In 1983, Nigeria flared as much gas as was
consumed in the developed nation of Australia.
Twenty years later not much has changed, except a
proposed oil industry bill that is widely touted as a cure – all for everything
ailing the troubled sector.
The problem is that the 200 – plus page Petroleum
Industry Bill (PIB), which plans to partly privatise and list the state oil
firm, the Nigerian National Petroleum Corporation (NNPC), tax oil and gas
profits at up to 74 percent, and give the oil minister supervisory powers over
all institutions in the industry, has been stuck in the Nigerian parliament for
over six years.
“There is no gas because there are no terms on which
gas will be developed,” said an oil industry source speaking to BusinessDay.
“Right now, if the petroleum minister were to write
a commercial deal on two of our mega gas fields, then the story changes
significantly.”
Nigeria has the world’s ninth-largest proven gas
reserves at 188 trillion cubic feet (tcf) and potential gas reserves of 600
tcf.
The country’s aspiration to ramp up production to 3
– 4 billion cubic feet (bcf) a day of gas by 2015 will require a significant
infrastructure spend of up to $30 billion, say stakeholders.
A lot of the necessary investment dollars are not
forthcoming though, due to uncertainty from the stalled PIB and the uneconomic
fiscal terms for gas in the bill.
This informs the calls by oil and gas experts for a
new fiscal and regulatory regime, outside of the proposed PIB, as a catalyst to
drive the development of the sector.
The new framework should be designed specifically
for gas and encompass pricing policies that are attractive to everyone active
along the gas value chain, as oil experts have identified pricing as key for
the successful development of the emerging gas sector in Nigeria.
“Let the business case for gas speak for itself and
let the legislation support the business case,” said Dada Thomas, managing
director of Frontier Oil, at the recent West Africa Gas Conference, organised
by the Nigeria Gas Association in Abuja.
Thomas said “PIB as it is, will increase tax on gas
from 30 percent to 80 percent; even with other incentives, on the whole, tax on
gas goes up. Why raise tax on gas when you should be reducing it?”
David Ige, group executive director, gas-to-power,
NNPC, in his contribution, said that oftentimes global perspectives in gas mask
peculiarities in Nigeria. Ige further observes that the country has unique
challenges, and thus needs to adapt unique policies for the challenge of
growing gas supply to match rapidly increasing demand.
He however adds that over the past five years,
Nigeria has been able to push gas supply from less than 500 million scf per day
to about 1.5 billion scf, out of which 850 million scf is dedicated to power.
Natural gas demand in Nigeria in recent years is
however still overwhelming the suppliers.
There is currently a shortfall of 750 million scf/d
of gas supply to the power sector, according to NNPC data released last month,
due to a lack of investment to explore for gas and infrastructure to meet
rising demand.
“There is need to rise to the challenge of
aggressive gas demand by addressing the shortfall in supply through a different
strategy of looking more for non-associated gas resources and embarking on
dedicated gas development,” said Joseph Dahwa, group managing director of the
NNPC, at the West Africa Gas Conference.
According to Dahwa, over the next two years, gas
demand in Nigeria will hit five billion scf per day.
“This is the age of gas. Gas is now the fuel of
choice,” Dahwa said.
While that may be the case the unwieldy behemoth
that the NNPC has become in Nigeria’s oil sector, is one major obstacle to
writing new commercial terms for gas.
“You cannot get gas to market from some of these
mega fields because the NNPC who often own 55 percent of the assets, are
unwilling to let go, despite having neither the capital nor capacity to develop
the fields,” said another oil industry source.
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