Strengthening economic gains of Natural gas adoption in Nigeria

In the ranking of world proven natural gas reserves by country, Nigeria is the largest in Africa and the 7th largest globally. The country currently produces an estimated 7 billion scf per day and account for an estimated 182 trillion scf of gas reserve. Despite this huge natural gas advantage, Nigeria has seen drastic drop in power supply in many parts of the country as it grapples with gas supply shortfalls.

Industry experts say that crucial to Nigeria’s aspiration to boost power supply to businesses and homes is the strategic adoption of natural gas, adding that this requires massive investment to unlock the value in the resource.

Recent findings show that by 2018, 50 percent of domestic gas production to power the economy will come from Nigerian independents, and it is expected that demand for gas will grow 7.2 Bcfd in 2025.

Nigeria, therefore, needs to re-strategise and embrace pragmatic options that will not only guarantee effective economic gain for adoption of her natural gas, but also ensures key sectors of her economy experience growth ” experts maintain.

Xraying the benefit of Natural gas

Operators in the 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 observed that some of the economic benefits from the use of natural gas include huge savings in fuel costs, smooth process flows arising out of stability of supply, reduced maintenance costs and increased operational efficiencies.

In the opinion of industry watchers, Nigeria will equally benefit from increased capacity production, employment and human capital development, adding 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 observed that Nigeria gas reserves is believed to be higher than oil reserves, thus, the country 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.

Eziegbo in a recent interview with BusinessDay observed that power and fuel costs traditionally constitute one of the highest single components of the overheads of the industrial sector worldwide.

Already, when you do an analysis of the available AG resources as compared with the current and future gas demand arising from the many gas-based projects and initiatives proposed for deployment, it becomes clear that there is going to be a huge future supply gap that we need to begin to address. 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.

According to him, “we will not get the full benefit of gas 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 opined that 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 noted 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 center 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 said

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.

Investment as game changer

Dada Thomas, managing director, Frontier Oil Limited observes the only incentive for indigenous companies willing to continue to invest in gas for domestic use is if government provides an enabling environment.

Thomas opines that freeing gas for local investors is the first step toward encouraging willing investors to develop gas for the domestic market.

“70 percent cost of gas projects are 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 mis-match, there will be no future investment in gas project in Nigeria” he said.

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 said.

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.

Dolapo Oni, Head of Energy Research at the Ecobank Group, observed that investments in the gas sector have been held back by several reasons, chief among which include the lack of proper regulations. The gas sector is still regulated by the associated gas framework agreement (AGFA) of 1991 and 1992. The National Gas Master plan drafted in 2008 is yet to be fully implemented.

KELECHI EWUZIE