Achieving effective gas-to-power aspirations hinge on tackling Transmission hiccups
Funding in the last 12 months has in no small ways limited investment opportunities with regards to effort to grow the power sector.
With75 percent of Nigeria’s power forecast for today and for the future hinged on thermo power plant which derives energy from gas, industry analysts insist that to grow power generation and distribution in Nigeria, there is the need to also grow the gas industry.
Industry experts are however worried that the infrastructure distributing gas around the country is poor and there is need for a public private partnership in growing this infrastructure.
Concerned players in the industry warn that there will not be one penny investment in gas infrastructure, development, gas projects in Nigeria in the foreseeable future if government does not address the investment and income currency mis-match currently in operation.
According to them 70 percent of any gas project is currently being financed in dollars because the technology, the equipment is not resident in Nigeria, stressing that dollars must be spent to get a gas project going.
While it is not too difficult to see several efforts being made by government to ensure that gas to power chain in today’s Nigeria takes off, several debilitating hiccups continues to threaten the process.
The origin of the problem in the opinion of industry experts is at the distribution level. The distribution companies should make sure that they are able to collect the money for the product that they sell to the consumers.
In the opinions of the experts, the distribution system is sick. People are stealing electricity, people are by passing meters and the discos are not fulfilling the obligation they signed when they bought the asset, by improving the infrastructure to deliver power to consumers properly.
“There is a lot of problem in the power sector. The biggest problem is that the discos are not economically viable right now. They bought a product they didn’t understand, they made promises they are not fulfilling, they are not collecting enough revenue to meet their obligation”, said an analysts.
Nigeria, the largest economy by GDP has a transition system which limits are capped at maximum of 5,000megawatts (MW). There is an installed capacity of 7,000MW, though only 5,000MW can technically be wheeled. So the transmission system has to be addressed.
Analysts opine that the transmission system has to be deregulated and privatised because it is the weakest link in the entire gas to power value chain. They observe that with about 12,500MW of installed generating power, the country only generate about 4,000 MW.
“The gas to power value chain is the weakest link. The big problem is that at the very end of the chain, which is at the disco consumer and distribution level, there is so much loss that the discos are not economically viable. So if they are not viable, everybody that feeds off the money that they collect is not viable”, said an analyst.
Wale Shonibare, managing director, Investment Banking, United Capital Commenting on the prospects of the gas to power value chain posited that there are quite a number of weak links which has to do with policy position stressing that government need to implement the right policy in order to attract investment to finance the sector.
He further hinged the success of financing opportunities in the gas and power sector to deregulation of gas prices, provision of long term patient capital, infrastructure development, and migration from dollar to naira financing
Analysts in the energy sector are optimistic that Nigeria electricity generation output will receive a 15,000 MW increase once the federal government and its other joint venture partners intensify its investment commitment to gas gathering projects which will further achieve zero gas flaring in the country.
Shonibare opines that a step into achieving this aspiration should start with the introduction of the domestic gas obligation which imposes an obligation on the oil companies to assign certain percentage of the gas being produced for domestic uses.
He sees a significant opportunity for the country to use her gas domestically for power purposes. “Looking at what is going on in the industry, the future is selling our gas domestically because the international prices are in decline”, he said.
At least $20bn would be needed to develop gas infrastructure in Nigeria over the next few years, Rolake Akinkugbe, Head, Energy and Natural Resources, FBNQuest observed.
“The current situation in global oil and gas markets also necessitates urgency for Nigeria in focusing on create domestic markets for her gas, given the muted demand in our traditional exports markets including Asian emerging markets”. She pointed out.
Akinkugbe reiterated that Nigeria is extremely rich in Natural Gas reserves, and the main thrust appears to be the delivery of gas in sufficient volumes that would boost Nigeria’s power generation capacity.
“I think that level of production is quite achievable, but it’s going to require significant capital investment and a strong and water-tight regulatory framework to drive it.
“Of critical importance will be the funding requirement in the sector, with gas transporting via pipeline as well as gas processing facilities likely to be the most costly parts of the value chain.
Analysts are of the opinion that that the country is endowed with abundant gas resources and the sector holds huge potentials for unprecedented growth, they are however concerned that the existing legal and regulatory framework, written primarily for oil does not provide robust technical and commercial framework for gas.
They further insist that the gas sector policies will provide Nigeria with the opportunity to harness and get maximum value from its stranded gas resources.
They however urge government to deepen market penetration and sustain demand growth and also vigorously pursue the completion of gas gathering and utilisation projects.
KELECHI EWUZIE