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Harnessing the Abundant Gas Potentials in Nigeria

-By Gideon Osaka

Nigeria’s oil and gas sector remains the livewire of the country’s economy as it still operates a mono-economy while making efforts to diversify.

In addition, Nigeria stands as the world’s 10th largest gas reserves but ranks only 17th in production, which shows that it is underutilizing it’s huge potential.

Although government is making concerted efforts to innovate and find measures of increasing its utilisation, alot still has to be done to achieve the needed result.

Some months ago, the Director of the Department of Petroleum Resources (DPR) Sarki Auwalu, revealed that Nigeria’s proven gas reserve has risen to 203.16 tcf, which is believed to be enough to support both domestic consumption and serve as a major foreign exchange earner if utilised.

Notwithstanding, experts believe there is much yet undiscovered. But the incentive for exploring gas is limited, even as much of Nigeria’s discovered reserve can only be processed with great market incentives and better infrastructure.

Sarki Auwalu

According to gas operators, there is urgent need for the federal government to address issues bordering on a pricing regime that allows the market to determine the price of gas in line with the basic global market principle of willing buyer, willing seller model.d

They said that transitioning to a market-led gas pricing regime would unlock the abundant potentials in the sector through increased investment in the sector.

The gas players, at a recent virtual business forum organised by the Nigerian Gas Association (NGA), themed, “Consensus pricing for the Nigerian natural gas value chain”, said the time had come for the country to leverage its gas resources to address its developmental challenges including huge infrastructure deficit, poor electricity supply, unemployment and poverty.

Arguing for a market-led pricing regime for the Nigerian gas value chain, the Oil Producers Trade Section (OPTS), an arm of the Lagos Chamber of Commerce and Industry (LCCI), stressed that a market-driven regime will encourage competition and attract investments into the country.

It said in the meantime, gas pricing should be set at a price that is cost-reflective of the investments and in addition, provides decent returns to encourage investors and investments, adding that this will enable investments and encourage further developments of the Nigerian gas industry.

The OPTS in its position paper presented at the session by its Chairman, Mike Sangster, recommended that the three–tier sectoral demand segments of power, gas-based industries and commercial be maintained and that domestic gas framework should not be linked to export parity pricing.

Federal Government of Nigeria announced on 30 June 2020 that the construction of the 614km gas pipeline had begun.

The National Union of Petroleum and Natural Gas Workers (NUPENG) and the Petroleum and Natural Gas Senior Staff Association (PENGASSAN), both affiliated to Industrial Global Union, see the development as an opportunity to create decent jobs and reduce the high levels of unemployment.

According to the National Bureau of Statistics, unemployment is over 23 percent or 21 million unemployed, and underemployment is 20.1 percent or 18 million. The underemployed are those who work less than 40 hours a week.

The government and the state-owned enterprise, the Nigeria National Petroleum Corporation, said the pipeline will provide gas for power generation and stimulate the creation of new industries in the towns of Kano, Kogi, Niger, Kaduna, and Abuja.

It is hoped that the new industries will create thousands of local jobs, transfer technology and promote local manufacturing. The pipeline will also benefit existing industries that rely on gas.

The construction is being carried out as part of China’s new Silk Road, where energy investments supported by China’s Belt and Road Initiative (BRI), which Nigeria joined in 2019. Through this initiative, the Bank of China and Sinosure (China Export Credit Agency) will finance the pipeline by $2.8 billion.

Chinese construction and engineering companies are contracted, and the Nigerian partners are Oilserve and BrentexCPP, all indigenous oil and gas companies.

Nigeria’s current production of 7,000 megawatts falls short of the country’s electricity demands for domestic and industrial use. It is hoped that the pipeline will close the gap by adding 3,600 megawatts to the national grid. Upon completion of the project, 2.2 billion cubic feet per day of gas will be produced according to the government.

The pipeline is set to join the Trans-Saharan gas pipeline which will export the natural gas to Europe. With Nigeria’s oil reserves expected to last three or four decades, the huge gas deposits allow for economic diversity.