Thoughts On The Nigerian Gas Master Plan.

Eze Onyekpere

Nigeria has abundant reserves of associated and non-associated gas estimated in excess of 187 trillion standard cubic feet. Though the country is ranked seventh in terms of proven natural gas reserves in the world, geological experts hold the view that more gas can still be found. Potentially, up to 600Tscf. This is realisable if oil and gas companies deliberately explore for gas as against finding gas while in search for oil. To facilitate gas gathering, processing and utilisation will require favourable development oriented market conditions and policy framework for the gas sector. This will convert our potential in gas into actual available resources that will drive national development and resolve the contradiction of a gas-endowed and exporting nation that cannot find enough gas to fuel its electricity generating plants.

Despite being rich in oil and gas resources, Nigeria suffers from significant under-capacity in electricity generation, with frequent power outages driving consumers towards large scale use of expensive back-up generation. Commentators have stated that the Nigerian Gas Industry is characterised by opaqueness, oligopolistic tendencies, inadequate infrastructure and investments, regulatory capture and politicisation of policy implementation. Low investment in gas infrastructure over the years has continued to hamper the development of the huge natural gas reserves in the country for domestic consumption, particularly for power generation. The International Energy Agency, in its special report entitled, “Africa Energy Outlook 2014”, said a critical uncertainty for Nigeria’s gas supply outlook was its inability to stimulate significant production of non-associated gas. “Huge resources exist, sufficient to cover both domestic demand and exports. Production of non-associated gas increases in our projection period, but it is gradual. Exploiting this resource requires a change in focus by the upstream sector and, importantly, the government to establish a framework to incentivise the necessary large-scale capital investment”, the report notes.

For the power sector, over 70 per cent of the power generating plants across Nigeria depend on gas to function and electricity is so vital for national development. More than 90 million persons (55 per cent of the population) do not have access to grid electricity. Nigeria targets to make reliable electricity available to 75 per cent of the population by 2020 and 100 per cent of the population by 2030. The demand for gas to produce electricity will therefore increase over the years. The implication of this is that to ensure improved power generation and access to sustainable electricity in Nigeria, the Gas Industry policies and framework must be robust to respond to domestic and international demand for Nigerian gas. Evidently, current investments in electricity generation are skewed in favour of gas-fired plants and this seems like putting all eggs in one basket in view of the renewable energy potential available for harnessing in Nigeria. It is imperative to note that, at the current rate of harnessing 5bscf a day, our 187 trillion scf will last for 102 years. But the rate of harnessing will increase as the implementation of the gas-to-power project is accelerated. Thus, at 15bscf a day, which is triple of the current harnessing capacity, the reserves will last for just 34 years. The gas reserves may even finish quicker than projected if more investments in Liquefied Natural Gas come on stream without additional discoveries of new gas fields.

Enter the Nigerian Gas Master Plan which seeks to take the country from ground zero to four basic steps ending in the attainment of full market driven status of willing buyer and willing seller. The contours of the present ground zero include a starved sub-commercial domestic market, poor infrastructure and increasingly unstable position. Step 1 will include the introduction of the domestic obligation rule, transitional pricing mechanisms, commercial structures and securitisation and the development of the infrastructure blueprint. In Step 2, the target is to attain full commerciality in the domestic market; Step 3 is about attaining full liquidity in the gas sector wile Step 4 which is the final step guarantees full market driven status. Infrastructure investments alone for the realisation of the NGMP were projected to cost not less than $25bn. From available evidence, it seems that Nigeria is still in Step 1 since the inception of the NGMP in 2008. The demands of Step 2 including the anchoring of the NGMP by legislation which should have been done by the Petroleum Industry Bill is stalled while full commerciality in domestic gas price export parity has yet to be fully attained. Further, investments in gas infrastructure have only come in trickles while the Final Investment Decisions in major Liquefied Natural Gas projects (Bonny Train 7, Olokola and Brass LNG projects) have been stalled.

But there is a great challenge in defining a development destination, in terms of what Nigeria wants to achieve with its gas resources, just within the framework of commerciality and market driven status. This does not state what exactly we want to do with our gas and how it should relate to our development. The market framework is just a means to an end and not the end itself. The fallacy of defining the means as the end is part of the binding constraints on our development because a policy with the ultimate goal of commerciality misses the point. Essentially, human and resource development is beyond commerciality. And this brings us to another challenge. Nigeria is implementing a Gas Master Plan without articulating fully the contours of such a plan. It seems there is no composite document containing the above referred NGMP. The available information is from snippets of presentations done on road shows for foreign investors. The audience of the NGMP is about foreign investors and their road shows. It is not about the Nigerian citizen in Nigeria or in the Diaspora. This may have informed the fact that we have yet to move beyond the preliminaries in implementing this plan seven years down the line.

In the light of the foregoing, the role and importance of natural gas to Nigeria’s economic and social development cannot be overemphasised. Gas gathering and utilisation is necessary to curtail environmental challenges associated with gas flares and the use of other traditional fossil fuels. It is also relevant for the expansion of the revenue base of the economy in the light of dwindling oil prices. It is therefore imperative that the NGMP be properly articulated and Nigerians given the opportunity to own their Master Plan. Copies of the document should be available to all who need it. It may surprise our technocrats perpetually sold to the myth of foreign investors that we may not necessarily need the quantum of foreign resources sought if our local resources are well managed. And even if we need foreign resources and technical partners, it could be procured in better value for money transactions rather than the mystification of very simple transactions.

This still takes us back to the need for the PIB to be urgently reviewed by the Buhari administration and passed by the National Assembly. We may also decide to properly manage the taxes and dividends from the Bonny LNG for further investments in the gas sector rather than the three tiers of government sharing and consuming same. The administration should also meticulously implement the domestic gas supply obligations to the letter because it will be a shame for us to be exporting gas while looking for gas to fire our electricity generating plants.

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