‘If power sector is vibrant, there is 70 percent chance that gas sector will also be vibrant’
Bolaji Osunsanya, President of Nigerian Gas Association (NGA), held an interactive media session as part of the build up to the 2016 Annual General Meeting and Business Forum of NGA. Frank Uzuegbunam, Editor, BusinessDay West Africa, was among the journalists he spoke to on the much needed big levers that elevate the gas industry in Nigeria among other issues. Excerpts;
It looks like the current administration is silent on gas master plan?
I do not think that the entrance of the new administration has in any way doused the pace but like every new thing, you expect rejuvenation when a new government comes and in this case, it is expected given where we are. Even the oil that is the main stay is dwindling and we would have thought that gas would be the natural resource that steps up to supplement whatever the shortcoming of oil.
At the 2016 NGA Business Forum, we have invited the special adviser to the minister of petroleum, Gbite Adeniji to share their new thoughts. We are not leaving it to just them. As an industry, we will be there to sell ideas that can lead to this rejuvenation we are all desirous of. I am aware that they have started to do a few things on the regulatory side. I am aware of the split of the Petroleum Industry Bill (PIB) into sections. I am aware of the governance part of it already circulated and discussed at the floor of the national assembly so I know that they are doing things in the new government but we need a more special focus on gas and that discussion will start at our Business Forum and continue thereafter.
Since Olatunde Odusina left as Minister of State for Gas, gas sector has not been receiving attention
That administration created a distinct ministry for oil and for gas. Like everything that you focus on, you should see appreciable impact. There is a sense in focusing on gas whether you do it by creating a special ministry or you make sure it has a special focus in policy initiatives. I do not have a strong position for a gas ministry but I expect that whatever ministry that supervises gas should make it a focused area. As you know, we are also looking at cost of governance and the widespread nature of governance so I won’t be quick to say that it is only by creating a ministry that will refocus our policies and initiatives on gas. I think there are other ways of elevating gas in the total resource portfolio base of Nigeria. Part of it is paying attention to the levers of gas; things like flared gas, marginal round specifically for gas, completing and funding appropriately the infrastructure blueprint on gas. If we get to implement these things quickly, it will be clear to even the man on the street that gas is the new focus and we will see the benefits of gas being the new focus.
Gas infrastructure has been going down since 2008 and there seems to be no concerted effort to change that. What is you view on that?
It is not exactly true that since 2008 that nothing has happened. I know that the NNPC and the NGC side of things increased the stock of infrastructure. The interconnector Ob-Ob 3 is nearing completion. That is a major trunk that will bridge the east back to the west. I know that is progressing and I know many other optimization pipelines had been done, little strips just to get things going. I would argue that we need a big break where we are really investing big sums to create the robustness and flexibility in our pipelines and that calls for a lot of money and investments and those would be the agenda we will be pushing with government to say we need a more focused investment in critical infrastructure and how you do it is to encourage the private sector. The view of NGA is that the more the sector is private sector-led, the better. We need to do big things like we did in the late 80s and 90s. There is no reason why we should not get the big backbone pipelines, Ajaokuta – Kano and Calabar – Ajaokuta off the ground now. This is the time to do it.
Global gas price going down but local operators are still pushing for more increase in the price of domestic gas. Are they not running themselves out of the market?
The important thing is that whatever gas we talk about has import parity. The argument in the past was that LNG and other sources of gas out there were a lot more expensive than we were selling gas locally. The argument also then was that what we were paying for gas did not incentivize the exploration and production companies to find gas. That was the situation before. Two things then happened. Shale gas came and with improved technology, the price of shale gas started coming down. The other thing that happened was that the Asian market that were prolific energy guzzlers also began to slow down. Those two factors came back to create a decline in the average international prices of gas. Nigeria was already priced low when it was high and we were inching upwards to $2.50. Now, we are coming to equilibrium and I see it as equilibrium because it is still not time when you go and import shale gas into Nigeria to compete at $2.50. We are looking at it actively. The day it becomes cheaper to bring gas in from Louisiana to Lagos with the attendant infrastructure, then it will be obvious that the $2.50 is not sustainable. We are not there yet. If you bring in $1.54 Henry Hub into Lagos or Accra, it will take almost another $11 to get it to use. The industrial customers are paying $7/scf but the alternative is much more expensive. The other point is, what is the cost of exploring gas locally? It is almost one and half times more than the cost of exploring gas in other climes but we have to watch to see that we don’t out-price ourselves at some point. Until Nigeria is well served, you will have those spikes but the moment supply is everywhere, the price will find its right level. I foresee in the future, if we take all the right steps, the $7/scf may come down in reaction to the supply and in reaction to what the external world is doing but you cannot take it in isolation.
Apart from infrastructure challenge, what are the other challenges?
The commercial nature of the big consumer is a challenge. Power is the biggest consumer in Nigeria today. That commercial structure is still fledging. I wouldn’t say that the power sector has come of age because there are many aspects of it that is still not bankable. You don’t know that NBET can always pay for power wheeled out, you don’t know that DISCOs can always collect the monies being owed, and you don’t know that the DISCOs can technically get all that the GENCOs send. There is still a lot to do to that sector if we acknowledge that the sector is 70 percent of our customer base as the domestic gas industry. That sector needs to be cured. If it is cured and it is vibrant, there is 70 percent chance that the gas sector will also be vibrant. We need that sector to be fixed.
The last which is still related to the infrastructure is willful sabotage; it is man-made and like every man-made problems, we can find solution to it if we sit down and talk to ourselves in the right manner. It calls for a lot of dialogue and fair play. It also calls for alignment of interests. The people of Niger Delta feel they have been wronged and we need to look at the situation more holistically. It serves nobody any good that the investments and infrastructure is in place, the gas is flowing and then for some willful act, that flow stops. We are all taking part in the pain that comes. There is no power, even the artisans cannot work; industries are not producing, they are laying-off workers. Everyone is hurting. We should have concerted initiatives that address willful sabotage.
Frank Uzuegbunam