Budget review throws up Nigerian Gas Master Plan

At the recent hearing by the Senate Committee on Gas Resources, Permanent Secretary, Federal Ministry of Petroleum Resources, Jamila Shuaru’s presentation was dispatched in a classic case of throwing the baby away with the bathwater.

Bassey Akpan, while exercising the Senate’s prerogative to review the 2016 budget provisions, excised the proposal for the allocation of N200million for review of the Nigerian Gas Master Plan (NGMP), an ambitious document long on intent but a pitiful failure at implementation.

“You cannot be asking for funds to review what you have not even implemented,” said Akpan.

Considering that it is over seven years since the plan was conceived and several funds have been allocated for its review, the request understandably met with outrage.

Tall dreams, small resolve

Approved in February 2008, by the Federal government, the NGMP was conceived to provide a coherent framework for the development of gas in Nigeria. Through the plan, Nigeria’s economy was to be actively powered by gas through maximizing the multiplier effect of gas in domestic economy, optimizing Nigeria’s share and competitiveness in high value export markets and assuring long-term energy security for Nigeria.

Conceived at time when global demand for gas was high, buoyed by the successes recorded by Nigeria LNG, power sector reforms that were creating demand for more gas in the local market, and high investor confidence, Nigeria seemed positioned to take advantage of the situation due to rising gas prices and huge reserves.

The objectives for the NGMP in the domestic market was to facilitate gas to power, boost domestic LPG and CNG, stimulate broad gas based industrialization with methanol, fertilizer etc. The NGMP was crafted to take advantage of the sudden boom in the gas sector. It was conceived so that Nigeria can participate in high value markets and strategically position the sector for growth and value addition.  It was also meant to assure long-term growth and capital investments in the sector. However, seven years after the document was drawn up, the lofty ambitions set that it set for the Nigerian gas industry remains a mirage.

This is occasioned by a mix of factors, inadequate capital and technical issues being some of the most prominent. However, a report by the Center for Social Justice observed that beyond these issues, awareness for the goals and purpose of the NGMP is very low outside the small enclave of Nigeria’s oil and gas experts.

Pushing for a review

At the Senate review hearing, Shuara argued that the country could not yet meet the objectives of the gas master plan as a result of exigencies that included an $8 billion court judgment procured against the ministry by an investor he did not name. While a court judgment of that magnitude could derail a lot of plans for any industry, it is not enough to heap all the woes of the industry on the court judgment.

Investments into the sector have not lived up to the billing. To achieve a component of the NGMP that calls for the construction of 2,300 kilometers of pipelines across the country to boost gas supply will require an investment of over $2 billion. But investors are not hearing a compelling message because strategic communication has not been focused on what investors can benefit from the project. The result is apathy leading analysts to call for Federal government funding for projects from resources that are sorely lacking and competing with bourgeoning recurrent expenses.

The report written by Eze Onyekpere and Ikenna Ofoegbu for the Centre for Social Justice, says about the development, “Due to a number of reasons, mainly the risk of politically inspired violence, vandalism, the risk of expropriation and the long gestation period before the investment becomes profitable, international oil companies are unwilling to invest in gas projects while governments and citizens are desirous of gas investments. It called for home-grown solutions with full implementation of the Domestic gas supply obligation to be vigorously pursued

Required action 

CSJ report recommended that the Federal government introduced incentives that are benchmarked with those offered by other gas-producing nations in Africa. There are fiscal incentives in the form of capital subsidy, grant and rebates, investments and production credits and reductions in taxes; sales, energy and value added taxes. Some have also offered public financing schemes such as loans and grants.

Some of the suggested funding sources identified by the authors of the report include an $18 billion unremitted oil funds identified by the Nigerian Extractive Industry Transparency Initiative(NEITI), should be recovered and a part of it dedicated for the effort. It also suggested dedicated bonds and development loans including Diaspora Bonds to fund the plan. The government may also guarantee loans and bonds for reputable companies to invest in the gas sector. By this arrangement, the federal government will only incur contingent liabilities which will not crystalize if the projects are well managed.

This is not to so that the plan has a total failure, which will be stretching the argument beyond the borders of civility. Nigerian National Petroleum Corporation reports that that Nigeria has reserves of 184 tcf, and has the 7th largest reserve of natural gas. It has seen demand increase from 1.5 bcf/d to 15 bcf/d and reduced gas flares. There is also more investment and utilization of domestic gas as a result of the policy. What remains is for the progress recorded so far in its implementation to be properly documented and publicized.

Considering the fact that previous budgetary allocations for the review of the NGMP has not achieved its objective, it would seem wise to restrict further funding for the same purpose but it does not necessarily invalidate the need for a review of the plan. However, this review need not be done by the same people and with the same format. It would seem a forum of critical players in the sector, investors and the general public is required to look at what needs to be done to improve the fortunes of the NGMP.

The agenda for the next review is to focus on why Nigeria with huge natural gas reserve cannot have enough gas to fuel its power programmes. It should also seek to find out if there are realistic short, medium and long term strategies to effectively monetize gas reserves for power projects.

Also, the forum should provide solution to obstacles to funding and devise solutions to unlock investments for gas development and transportation projects. It should find a solution to the snail pace of sectorial development despite its potential benefits to the economy. Another critical area to be reviewed is the non-alignment of Nigeria’s gas and power regulatory frameworks. Security of gas infrastructure requires keen attention because the use of conventional means of securing pipelines is losing grip with current realities.

ISAAC ANYAOGU