The gas market has not been fully explored to optimise its economic benefits to the nation. Stakeholders in the gas sub-sector are seeking ways to increase its contributions to grow the nation’s gross domestic product (GDP), writes AKINOLA AJIBADE
Nigeria, with 187 trillion cubic feet of proven gas reserves and an estimated 600trillion cubic feet of gas potential, has what its takes to play in the global gas market. The country’s natural gas has been designated the preferred fuel for power, and it is expected to deploy in the short term, 2.5billion cubit feet of gas to the sector by 2015. Also, Nigeria exports gas to Asia and other continents, and is expected to make the product another source of revenue generation. However, the country has battled myriads of problems associated with oil and gas production.
From pollution associated with gas flaring, low production of Liquefied Petroleum Gas (LPG), shipment/ supply bottlenecks, to fluctuations in the prices of the product to poor consumption and the recent crisis between the Nigerian Liquefied Natural Gas (NLNG) and Nigerian Maritime Administration and Safety Agency (NIMASA), the list is endless. These have affected the industry’s growth and develoment.
Last week, stakeholders gathered at Oriental Hotel, Lagos, for the third edition of the Nigerian Liquefied Petroleum Gas Association conference to discuss some salient issues affecting the sector. Some of the issues raised were how to deepen the market and further make operators harness the potential in it.
According to the stakeholders, the market can be deepened by encouraging more people to use LPG otherwise known as cooking gas, autogas, and others.
They said the country has huge gas reserves to its credit, arguing that regulatory, operational, and commercial problems must be addressed to deepen the market.
The Managing Director, Longview Gas Limited, Mr Femi Fanoiki, said overlapping of jurisdictions among agencies is one of the major problems besetting the growth of the gas sector. He said the need to separate the functions of agencies, such as the Department of Petroleum Resources (DPR), the Standards Organisation of Nigeria (SON) and the Lagos State Environmental Monitoring Agency (LASEMA), is imperative to move the sector forward.
He said the three agencies are duplicating efforts by accessing the quality of gas used in the country. He said separating the roles of these agencies will hasten the delivery of gas to the end-users, adding that the development will also increase the patronage of the product and by extension, economic activities.
Speaking on the theme, ‘Challenges in operating in the Nigerian LPG Sector,’ Fanoiki called for a simple and flexible method of accessing the quality of gas for growth.
Also, the Chief Executive Officer, NLNG, Babs Omotewa, said operators needed incentives in form of tax waivers to maximise the potentials in the industry. In a paper, titled: ‘Domestic Production/ Supply: NLNG’s Perspective,’ Omotewa, said incentives will help stakeholders in the gas value chain to grow their businesses and further bring more people into gas usage net. Citing Brazil, India and Senegal, he said governments in those countries have provided incentives to gas operators, adding that the development has impacted positively on the industry.
Omotewa said the dearth of infrastructure and its attendant problems have slowed down the growth of the sector, adding that addressing these problems will help in deepening the market. He said the creation of two additional Greenfield Liquefied Natural Gas projects at Brass and Olokola will help in growing the sector, adding that the shipment of gas from its NLNG’s Bonny Plant, Rivers State to Lagos must be sustained to deepen the gas market.
He said: “There are 10 off-takers, otherwise known as big ships that move LPG from Bonny through the high sea where they stop for smaller vessels to take the product to Lagos. There is the need to increase the off-takers and the vessels to reduce transportation problems. When this happens, there would be prompt delivery of cooking gas to the oil marketing firms for onward distribution to consumers. ‘’
He urged the government to allow direct importation of cylinders to enable more people access gas for domestic use. The development, he said, would help in deepening the LPG market in Nigeria and increase economic activities. Omotola said the market is wide enough to accommodate more operators, advising investors to tap the opportunities.
‘’Few years ago, we struggled to get seven firms in the market. But now we have over 200 firms that are contributing their own quota to the growth of the industry. “There is no reason Nigeria should not be consuming LPG in excess of one million tonnes if the right infrastructure are in place. Also, NLNG has increased the supply of LPG from 150,000 to 250,000 tonnes to deepen the market, ‘’ he added.
Nigeria operates a free-market system that allows business owners charge differential prices on goods or services rendered to people. The system, Fanoiki said, had affected the distribution and sales of gas to the end-users. He said base station gas owners, retailers, oil marketing firm sell gas in response with the market forces.
‘’Though it is good to have a free-market system, it should not be abused by people. There should not be arbitrary increase in the price of gas or its by-products. Product pricing mechanism must be put in place to check such practices,” he said.
Strong advocacy initiatives
The President, Nigerian Liquefied Petroleum Gas Association Association (NLPGA), Dayo Adeshina said an awareness programme is needed to deepen the market. He said advocacy issues should be tailored towards meeting the needs of stakeholders, especially the consumers. He said LPG usage in Nigeria is the lowest in West Africa, in spite of the increase in supply of the product from 70,000 metric tonnes in 2007 to 150,000 metric tonnes in 2013. He said a lot needed to be done in sensitising people on the use of gas for domestic and industrial needs.
Adeshina said the Federal Government’s decision to drive the consumption of LPG to about one million tonnes yearly by 2015 might not be realised going by the slow rate of acceptability of the product. He said 19 states suffer from desertification caused by tree cutting and other unfriendly environment activities, stressing that one of the ways of mitigating the problem is optimal utilisation of LPG.
The Managing Director, Chimons Gas Limited,Chibuike Lawrence Achigbu, said individual initiatives must be adopted to deepen the market. He said he leveraged on his membership of LPG Trade Group of the Lagos Chamber of Commerce and Industry to organise an advocacy programmes on gas. He said the development has helped orchestrate road shows to show the importance of LPG. He said the company is lobbying the governments on how to deepen the gas market and further encourage growth.
Oil firms approach
Oando Marketing Plc has signed a memorandum of understanding (MoU) with the National Association of Microfinance Banks (NAMB) to enable low income –earners buy its gas known as Oando’s O-Gas. Through this, people can approach any of the microfinance banks and get O-Gas 3-in 1 cylinder with an initial deposit of N200. Subsequently, they will be making N200 daily payment to the bank for 30 days until they complete the payment cycle for the cylinder.
The company’s Head of Marketing Communication, Seun Soyinka said: “ The new initiative is consistent with OMPs (Oando Master Plan) to switch millions of Nigerians from the use of biomass to clean, efficient , affordable and sustainable LPG using Oando’s 3kg O-Gas , an integrated offering that comes with a cylinder ,burner and gas. “
Chairman NAMB, Lagos State chapter, Valentine Whensu, said: “The partnership will boost the liquidity and the confidence level in MFB, because they provide all that is needed for their customers, by giving them loan, encouraging them to save, and taking care of their health which is very important in the life of every human being.”