Nigeria loses over N50bn annually to non-reflective gas pricing

There are indications that Nigeria may be losing over N50 billion annually to lack of adequate gas pricing regime. Nigeria’s proven gas reserve as of January 1, 2020, is put at 203.16 trillion cubic feet (tcf), according to the Director/Chief Executive Officer (CEO) of Department of Petroleum Resources (DPR), Sarki Auwalu.

Meanwhile, its unproven reserve is estimated at over 600 tcf and in combination with the proven reserve, experts have said Nigeria is a gas nation and not an oil nation.

However, experts are of the opinion that inadequate gas pricing continues to deter the much needed private sector participation and investment in the much needed gas infrastructure that will enable the country to attain its twin goal of economic diversification and gas-based industrialisation.

“Gas, basically, is a huge potential for us in enabling economic diversification. Our estimate shows that if our industry today moves to gas would be saving close to about N50 billion annually. Assuming the already existing industries move to gas today, not to talk of other industries that can come along as well,” said Dr. David Ige, Managing Director/CEO of Gas Invest Ltd.

He stated this in a webinar organized by Nigerian Gas Association (NGA).

“We have the opportunity to grow export oriented fertilizer methanol, more importantly, some domestic gas based industries can capitalise on major downstream effects. Methanol plant locally, petrochemical plants and fertilizer plants; all of these can create massive intermediate industries including formaldehyde, acetic acid, olefins, MTBE, aromatics, ammonia and urea etc; and by the time you get to tertiary industries, you can see a mirage of possibilities. All of these are anchored on gas. We try to look at what the import-substitution potential will be. Easily, we are looking at about $7.5 – $10 billion annually just by working our gas sector all the way down to the industry. If there is any commodity that can transform the economy and grow the GDP clearly, it is gas,” Dr. Ige said.

He argued that pragmatic steps have to be taken to achieve the above. They include: need to stimulate the gas market, not just supply and demand but the dynamics of the gas market to allow competition.

“There is a need for a regulator. At the moment, the absence for a competent regulator for gas is a major barrier to investment. Whether it is a single regulator or a separate regulator, it doesn’t matter, but a regulator that’s going to regulate the gas market aimed at stimulating competition, dealing with issues around open access, anti-competitive behavior, licensing and so on.

“Clearly, such a regulator needs to move away from continued price regulation, so the idea should be to put the framework in place for competition to take place,” he said.

He also said making gas an enabler is key. He called for a fiscal system and a fiscal term for gas that is anchored on stimulating supply robustly.  He said it must be a fiscal system that recognises diversity of the types of players that will be coming on stream.

“This is not the time for the government to build a fiscal system that is aimed at growing the purse of the government. The fiscal system must be specially targeted to stimulate supply growth,” he said.

Minister of State for Petroleum Resources, Chief Timipre Sylva, has declared 2020 as a year of gas in which he said the country will deepen domestic gas utilisation and make gas an economic enabler going forward.

In a conversation with the Nigerian Tribune, Mr. Austin Avuru, CEO of Seplat, posited that until gas is seen as an enabler for the larger economic growth for the country, domestic gas consumption may not be improved.

“We need to see gas as a major enabler. If we put in 2 to 3bcf of gas, we will power the entire west Africa with the multiplier effects of having such power. We will have fertilizer plants to be net the exporter of fertilizers. The steel plants will function, the cement plants will function,” he said.

On his part, the Managing Director of Nigerian Gas Marketing Company (NGMC), Mohammed Ahmed, admitted that the industry is faced with enormous challenges including gas pricing. He, however, advocated for incentives in the form of policy guide that will give up a kind of succor to the end user customers while at the same time, ensuring that investment in the sector takes place.

The President of NGA, Mrs. Audrey Joe-Ezigbo, posited that over the last few years, “we have seen a ramp up in domestic gas utilisation but we agree that export gas still dominates the profile of gas in Nigeria. Coming out of what has happened with the pandemic, one of the key things that we have realized as a country is that there is a need to focus on in-country utilization.

“We need to create the channel through which we utilize our own gas in-country to create capacity, to build technology and ensure industrialisation and certainly it will provide the power that we need.”

 

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