheer demand for gas, the prospects are bright, but whether that gas can reach its desired market is a completely separate issue”
“There are some levels of improvement among local gas producers and there are expectations that they would be the major driver of local gas market. Producers with high gas production are likely to begin commercialisation to cushion the effect of revenue drop from crude oil production. There is expected push for higher gas price among producers supplying power plants, although export and non-commercialised gas are still going to dominate the industry”. Analysts said.
Analysts insist that to actualise the gas demand projection, the domestic market must be made attractive to investors who need to invest huge capital upfront in gas processing and pipeline for distribution.
KELECHI EWUZIE