Tackling operational hiccups in West Africa’s gas sector business

West Africa is home to approximately 32 percent of Africa’s total natural gas reserves. Nigeria holds the community’s largest proven reserves with 185 trillion cubic feet (Tcf). Proven reserves are also located in Cote d’Ivoire (1.0 Tcf), Ghana (840 bcf) and Benin (40Bcf).

The vast majority of natural gas found in Nigeria are associated gas with many of the fields lacking the infrastructure to produce the associated natural gas, thereby leading to flaring.

The challenges facing gas companies operating in West Africa continue to be diverse as poor infrastructure and a lack of skilled resources, among others slow the desired progress anticipated.

Regulatory uncertainty and delays in passing laws are severely inhibiting sector development in many countries around the region.

According to a recent PwC report, West Africa’s gas industry has continued to show substantial growth, with new hydrocarbon provinces developing at a significant pace.

The report indicates that Nigeria among other countries contribute significantly to the regions 502 trillion cubic feet (Tcf) proven natural gas reserves.

However, the major challenges identified by organisations in the gas industry have remained largely unchanged with the top three issues of uncertain regulatory framework, corruption and poor physical infrastructure also identified as the biggest challenges.

While uncertain regulatory frameworks remain a concern across the industry, Nigeria was one of the few countries where respondents did not consider it to be of the top-three challenges to developing the industry. According to the Review, this suggests that companies have accepted the lack of ratification of the Petroleum Industry Bill (PIB), which has been in the process of implementation for long years.

In the review report, the inadequacy of basic infrastructure also ranked much higher in the current as industry operators are concerned about the lack of infrastructure in developing countries and the negative consequences this may have for their businesses, especially those operating in key West Africa countries. Taxation issues have also become a concern to companies across West Africa as uncertain taxation as well as new tax laws has created an additional financial burden for companies.

The report further indicated that companies will largely be relying on their own cash flows to fund their own businesses as E&P companies are funding their operations differently from the other industry players with less than 40 percent of funding coming from cash flow. This can largely be attributed to blocks and regions yet to come into production.

To resolve these lingering challenges and put West Africa in the forefront of gas development, industry close watchers insist governments and gas companies must collaborate to play a significant role in sustaining growth and development in the region.

Experts observe West African countries have a host of stringent laws and regulations that create challenges for companies and international investors to overcome.

“Operational planning therefore needs to be carefully thought out, taking into account demand growth, infrastructure requirements, investment needs and potential, long-term strategies and the role of government if companies and countries want to sustain growth and development in the region”. They said.

KELECHI EWUZIE