Nigeria to roll out gas pipeline network code

A new regulatory instrument that is aimed at ensuring gas pipeline integrity, open access to pipeline and common understanding on metering is expected to come on line soon, as part of efforts towards transparency and efficiency in the operation of pipelines in the country.

The governance code will help to boost investment in gas development in the country, industry players and analysts told BusinessDay West Africa Energy. 

The Gas Pipeline Network Code, to which the Department of Petroleum Resources (DPR) is said to be putting finishing touches, is expected to be unveiled in the next couple of months. 

“As part of the gas master plan, the gas network code is also developed. When fully implemented, it presents a governance code for open access to the pipeline and other pipeline protocol which the Nigerian National Petroleum Corporation (NNPC) and any other transporter of gas will abide by,” David Ige, group executive director, gas and power, NNPC told BusinessDay West Africa Energy by phone. 

“The network code is a regulatory instrument. It will help to ensure that wrong quality gas does not go into the pipeline,” said Ige, adding that “The detail of the implementation of the code is being worked upon by the DPR. Within the next couple of months, DPR will roll it out.” 

The Nigerian Gas Master Plan (NGMP), which was approved in February 2008, was designed to optimise the vast gas resources in the country, with a target to move from the ground zero – characterised by increasing unstable position, thriving export, starved domestic, sub-commercial domestic market and poor infrastructure – to attain full market-driven status. 

The key strategies of the Plan includes to stimulate the multiplier effect of gas in the domestic economy; position Nigeria competitively in high value export markets, and guarantee long-term energy security in the country.

Bolaji Osunsanya, managing director, Oando Gas & Power, said: “I am happy that resources have been committed to the gas pipeline network code. The whole industry has anticipated it and we expect to see it come on stream soon. It is a welcome development.” 

“It assures that when you invest, your pipeline or gas will be operated in best practices. It helps in boosting the confidence of international financiers because they are always concerned about things being done properly,” he added.

Aside from the security risks hampering gas development in the country, poor regulatory regime coupled with sub-commercial frameworks, notably fixed low prices for domestic users also discourage investment in gas. 

“I think this step is very important to attracting investors into gas development. It will provide them with an idea of how serious government wants to drive the gas sector forward,” said Dolapo Oni, energy analyst at Ecobank. 

Commenting on the capacity of the NNPC to maintain gas pipelines in the country, Ige said: “In essence, we have demonstrable operating capacity, there is code that will give access to the lines and if price is right and paid, I think all will be fine. Nonetheless, there is scope for other players to invest and operate pipelines.” 

As part of measures to meet the growing domestic gas demand, driven by the power sector, the government had early this month increased the domestic gas price to $2.50 per 1,000 million cubic feet (Mcf), from $1.50/1,000 Mcf. 

According to Diezani Alison-Madueke, minister of petroleum resources, who announced the new gas price, the government also approved $0.80/Mcf as transportation costs for new pipeline capacity, adding that the new prices reflect the current market value, which would now be benchmarked against US inflation annually.

According to Alison-Madueke, gas supply challenges reduced supply to the power sector to about 750,000 Mcf/d, which could only provide 4,000MW of electricity as against the government’s target of 6,000MW.

“It is expected that barring unforeseen developments these interventions will add at least 370,000 Mcf/d of gas and assure a generation capacity of at least 5,000 MW within four to five months,” Alison-Madueke said.

 Failure to secure adequate gas feedstock remains the biggest risk to Nigeria’s efforts to ramp up power generation capacity, which is forecast to grow by 9 percent yearly to 2023, according to a recent report by Business Monitor International, an independent provider of country risk and industry analysis specialising in emerging and frontier markets.

 The new pricing regime – a key demand by investors in the gas supply chain – is expected to help to accelerate the completion of new gas projects.

These include the Utorogu field expansion that would add 60,000 Mcf/d, expansion of the Oben gas plant and drilling of new wells to add 100,000Mcf/d, as well as the re-entry of the Odidi field and revamp of its processing plant and flowlines which would deliver up to 40,000 Mcf/d.

The network code provides the entire governance rule on quality of gas everybody must bring because once the gas gets into the pipeline, you don’t know whose gas is causing the trouble, Ige said. 

“The code was developed by the people who developed the one in the UK. It will help with the pipeline integrity as there will be protocol on pipeline maintenance; there will be common understanding on how gas is measured and common understanding on open access to the pipeline. Maintenance programme will be spelt out. This kind of things is important to private investors,” he said. 

The Nigerian Gas Company Limited (NGC), a subsidiary of NNPC, is charged with the responsibility of transmission, distribution and marketing of Natural Gas. 

NGC currently operates gas facilities comprising of over 1,250 kilometres of pipelines with an over-all design capacity of more than 2.5 billion standard cubic feet of gas per day, 16 compressor stations and 18 metering stations. 

Some of the supply systems include Aladja Gas Pipeline System, Oben-Ajaokuta-Geregu Gas Pipeline System, which will form the back-bone of the proposed Northern Pipeline System; Sapele Gas Supply Systems, Imo River-Aba System; Alakiri to Onne Gas pipeline system supplies; Escravos-Lagos Pipeline, and Ajaokuta-Geregu Gas Pipeline System.

FEMI ASU