Nigeria targets 3 billion scfpd gas supplies by 2020
The projection by Nigeria to hit 3 trillion standard cubic feet per day (scfpd) of gas supply by 2020 may sound ambitious to say the least, but is not at all beyond attaining for the largest economy in Africa by GDP only to the extent that huge investment infrastructure permits.
Nigeria has the seventh largest gas reserves in the world with an estimate figure of 187 trillion cubic feet of proven high quality gas reserves and equally ranks among the top 30 largest natural gas producers with 1.35 Trillion cubic feet of dry natural gas according to recent statistics.
Nigeria currently produces 7 billion scf per day. 43 percent of production is either re-injected or flared without any commercial benefit, another 43 percent is exported via NLNG, WAGP etc. Only 13.3 percent is consumed locally of which 8.9 percent is allocated to gas-to-power.
The Federal Government at different fora in the last couple of years has reiterated that the full integration of the gas master plan would bring about the needed investment in gas processing, transmission and downstream gas utilisation as the year 2020 approach.
Part of government investment prospect for gas industry in the long run is to create new industries out of the old oil industry; capturing economic value and generating as much revenue from gas as from oil.
To further align with the federal government gas vision, NNPC in a report on their website affirms that comprehensive and integrated gas utilisation Master plan/programmes have been embarked upon, in which LNG and IPP developments are being given priority.
According to the report, the expected increased export earnings from LNG, coupled with adequate domestic power supply from IPPs, will strongly support and broaden economic expansion and urbanisation, increase the income generating capacity of Nigerians and lift the general wellbeing. It will further reinforce Government’s efforts towards integrating the Host communities into the mainstream of national development and growth.
Analysts are however skeptical that the unavailability of laws that guide the production of gas locally may invariable led to unstructured and low production capacities in a market where demand exceeds supply.
They argue that implementing the gas master plan remains a daunting challenge as full implementation will require high level private participation in the industry. However, the industry is still unattractive to private investors given the governments control of local gas market pricing.
Dolapo Oni, Head, Energy Research, Ecobank Development Company (EDC) Nigeria Limited observes the idea behind the drafting of the Gas master plan was good, but it needs to be reworked to reflect current economic realities.
“The gas master plan is a good plan, but what has been the problem with the plan is that of implementation. For us to be able to implement it we must have all the investment, we must create the infrastructure which at the moment is at the mercy of the Nigeria gas company. They are limited to what they can fund” he said.
Oni pointed out that to achieve the gas master plan the domestic market must be made attractive to investors who need to invest huge capital upfront in gas processing and pipeline for distribution.
Industry watchers are of the opinion the issue of lack of infrastructure and gas flaring, will be part of the determining factors in the nation’s prospect in benefiting optimally from her gas supply through West African Gas Pipeline (WAGP).
Lack of investment is what is limiting the ability of Nigeria to hit her projection figure when it comes to gas supply, Wumi Iledare, Director of Emerald Energy Institute, University of Port Harcourt, Rivers State said.
Iledare sadly observed that the governance structure of the country is not investment friendly stressing that the lack of a clear separation between regulator and policy formulator and even the commercial entity will continue to be a clog in the wheel of progress to any meaningful investment prospect in the gas sector. Everything today still revolves around NNPC, If they do not move away from that so that investors can see the possibility of transparency and accountability in the system, there is little that can happen by way of investment he said.
According to him, “The market sensibility to bad market is not in our favour at the moment over time, I do not think we have the administrative setup at this moment to even achieve the change we are gunning for in the oil and gas sector. This is important thing that need to be quickly address before the gas market can really function”, he said.
He further opines that there is need for government to look at providing institutional governance that is required to allow the oil and gas industry to be the engine that will propel to country to diversify our economy.
Jubril Kareem, an energy analyst disclosed that Nigeria remains very strong in terms of gas production as production has not dropped by any significant margin since the global crude oil price drop started.
According to him, “Our output represents only about 1percent of global output. In contrast, investment in gas production, most importantly for local consumption is quite encouraging. Investment in gas-to-power is dismal and there are no sign of a turnaround anytime soon.
Kareem suggested that the solution to this is simple so as to encourage a local gas market without government interference in pricing stressing that this will definitely be attractive to investors.
“However, government determination to keep cost of electricity low is hindering this development as a cost reflective gas price will translate to higher tariff for electricity consumers”, he said.
“Although eventually in the long run when such investment are matched by improvement in power generation and transmission, price will definitely find a lower level than the expected interim surge should the government decide to deregulate the industry”
While commenting on government and private sector collaboration Kareem observed that in the interim, it needs to focus on policy and incentive for gas producers and pipeline operators. With a solid agreement between the two, we can begin to anticipate the much needed investment in the sector.
“There are some levels of improvement among local gas producers and I expect them to be the major driver of local gas market in 2016. Producers with high gas production are likely to begin commercialisation to cushion the effect of revenue drop from crude oil production”.
“I also expect a push for higher gas price among producers supplying power plants, although I believe export and non-commercialised gas are still going to dominate the industry” he added.
Key industry experts are of the belief that a strategic drive by private sector will ensure the realisation of government’s intention to increase the national gas supply by 2020 by so doing contribute to enhance economic activities.
KELECHI EWUZIE