US’s decision to open up its gas resources for exploration will increase its reserves from 229 trillion cubit feet to 312 trillion cubic feet by 2035, and the new resource is likely to compete with Nigeria’s liquefied natural gas in the international market.
To overcome this potential threat, operators have called on the Federal Government to review its strategies to withstand the competition in the gas market and further generate more revenue for the country.
The President, International Association of Energy Economics (IAEC), Prof Adeola Akinisiju, said Nigeria must rethink its strategies to be ahead of the competition in the global gas’ market, adding that the country must try and give discounts to get new buyers, and retain the old ones for sustained growth.
He listed two types of exports namely; the Nigerian Liquifield and Natural Gas (NLNG) based exports and non-NLNG based exports.
The former, he said, had to do with long-term contracts that NLNG has with Italy, Spain, France, and other countries in Europe, while the latter relates to short-tern exports to countries in Asia Pacific.
“The gas we export are based on NLNG long-term agreements with some countries. As for non-NLNG based exports, they are excess production that Nigeria has. This has some implications because it requires that we compete with countries that are in the Middle-East before we can sell our gas well. To achieve this goal, we may have to offer disocunts to buyers,” he said.
He said Nigeria has some expectations about trajectory of prices, arguing that the country may not achieve it unless it looks for other markets. He said the price of gas in the US will have a long-term effects on the international prices of gas, advising Nigeria to prepare for the shocks that may arise from the development.
Akinsiju said: “Because of the huge discovery in US, more volumes of gas would be release into the market. When the supply is high, the price would come down. That shows that market forces will come into play. There would likely be a fall in the long-term price of gas. When this happens, it would affect many exporters of natural gas.”
The General Manager, External Affairs, NLNG, Dr Kudo Eresta-Eke, said the US’s growing gas reserves may have long-term effect on Nigeria, unless urgent steps were taken to address the problem.
He said the US, which has been an importer of gas, is about reversing that status as a result of new discovery of Shale oil and gas, explaining that the discovery which was brought about by advancement in technology, has made the US an exporter of gas.
He said once the US resolves the legal issues surrounding the exploration of its gas, Nigeria would have more volumes to compete with in the international market.
“When there is plenty of supply, the price will be affected. The more the supply of gas, the less the price. When the price of gas is lower, the economies of countries with projected greenfield projects will suffer. Any greenfield project that has not established itself would have problems. Such projects would be difficult to sustain. The projects that are likely to be sustained are projects that are not only on ground, but are recording profits, Eresia-Eke, said, adding that once the price of gas becomes lower, new entrants would find it difficult to enter the market.
The President of the Nigerian Liquifield Petroleum Gas Association (NLPGA), Dayo Adesina, said the country must adopt measures to absorb shocks in the international gas market.
He said market volatilities are not new, arguing that the Nigeria needs to prepare for them in view of the increase in the number of gas exporters.
Adeshina urged the government to step up efforts to create new markets as competition hots up globally, stressing that gas exporting countries, including Nigeria must be wary of competition from their counterparts with bigger reserves if they want to survive.
He said over $400million investments were recorded by operators in the Liquifield Petroleum Gas (LPG) segment in the past five years, adding that the investments cover areas such as construction of terminals,depots and bottling plants, among others.
Information from The Nation was used in this report.