Move over oil, it’s time for gas

With good reason, Nigeria has been described as a gas province with just a drop of oil. This is on account of the country’s significant proven gas reserves of 187 Trillion Cubic Feet, (TCF), the ninth largest proven reserve in the world, but using the commodity to drive the local economy has eluded the country.

So it was refreshing to hear of the Nigerian National Petroleum Corporation’s (NNPC) plan to ramp seven critical gas development projects (7CGDP) scheduled to deliver about 3.4billion standard cubic feet of gas per day on an accelerated basis to bridge a projected medium term supply gap by 2020.

Delivering the Oil Industry address at the annual Society of Petroleum Engineers’ Oloibiri lecture series, Maikanti Baru, group managing director of the NNPC through Bello Rabiu, chief operating officer in charge of the Upstream Directorate of the NNPC, said that the 7CGDP would be executed aggressively on a sustained level.

The projects include: development of the 4.3 Trillion cubic feet (TCF) Assa North/Ohaji South field, development of the 6.4 TCF Unitized Gas fields (Samabri-Biseni, Akri-Oguta, Ubie-Oshi and Afuo-Ogbainbri) and the development of 7TCF NPDC’s OML 26, 30 & 42. Others include; development of 2.2 TCF Shell Petroleum Development Company, (SPDC) JV Gas Supply to Brass Fertilizer Company, cluster development of 5 TCF OML 13 to support the expansion of Seven Energy Uquo Gas Plant and the cluster development of 10 TCF Okpokunou/Tuomo West (OML 35& 62).

Baru said that the anticipated rise in domestic gas demand to about 7bscfd which is envisaged to outpace gas supply development trajectory necessitated the urgency for NNPC to identify short, medium and long term gas resources to bridge the huge supply gap.

When fully implemented, the projects would enable the nation meet its aspiration of delivering gas to support 15,000MW power generation and position Nigeria as a regional hub for gas based industries (Petrochemicals, Chemicals, Methanol, Fertilizer, etc.).

Nigeria currently produces 8.0 bcf/ d of natural gas but 38 percent of this, the equivalent of 3.05 bcf/d is exported in the form of LNG by the Nigeria LNG. Thirty six percent or 2.9 bcf/d serves as re-injection fuel and for other operational uses. Sixteen percent or 1.3 bcf/d of gas produced is dedicated for domestic consumption in power and industries and 0.75 bcf/d or 10 percent is flared.

What the NNPC is saying in effect is that it has updated its domestic gas demand from 5bscfd in 2020 to 7bscfd. By every standard, this is an ambitious target, perhaps even irrational. But Nigeria ramped domestic gas utilisation from about 197 million scf/d in 1999 to about 573 mmscf/d in 2004 and between 2007 and 2017, local consumption grew to 1.3bcf/d.

We can dream but there are teething challenges in the way. The Domestic Gas Supply Obligation is now ripe to be buried. The commercial terms for gas as the circumstances that led to the DGSO including lack of capacity, infrastructure gaps are now closing.

Other issues that require prompt attention is resolving pipeline vandalism and communal disruption as this sabotage erode confidence in the market. The industry needs a regulator different from the oil sector. Nigeria needs to move away from an oligopolistic structure that confers acreages to few players, even though they may lack the capacity to develop the market.

There should be separate licensing rounds for gas acreages and oil majors with access to gas acreages without financial incentive to develop them because it does not make economic sense due to limited returns in the domestic market, should be incentivised to utilise the assets.

Gas infrastructure is limited and evacuation is still a nightmare. Statutory charges involved in moving gas do not also incentivise producers as well as current commercial terms. While there has been growth in human capital in the sector with the activities of independents, but critical skill sets required in gas exploration are still lacking. In framing gas fiscal term, Nigeria would need to decide if it wants to grow revenues or develop the domestic market.

ISAAC ANYAOGU