gas pipelines

It would not be an exaggeration to say that Nigeria’s economy is in danger of collapsing. The  fall  in  oil  prices  have  landed  our  coffers  a  heavy  and  devastating  blow. The  Minister  of  Finance/Coordinating  Minister  of  the  Economy  in  an  interview  with  The  Wall  Street  Journal  recently revealed  that  Value  Added  Tax (VAT), which  presently  stands  at  5 – 10  percent, may  be  doubled  if  oil  prices  continue  to  slide. Our  currency, the  naira, has  been  devalued, taxes  are  now  being  imposed  on  luxury  goods, and  our  oil-price-benchmark-hinged  budget  has  been  revised.

Brent crude oil price which peaked at $115 a barrel in June last year, declined to about $45 per barrel by January this year before rallying to $60 per barrel last month. Crude oil accounts for about 90 per cent of Nigeria’s export earnings and 70 per cent of total revenue. As such, any drop in the price of oil has a significantly negative impact on the Nigerian economy.

Nigeria’s over reliance on oil has finally come home to roost and it  behooves  us  to  raise  posers, reflect  soberly  and  proffer  solutions – short, mid, and  long  term as to why gas, which has been ignored for so long needs to come to the fore.

First, some key questions to ask are; is  this not  the  nation  whose  Liquefied  Natural  Gas  company (NLNG)  once  had  the  fastest  growing  facility  and  on  whom  the  alternate  lot  fell  on  as  the  third  largest  exporter  of  liquefied natural gas (LNG)  in  the  world? How  did  a  nation  whose  gas  reserves  not  only  out sizes  its  oil  reserves  in  alarming  metrics, but  ranks  amongst  the  largest  in  the  world  make  oil  its  big  story? What  utility  has  giving  too  much  attention  to  oil, at  the  detriment  of  gas, served? Considering  the  quantity  of  energy literally  flowing  under  our  feet – a  proven  gas  reserve  of  188  trillion  cubic  feet (tcf)  and  potential  gas  reserves  of  600  trillion  cubic  feet (tcf), how  do  we  explain  one  of  our  biggest  headaches; power  generation? Did  the  Nigeria  Infrastructure  Advisory  Facility (NIAF), a  DfID  funded  program, not  assert  through  its  website  that  considering  our  reserve, we  can  power  all  of  our  states  and  neighboring  countries  for  the  next  50  years? How did we then get it all wrong?

How  we  got  it  wrong  was  succinctly  captured  by  Mr. Abiye  Membere, a  former  Executive  Director (Exploration  and  Production) in  NNPC  in  his  speech  at  a  National  Oil  and  Gas  Conference  and  Exhibition  hosted  in  Abuja: “The  oil  and  gas  industry  did  not  start  well. We  started  the  oil  and  gas  industry  only  looking  for  oil  as  if  the  gas  aspect  was  not  important.” This chiefly explains the current lack of  investment  in adequate gas  infrastructure in Nigeria.

From  the  foregoing coupled with the  growing  competition  from  neighboring  African  countries, the  several  stalled  LNG  projects – Olokola  LNG, Brass  LNG  and  NLNG  Train  7 –  and  the  trillions  of  standard  cubic  feet  of  gas  we  lose  to  flaring, is  there  still  a  need  to  make  gas  top  priority? Furthermore, considering  the  extraordinary  discoveries  of  natural  gas  in  the  Rovuma  Basin, East  Africa,  and  its  close  proximity  to  Asian  gas  importing  markets as well as the fact that traditional importers of LNG such as the US are also becoming not only self sufficient, but also exporters, is  there  a  chance  we  can  reclaim  our  rightful  place  in  the  global  LNG  supply  chain?

The answer to all of the above is…yes. Regardless of LNG project developments across the continent, and the loss of certain markets across the globe, there is still the fact that natural gas remains the world’s fastest growing energy source and is set to outstrip coal and occupy the number two position, after crude oil by 2035, according to BP’s Energy Outlook for 2035. Furthermore, there are still available emerging markets across the globe as well as a growing West African market to cater to. For instance, the Republic of Cote D’ Ivoire recently signaled its intention to procure Liquefied Natural Gas (LNG) supplies from Nigeria in support of its growing power needs.

If nothing at all, the Nigerian domestic market serves as enough reason for the imperativeness of gas development and utilization. With  the  availability  of  cheap  natural  gas; more private owned  factories, power plants, oil  refineries, petrochemical  plants  and  fertilizer  complexes, such as  that  of  Africa’s  richest  man, Aliko  Dangote- which is  currently underway- will  be  commonplace.

Energy  is  a  pillar  of  wealth  creation  and is currently at  the  core  of  human  existence. With  sufficient  gas, our  energy  and  feedstock  needs  will  be  met,  power  generation  will  improve and the knock on effect for Africa’s largest economy would be enormous. Clearly, gas is of national strategic importance. With  its  potential  of  prompting  an  industrial  revolution  as  is  presently  the  case  in  Qatar and China, a  Nigerian  manufacturing  renaissance  is  bound  to  happen  which  would mop up  tons  of  unemployed  youths.

Thus, this  is not  a  time for the government to  trade  in  bland rhetoric  such as  “the  gas  sector  will  be  revamped”  or  ”more  attention  will  be  given  to  gas.” Neither  is  it  a  time  to  formulate  policies  that  will not  be  implemented  or  laws  that  will not  be  enforced. This essentially means that more attention needs to be given to the adequate and practical implementation of the Gas Master Plan and also the Nigeria Gas Transportation Network Code. Furthermore, the passage of the Petroleum Industry Bill (PIB) is also imperative from a fiscal perspective.

Also from a fiscal perspective, is the need to review domestic gas prices to ensure that they are in line with gas producers expectations and to ensure that they remain competitive enough to guarantee sufficient gas supply to the domestic market. Furthermore, the stakeholders of stalled LNG projects such as, Olokola LNG, Brass LNG and NLNG Train 7 need to accelerate the decision making process and come up with Final Investment Decisions (FID) on the various projects, if Nigeria is not to be left behind in the LNG space for good.

Finally, with  the  recently  launched  gas  flare  tracker, and  by  enforcing  Regulation  43 (Petroleum  Drilling & Production  Regulations)  of  the  Petroleum  Act (Cap  350  Laws  of  the  Federation  of  Nigeria)  and  the  Associated  Gas  Reinjection  Act (Cap  26  Laws  of  the  Federation  of  Nigeria  1990  as  amended), it is hoped that gas  flaring  would also be  reduced  to  the  barest  minimum.

The  opportunity  for  us  to  shelve  our  priorities  and  salvage  our  nation  from  economic  straits  by  seriously  looking  at  gas  has  presented  itself. Now  is  the  time  to  summon  the  courage  and  urgently  pledge  the  reversal  of  our  nation’s  menacing  present  by  backing  the  Gas  Revolution  Agenda  launched  in  March  2011  with  significant  actions.


Written by Noma Garrick and Joel Pereyi for Energy Mix Report