‘Investment in gas virtual pipeline to tackle energy hiccups, vandalism’

Nigeria’s concerted efforts to overcome the debilitating challenges of vandalism of gas pipelines by Niger Delta militants that have resulted in a drop in power generation may not see the light of day unless government creates a favourable investment climate that will support the deployment of virtual pipeline in the process of movement of gas, industry experts advise.

Virtual pipelines are substitute to physical pipelines that distribute gas via land or sea transport. They replicate the continuous flow of energy via transportation logistics using trucks or ships.

Concerned operators observe that there has been an alarming increase in vandalism of gas pipelines in the past five to six months within the oil rich Niger-Delta region of Nigeria, which generally serves as the transit region for a large portion of the pipelines.

They advocate that with support of the government through the right policy to aid investment, the power sector is expected to be a prime beneficiary of this idea.

Ayodele Oni, a specialist in international energy investment law and policy, observes that the push for virtual pipelines has increased in the last three months, with a number of foreign investors considering the idea and looking to come into Nigeria to provide support to industries and productive activities that rely on gas.

Oni says that while the private sector seeks to invest in same, government does need to provide an enabling environment through good policies and incentives (fiscal and otherwise), improved road networks and a robust rail system together with proper planning.

“Irrespective of the role played by the private sector to improve power supply, it is pertinent that the Federal Government of Nigeria and state governments too, also invest in improvement of road infrastructure. Alternative transportation modes like the cable cars being developed may serve as a plausible means of transporting the LNG or compressed natural gas,” Oni says.

According to Oni, “With investments in the electric power sector, especially by foreign investors, capable of boosting investor confidence and triggering improved liquidity, which helps cushion the effects of the current recession.”

Industry watchers are of the opinion that deepening investment in virtual pipelines system can be instrumental to improving gas availability, especially for electric power supply in the country.

Statistics indicate that Nigeria currently produces an estimated 7 billion scf per day and account for an estimated 182 trillion scf of gas reserve. Despite the country’s abundance of natural gas deposits, several challenges have over the years continue to stifle the translation of the benefits of this huge gas potential into improved power generation for domestic as it concern the gas to power projections.

Analysts observe that despite government’s best efforts, however, the electric power sector has contended with gas production and supply challenges, noting that the unattractive pricing of domestic gas makes it unfavourable for private sector participants to get involved in the sector.

Industry experts believe that electricity supply or the lack of it will remain a very sensitive issue with several political and economic sophistications, as the questions that continue to beg for answer among industry watchers is, will Nigeria ever attain effective power supply to grow the economy?

According analysts, the lack of a proper commercial structure for gas production, especially for domestic use, to insufficient gas pipelines and lack of a strong infrastructure backbone remains a subsisting challenge, among others

They further say that vandalism of the existing pipeline infrastructure also posted a challenge to gas supply in the country such that even where the government has sought to make domestic production and use of natural gas profitable and attractive, and despite Nigeria’s natural advantage of having large gas reserves, not much gas reaches the location where same is required for power generation.

Domestic gas projects will become more profitable if indigenous companies are given access, Dada Thomas, managing director, Frontier Oil Limited, observes.

According to Thomas, “the only incentive for indigenous companies willing to continue to invest in gas for domestic use is if government provides an enabling environment.”

He says freeing gas for local investors is the first step toward encouraging willing investors to develop gas for the domestic market.

“A gas project, 70 percent of it is in dollars because of the technology, the equipment is not resident in Nigeria. You have to spend dollars to get a gas project going. So, if government does not address this investment and income currency mix match, there will be no future investment in gas project in Nigeria,” he says.