Gas critical to the development of Nigerian economy – Stakeholders

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Minister of State for Petroleum Resources, Timipre Sylva

As the disruption in the global economy due to the Pandemic, leading to declining in oil prices due to low demand, stakeholders in the oil and gas sector have affirmed the need for the country to drive development through its gas commercialization programme.

According to them, the world is changing, along with climate change advocacy which means that the narrative of cleaner energy is real, and that is why they are emphasizing gas business. And there is a need to also keep very close eyes on everything that will make the nation reduce the level of carbon emission into the environment.

They insisted that the sector and entire populace should be aligned with a healthy environment, while also ensuring very well and solid social impact in businesses by encouraging the gas to power initiatives, supporting SMEs and job creation through our gas commercialization.

Also, they affirmed that any company that would like to survive in the oil and gas industry going forward will have to be a low-cost producer of oil. This is because the oil has become a marginal business, the price volatility will continue, therefore, only the companies that are able to continue to produce at low cost can thrive.

As a matter of fact, the development of Nigeria’s vast gas resources has been one of the major policy thrusts of successive governments in Nigeria.  It is worthy of note that Nigeria is blessed with resources for growth and global competition in gas.

According to the Department of Petroleum Resources (DPR), Nigeria has the largest gas reserves in Africa and is ranked 9th globally – Current estimates put its proven reserves at about 200 (Tcf) and 600Tcf unproven.

For the record, as of January 2020, Nigeria’s proven gas reserves stood at 203.16trillion cubic feet, according to the Department of Petroleum Resources (DPR) –the regulator of the Nigerian oil and gas industry activities. The nation’s unproven gas reserve is still at about 600trillion cubic feet. These numbers no doubt put Nigeria as a major player in the world gas market as the country currently ranks the ninth largest gas producer globally and the number one on the African continent.

For long, there have been conversations around how Nigeria can leverage the vast opportunities in its gas resource to open up the country for investments, which will, in turn, lead to massive job creation, enhanced energy efficiency, increased productivity as well as increased revenue to both government and businesses.

Although, Nigeria prides itself as a major exporter of LNG to the world via the Nigeria LNG Limited, making gas available for domestic use through business-friendly government policies and actions will help a great deal in driving economic diversification and competition.

Players in the country’s gas sector are of the view that there is no better time to optimize the potential of the gas resources than now that the whole world is struggling for survival due to the impact of coronavirus.

Absolutely, Nigeria has a robust and rapidly evolving demand base. through the  National Gas Policy (NGP) and the Nigerian Gas Master Plan, the FGN continues to focus its efforts to unlock the vast gas resources through reducing gas flaring, increasing domestic supply and utilization, while diversifying Nigeria’s economy.

It is on this strength that, Nigeria is translating its critical thinking in gas development to actual investment in line with the declaration of 2020 as Year of Gas for Nigeria, by Minister of State for Petroleum Resources, Timipre Sylva,

At the beginning of the year, the Minister of State for Petroleum Resources, Timipre Sylva, declared 2020 as the Year of Gas for Nigeria. Matching words with action, the year began with impressive move to harness Nigeria’s gas by tackling some of the barriers including the passing a regulatory framework for the upstream sector and the launch of the Nigerian Gas Transportation Code to further drive gas-based industrialisation.

As March approached, the industry experienced a sharp drop in oil price at $24.63 Brent and then to $16.95 Brent in April. Covid-19 had impacted lives and business in unprecedented measure. Many plans were put on hold and a new global mantra of cost cutting for survival emerged.

This however did not deter planning and execution of measures aimed at actualising laid down action plan. The country scored big mark in its intent to forge ahead, when news of Nigeria Liquefied Natural Gas, NLNG awarding a $4 billion EPC contract for the Train 7 project to Saipem, in a joint venture with Daewoo E&C Co. Ltd. and Chiyoda Corp., was executed.

It was a cheering news as it was considered key to progression of plans to further develop the industry, and therefore world economies. The awarding of the contract signified a key milestone in the advancement of the project and sparks plenty of optimism for Nigeria amidst a global pandemic.

Once operational, Train 7 will add around 8 metric tonnes per annum (mtpa) of capacity to the Bonny Island facility, taking the total to around 30 mtpa. This moves Nigeria’s global position to the 3rd largest exporter of LNG.

Tony Attah, MD & CEO of Nigeria LNG, speaking on the EPC contract during the dmge Africa Energy Series: Spotlight Interview stated that, “The FID for Train 7 & award of its EPC contract is… very reassuring as it renews our hope that Nigeria LNG will maintain a significant market share in the global gas market and will continue to reap the potential benefits in the market.

