*Say 12BCF of gas unaccounted for in 12 months
*Babalakin decries Nigeria’s underutilised natural resources
Chigozie Amadi
Key stakeholders in Nigeria’s gas sector yesterday converged on Abuja to discuss the country’s perpetual underperformance, despite having the 9th biggest reserves in the world, with over 209 Trillion Cubic Feet (TCF) of the commodity.
Major themes which resonated during the event, were the need to ensure an appropriate gas pricing mechanism, effective enforcement of the network code, consistency in policies as well as the full liberalisation of the gas market.
The colloquium themed: “Strategies for Developing Nigeria’s Gas” was organised by Wale Babalakin & Co, led by its Founder, Wale Babalakin (SAN) as part of the company’s Corporate Social Responsibility (CSR).
The event was attended by the eggheads in the sector, including the Minister of State Petroleum Resources (Gas), Ekperikpe Ekpo; the Chief Executive of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Farouk Ahmed and former Executive Director, Gas and Power, Nigerian National Petroleum Company Limited (NNPC), Dr David Ige.
Also in attendance were: The Chief Investment Officer, NNPC Gas and Power Investment Services , Dr Salihu Jamari; President, Nigeria Gas Association (NGA), Akachukwu Nwokedi; Manage Director, Shell Nigeria Gas; Ralph Gbobo as well as Group CEO, UTM Offshore, Dr Julius Rone.
Others included: Acting Managing Director and Asset Manager, Neconde Energy Ltd, Chichi Emenike; Executive Director, Midstream and Downstream Gas Infrastructure Find (MDGIF), Oluwole Adama as well as Dolu Olugbenjo, Chief Investment Officer, Stanbic IBTC Infrastructure Fund.
The panel sessions were anchored by Partner and Head, Energy Group, Babalakin & Co, Prof Bayo Adaralegbe as well as Mariah Lucciano-Gabriel, General Manager, Gas Commercial, Sahara Group.
At the event, Babalakin stated that the initiative was aimed at meaningfully contributing to national discourse and the growth and development of the Nigerian economy.
Stressing that Nigeria is blessed with abundant natural gas, having the largest natural gas resources in Africa and ranked the 9th country with largest gas reserves in the world, he said that unfortunately, Nigeria’s gas resources have remained largely untapped, unutilised or underutilised due to several reasons, including paucity of investments and inefficient and opaque regulatory system.
“With sustainable investments and efficient and transparent governance system, our gas has the potential of significantly contributing to our national revenue.
“Commendably, there is renewed vigour and focus towards optimising investments in, and utilisation of, our gas resources. This is buttressed by the several inaugurated and ongoing gas projects across Nigeria today; and the drive towards transition to Compressed Natural Gas (CNG) powered vehicles,” he stated.
In his intervention, the minister who was represented by the MDGIF Executive Director, Adama, explained that Nigeria stands at a pivotal moment in its history, particularly in the realm of energy.
With vast reserves of natural gas, he said that Nigeria possesses a resource that holds the key to unlocking immense potential for economic growth, industrialisation, and sustainable development.
“However, realising this potential requires concerted efforts, innovative strategies, and unwavering commitment from both the public and private sectors.
“ Investment in infrastructure is paramount to unlocking the full potential of Nigeria’s gas sector. We must prioritise the development of gas pipelines, processing plants, liquefaction facilities, and distribution networks to facilitate the efficient and reliable supply of gas to domestic and international markets.
“While domestic demand for gas continues to grow, we must also explore opportunities for export and diversification of markets. Leveraging Nigeria’s strategic geographic location and competitive advantages, we can become a leading supplier of Liquefied Natural Gas (LNG) to global markets, thereby attracting significant investment and generating substantial revenue.
“Embracing technological advancements and promoting innovation is essential for enhancing efficiency, reducing costs, and mitigating environmental impacts in the gas sector. We must encourage research and development initiatives, foster collaboration with the academia and industry stakeholders, and leverage digital technologies to optimize operations and maximise value creation,” he said.
He stressed the need for stakeholders’ collaboration among government, industry players, local communities, and civil society, noting that it was indispensable for sustainable development and social responsibility in the gas sector.
In his submission, the NMDPRA boss, Ahmed, who was represented by the Director of Gas Operations and Development, Joseph Musa, admitted that the Petroleum Industry Act (PIA) was not a perfect document, but stressed that the organisation was amenable to its amendment.
He described some of the operators who inject molecules into the network as ‘reckless’ , reason that there are discrepancies between input and output gas, stressing that the government was working to ensure that wastages are eliminated. “So some of them are very reckless. And that is the battle we’re actually battling,” Ahmed said.
He said that the argument that the government was not allowing a cost-reflective tariff in the gas market was not entirely true, stressing that government has made a proposal that only the 20 per cent consumed locally should have a controlled price.
“When we engage them, they showed us all the beautiful mathematics. And we said, okay, we are not in that area with you. We are not experts. But the little we know is that there is an obligation by the government and the law has been passed.
“So now with this thing that you have actually done, go back and do a sensitivity analysis or a model that will give the domestic market only 20 per cent of the gas you are going to produce from those areas, while 80 per cent go for the willing buyer, willing seller.
“Because I know that when you are going to do any economics on any project, if you’re able to do 80 per cent, 75 per cent on the return on that, it’s very good. So the 20 per cent or 15 per cent or 25 per cent, you can even count it as loss. And if your economics is good, then the project is going to go through,” he argued.
As a responsible government, he said that there was the need to protect the domestic market, pointing out that the only way to do that is to make sure that a certain volume of the gas goes to the domestic market at reasonable price until the market stabilises.
Last year alone, he said Nigeria had a deficit of almost 3 to 4 BCF per day, stressing that while there’s a lot of demand, the system that should take about 5.8 BCF per day, is barely taking 1.1BCF to 1.2BCF.
Also speaking, Gbobo of Shell lamented that for the first time, last year, stakeholders sat down to carry out an audit of system losses in the sector and discovered that over 12 BCF was unaccounted for in just 12 months.
“I will speak for my company. For the past two years, our experience is we’ve been getting about 80 per cent of what is put upstream for us. So which means before we even go to the market to sell the gas, we are already at a loss.
“So we pay for 100 per cent and we get 80 per cent. Why is that? Because your players in the network are not behaving, they are not disciplined, basically. And again, it still boils down to the whole issue of implementation of the PIA.
“The PIA made provision for the network code, which again is a fantastic provision. Network code is operated in other parts of the world,” he stated.
He added: And for the first time in the history of the domestic gas market, last year, there was a reconciliation. And you can imagine, we’ve been operating this network for decades.
“Last year was the first time that the whole industry sat down to reconcile and say what volume entered, who put what, who removed what, and all that. The outcome wasn’t positive, because I think if you add the 12 months of the year, about 25 BCF, was unaccounted for. But the point is, at least now we know. So you can imagine what happened in previous years,” he stated.
Emenike of Neconde argued that at the heart of the distortions in the market is the control of pricing by the government, especially gas-to-power and gas-to-industry.
“We had just one incident of a gas price change, and all our economics for that sector went into red. We entered into legacy debts immediately, and we were scouring all over the place.
“For years, till I left that particular firm, it wasn’t resolved. These are the real-time issues that we’re dealing with. So when you come to a document as the PIA, we need to look at what we’re dealing with, because this is the entire ecosystem that a business sits on,” she stressed.
She added: “We have said this times without number, we’re seeking some degree of speed in this business, okay, in this industry. Government has no business in business. Take away this ceiling of trying to cap. Allow everyone to go just to hustle for financing wherever you might get it.”
