Stakeholders see improved economic benefits for Nigeria with natural gas adoption
Stakeholders in the Nigerian oil and gas industry are optimistic that Nigeria’s industrial, commercial, transportation and power sectors stand to benefit economically from the strategic adoption of natural gas as cost-effective alternative source of energy.
They observe that some of the economic benefits from the use of natural gas include huge savings in fuel costs, smooth process flows arising from stability of supply, reduced maintenance costs and increased operational efficiencies.
In the opinion of industry watchers, Nigeria will equally benefits from increased capacity production, employment and human capital development, saying that natural gas has the potential to engender rapid positive growth and enormous impact in the overall economy of our nation.
Joseph Eziegbo, chief operating officer, Falcon Corporation Limited, observes that Nigeria gas reserves is believe to be higher than oil reserves, saying that as the second largest economy by GDP, Nigeria will get the full benefit of this if beyond eliminating flares, the government encourage investment in aggregating the non-Associated Gas (NAG) resources into usable forms for the overall benefit of the nation’s economy.
In the ranking of world proven natural gas reserves by country, Nigeria is the largest in Africa and the seventh largest globally. Nigeria currently produces an estimated 7 billion scf per day and account for an estimated 182 trillion scf of gas reserve.
Eziegbo in a recent interview with BusinessDay observes that power and fuel costs traditionally constitute one of the highest single components of the overheads of the industrial sector worldwide.
According to Eziegbo, “Our gas reserves are believed to be higher than our oil reserves, however, we will not get the full benefit of this if beyond eliminating flares, we do not invest in aggregating our non-Associated Gas (NAG) resources into usable forms for the overall benefit of the nation’s economy.”
He says appropriate pricing, effective laws and specific regulations guiding investments in the gas subsector are an imperative to make such investments in NAG development a reality, with the attendant huge benefits to the entire nation.
“The cheapest and largest volume of resource we need for industrialisation is natural gas, which is in abundance in the country,” he said.
He further notes that with Nigeria’s long years of battling with erratic, unstable and expensive fuel, power generation options encouraging investment in developing natural gas, as alternative will deepen economic growth.
“As a result of the harsh realities, much global focus now centre on looking for the best and most cost-effective alternative sources, as well as looking at how to increase efficiencies out of whatever energy sources are being utilised,” he says.
Industry experts are of the view that once government through a sustainable framework create an enabling environment, private investors are willing to invest to exploit the huge gas resources, build fertiliser plants that will utilise gas to fill huge domestic demand.
Dada Thomas, managing director, Frontier Oil Limited, observes that the only incentive for indigenous companies willing to continue to invest in gas for domestic use is if government provides an enabling environment.
Thomas believes that 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.
Analysts argue that the absence of incentives to encourage investment in key infrastructure to boost local production and sales of the product to consumers, must occupied a pride of place in government priority list.
They maintain that while it is not difficult to decipher that ultilisation of gas has assumed a new dimension for both economic and technological development stressing that achieving the desire result in local gas supply or the lack of it will remain a very sensitive issue with government involvement in unrealistic prices.
The solution to this is simple and not in any way complicated, a local gas market without government interference in pricing will definitely be attractive to investors Kareem Jubril Adedayo, an energy expert with Eco Bank observes.
Adedayo said that 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 is however optimistic that 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.