Speaking recently at a panel session organized by the World Energy Council,,  Shell Nigeria Exploration and Production Company (SNEPCo ) Managing Director , Mr. Bayo Ojulari,  pointed that  with the coronavirus disrupting global energy balance, there is  need to encourage local consumption of gas, especially for power generation in a country with huge energy deficit remains key

He expressed that from an international investor perpective  “Gas is a transition fuel; the industry needs it to move to the next level. Ojulari said gas has provided alternative to cleaner energy and the future is with gas. It is the option for Nigeria to develop the economy.

He said the key fundamental for gas is end to end which is from the producer to the consumer. The challenge in Nigeria is to develop gas and stakeholders should harmonise right prices. The domestic space is friendly with gas due to willing buyer, willing seller. What the sector needs is an accelerated regulation because for the last 25 years attempt to force prices on gas has stifled investment.

Development is a key factor to natural gas resources while incentives of government should be directed towards consumers. This will unlock the industry.

He said Shell Nigeria Exploration and Production Company (SNEPCo) is one the International Oil Companies (IOCs) operating in Nigeria with focus to building capacity in the country. The company has a major project known as Bonga Floating Production Storage Offloading (FPSO).

For the Managing Director of Seplat Petroleum Development Company Plc, Mr. Austin Avuru, Nigeria should begin to pay more attention to domestic gas consumption in addition to gas export as a way to drive massive economic growth and development.

He said while the country earns revenue through liquefied natural gas (LNG) export, more critical should be to encourage domestic gas consumption because of its multiplier effects.

Avuru noted that delays in gas infrastructure development had denied Nigeria the needed economic growth, including the power supply challenge currently being suffered by the citizens.

According to him, “in almost 50 years of our industry up to 2010, domestic gas consumption was no more than 300million standard cubic feet per day (mmscfd). When the gas-to-power mantra started, we assumed a transition period of about 2012 to 2015 with a ramp up in power generation and distribution and the projection was that by 2015 to 2017, domestic gas consumption will go up from 300mscuf per day to about 2 billion standard cubic feet per day (bscfd).

“It did ramp up quite rapidly between 2013 and 2015 from 300 mscfd to 900mscfd. In the last five years since 2015, that consumption figure has almost remained flat at about 900mscfd to 1.1bscfd.

“The reason is that for this five years period, power generation has remained flat at about 4,000 megawatts (Mw), when we are supposed to be at about 15,000Mw.”

Avuru pointed out that one of the major constraints associated with sending gas for infrastructure and big industries was inadequate transmission infrastructure.

He said that a combination of delays in finishing gas transmission infrastructure and the fact that power generation has not gone up at all in the last five years meant that, “since we ramped up domestic gas consumption rapidly within three years to about one bscfd, we have stayed that way for the past five years without further increase.”

Interestingly, however, in the current COVID period, the need to increase availability of gas to power Nigeria’s economy becomes more obvious as most of the manufacturing industries witnessed no disruption in their operation because they use natural gas to power their engines.

The crucial role of gas in powering critical infrastructure and industries such as power plants, hospitals and manufacturing industries attests to the need for the resource to be made more available for consumption in the country.

For instance, most of the notable packaged food/consumer goods industries like Chi Limited, Anxin Industrial Technology Nigeria Limited, Promasodor Nigeria, Apple & Pears Limited, who use gas as a cleaner fuel to power their plants are relishing the value they are getting from using the resource.

Also, the president of   Nigerian Gas Association, NGA, and Deputy Managing Director Falcon Corporation, Audrey Joe-Ezigbo called for in-country utilisation of natural gas instead of export as a lesson learnt from the COVID-19 pandemic where crude oil producing countries were unable to export their oil.

According to  Audrey Joe-Ezigbo , Nigeria needs to create channels where it can use its own gas to create capacity to build technology and ensure industrialisation such as providing the power that it needs.

She noted, even as Nigeria is a major gas resource holder, and exporter, the country still struggles on the domestic industrialisation with unmet domestic gas demand, and insufficiency in gas supply to the power sector for power generation.

“…and this is not rocket science as we know because for every dollar of gas that you invest, you find a three dollar increase in GDP. This is imperative for Nigeria given our current situation; that we must finally begin to take very clear steps to change the narrative and build an aggressive gas industry as this is what will underpin the attainment of the Nigerian economy recovery goals and objectives”, she said.

As the economy faces some challenges over the past few years, there have been clamours for diversification of the economy to ensure that other sectors also contribute their quotas to development and earn more revenue for the country.

Gas has the resource to be a key driver of rapid development in Nigeria as seen in several countries like the U.S, UK, and even Africa. Gas can provide large employment, and for a country that has large unemployment statistics such as ours, we significantly need to ramp up gas usage to create value. We know that in using gas for the economy, we are able to create direct employment through exploration, transportation, and distribution of natural gas. We are also able to create indirect employment through the industries and manufacturing sectors that use them. There is also induced employment because as the welfare of those in the industry improves, there are also being able to reintroduce their income back into the economy creating a cyclical demand of goods and services that are output of the gas industry”, she said.