Silver lining in horizon for Nigeria’s gas sector
President Muhammadu Buhari listed improving electricity supplies as one of the key targets of his government. Buhari, in his inaugural speech, described power shortages as a “national shame” after previous administrations since 1999 spent as much as $20 billion to boost supplies without any success.
Gas security remains the key to improving electricity supplies and meeting up with the government set ambitious plans over the years to increase power generation from the current 4GW to 40GW by 2020, in recognition of the huge deficits in power availability.
Nigeria currently produces about 9 billion cubic feet of gas per day, half of which is exported as liquefied natural gas. Another 1 billion cubic feet a day is flared in the course of oil production, 1 billion cubic feet is re-injected into oil wells daily for pressure stability and about 2 billion cubic feet per day is set aside for power stations.
David Ige, Group Executive Director, Gas and Power, Nigerian National Petroleum Corporation (NNPC), in an interview with newsmen earlier this year stated that Nigeria has grown its gas supply market from 300 million to two billion cubic feet per day.
Ige attributed the feat to successful implementation of the Nigeria Gas Master Plan adding that the gas master plan was a policy document that basically outlined government aspiration for Nigeria.
He said its implementation had already positioned Nigeria to be the largest producer of fertiliser by 2018 on the continent. He said the policy had impacted positively on the sector, adding that everything that was outlined in it was being implemented to the letter.
Inadequate gas supply has been traced to pricing issues and the non-resolution of PSC gas rights to enable development of significant PSC gas resources.
About 70 percent of Nigeria’s power plants are fuelled by gas, and significant debts to gas suppliers had built up due to the absence of formal, direct and binding agreements between gas suppliers and power plants. However, the recent payment to the gas suppliers is a silver lining on the horizon. This is the third tranche disbursement out of the CBN’s N213 billion Nigerian Electricity Market Stabilisation Facility, which promises to inject liquidity into the power sector to, particularly pay for built- up shortfalls, including outstanding obligations to gas suppliers.
CBN disburses N6.9b to gas suppliers
The Central Bank of Nigeria (CBN) has paid the sum of N6.9 billion to gas suppliers as part of its Nigerian Electricity Market Stabilisation Fund (NEMSF), which is set aside to ensure a steady power supply to the country.
The amount is representing legacy debts owed the gas suppliers by power distribution companies (DISCOs). The Central Bank of Nigeria (CBN) had set aside N213 billion to help stabilize the electricity power sector by providing funds to operators in the sector to enable them make necessary investments as well as, clear debts that have been considered as inhibiting power supply to homes and businesses.
The CBN Governor, Godwin Emefiele, at an Abuja event to disburse the cheque, disclosed that the payments made by the apex Bank represent debts by the power sector in proportion to the obligations to repay the facility by five DISCOs that have so far signed up to the facility. Emefiele disclosed that Discos owes gas suppliers as much as N40 billion as at the end of December 2014. While describing the disbursement to the gas suppliers as a milestone that had to be achieved, the CBN boss said the move was an important step in revitalising Nigeria’s energy sector.
The Nigeria Electricity Regulatory Commission (NERC), in August 2014, approved a commercially viable benchmark price of $2.50/mcf (one thousand cubic feet) for gas supply, and 80 cents/mcf as transportation costs for new capacity, in order to encourage existing and prospective gas suppliers’ ramp up their investments.
Companies that got paid include Chevron, N2.04 billion; Ibom Power, N1.7 billion; Shell, N965 million; ND Western N852 million; Seplat, N739 million; NPDC, N407 million; Pan Ocean, N 230 million; Eko Disco also received N4.4 million.
Supo Shadiya of the Chevron/NNPC Joint Venture Company, speaking on behalf of the gas suppliers, said that the payments were a major relief to the sub-sector and pledged that they were now more confident to play greater roles in the supply of stable electricity power to Nigerians.
“There is a very strong commitment on the part of suppliers to domestic gas market and indeed it is important for us to partner with the government to achieve the mission that the government has set for the power sector over the years. We are happy to be part of that”, he said.
He noted however that there were certain enablers which the NNPC had to make available, in line with the provisions of the 2014 MoU and there urged the national oil firm to play its part for a successful implementation of the agreement.
The enablers included gas infrastructure as well as security of facilities which attacks have in the recent past brought power generation to its lowest.
Gas production to quintuple by 2020
There are plan for Nigeria to quintuple daily gas production and almost double daily oil production by 2020, according to Kazeem Raimi Seplat Petroleum Development Company Corporate Planning Manager while speaking at the SPE London Annual Conference 2015.
Raimi stated that the country’s current gas output stood at 4 billion cubic feet per day, with gas reserves at 180 trillion cubic feet, and Nigeria’s current oil production rate was 2.2 million barrels per day, with reserves at 37 billion barrels. The 2020 target for the country’s daily gas and oil production is 20 billion cubic feet per day and four million barrels of oil per day, respectively, according to Raimi. Nigeria’s gas reserves are also targeted to increase to 300 trillion cubic feet and oil reserves to 40 billion barrels.
Nigeria holds the largest oil and gas reserves in Africa and approximately 80 percent of the country’s GDP comes from the oil and gas industry. The country spends an annual average of $40 billion in upstream investment and is the largest hydrocarbon producer in Africa.
The NNPC has said that in addition to Nigeria’s proven natural gas reserves of 182 trillion cubic feet (TCF), about 600 thousand cubic feet of undiscovered gas potential is still available for her to tap from. NNPC said that with such gas potential available to Nigeria, the country’s hydrocarbon industry would remain competitive despite new hydrocarbon discoveries in Sub-Saharan African countries like Mozambique.
FRANK UZUEGBUNAM