Deepening Domestic Gas Supply Obligation compliance to shore up needed local investment
Operators in the Nigeria gas space are upbeat that strategic compliance to Domestic Gas Supply Obligation by gas producers is a clear path to attract the needed investments to boost Nigeria local gas demands.
Domestic Gas Supply Obligation (DSO) is an initiative of the Federal Government to meet national demand. DSO was assigned annually to all gas producers pursuant to the National Domestic Gas Supply Obligation and Pricing Regulations 2008 to determine the gas demand or the national gas requirement annually and evaluate utilisation along the gas value chain, among others.
Before now, the level of compliance by oil firms was very low. According to the Department of Petroleum Resources (DPR), between 2008 and 2013, DSO compliance was about 23 percent; by 2016 it rose to 38.18 percent and currently stands at 40 percent.
Nigeria produces an estimated 7 billion scf per day and account for an estimated 182 trillion scf of gas reserve. Among this figures, only 13.3 percent is consumed locally of which 8.9 percent is allocated to gas-to-power.
Statistics indicates that gas penetration out of the major cities in Nigeria is only 1 percent in a nation with a population of over 180 million people this concerned industry analysts says does not speaks well for the prospect of domestic gas utilisation.
It is against this backdrop that gas experts see the level of compliance by producers to the domestic supply obligation (DSO) as a welcome development.
According to them, “We can also attest to a reduction in the level of flaring. On the pricing side, we have seen some movement towards achieving a strong commercial and more cost-reflective pricing framework, and certainly the scope of the Gas Master Plan itself has created several investment opportunities that we expect to begin to see movement in over time”.
Analysts observed that the Nigerian Gas MasterPlan was set up to among other things address the delivery of gas-to-power targeted at ensuring about three-fold objectives – increase in generation capacity; to achieve a reasonable level of gas-based industrialisation and thereby positioning Nigeria as the undisputed regional hub for industries such as fertilizer, petrochemicals and methanol which require Natural Gas as feedstock; and of course to ensure we deepen our export gas market making it more robust and profitable.
They pointed out that increasing vandalism of oil and gas facilities in the Niger Delta have considerable reduced Nigeria Gas Company ability to deliver required gas in the downstream.
Analysts opine that funding as a major towards building the require infrastructure to grow the gas to power value chain to grow the economy.
Industry watchers observe that if the issues around credible and enforceable gas contracts coupled with a price regime are not tackled, willing local investors will continue to shy away from putting their money into production of gas for local use.
They are of the view that Gas projects will become more profitable if indigenous companies are given access, stressing that it will be easier for local companies with proven track records to attract investors to execute projects that can unlock gas for Nigeria.
KELECHI EWUZIE