Towards actualising Nigeria’s Gas Year agenda

Last week, stakeholders in the oil and gas industry converged on the Nigerian International Petroleum Summit (NIPS 2020) in Abuja to discuss how best to achieve the Federal Government’s agenda of making 2020 a year of gas. OLATUNDE DODONDAWA writes about the new policy pronouncement and way forward on the agenda.

Introduction

The NIPS 2020 provides the platform for stakeholders in the oil and gas industry in Nigeria and Africa at large to discuss new technology in the sector, technology transfer from the International Oil Companies (IOCs) and output maximisation by the Indigenous Oil Companies or independents through collaboration and partnerships.

Participants were urged to share intelligence on cyber security to mitigate the challenge of data theft on cyber insecurity. The Technical Assistant (Gas Business & Policy) to the Minister of State for Petroleum Resources, Justice Derefaka, made the call during a panel session at the NIPS 2020.

According to him, “sharing of intelligence among operators in the industry and simulating situations before cyber-attacks can help reduce vulnerability.”

On his part, Senior Account Representative, Huawei Enterprise Energy Business, Amusa Babatunde Adeyemi, said that legislation is important in addressing the issues of data vulnerability in the industry, adding that the ability of the different technologies used in different operations in the industry to inter-operate with one another will greatly reduce exposure and vulnerability.

Earlier, Dan David, Managing Director, CyberSocAfrica, had told delegates at the summit that the use of technology, despite its benefits, also exposes the oil and gas industry to threats.

“The oil and gas industry is marching towards digitalisation and adoption of new technologies. The use of new technology is also to check the attack of cyber security issues in order to make the industry more secure and safe,” David said.

The session highlighted the impact of technology, policy, social, and changes in business model on the demand and supply sides of the oil and gas business. It also suggested plausible scenarios that policy makers can adopt as a response to various challenges in managing emissions and investing in infrastructure.

A new gas transportation code launched

The Minister of State for Petroleum Resources, Chief Timipre Sylva, used the opportunity to launch the National Gas Transportation Network Code which stipulates terms and guidelines for gas transportation, specifically applicable to gas producers, shippers and their agents. Its provisions allow a window of six months for legacy agreements to migrate onto the network code while new and intending agreements are expected to align with the new code immediately.

Speaking on the importance of the code, Mr Abel Nsa, Assistant Director, Department of Petroleum Resources (DPR), explained that the network code is a set of rules and contractual framework between producers and transporters.

“It provides transparency and a level playing field for everyone who wants to come into the gas system. It is like a protocol to move gas within the system,” Nsa said.

Mrs Audrey Joe-Ezigbo, President of the Nigerian Gas Association (NGA), expressed the pleasure of her association at the launching of the code, adding that it will help Nigeria become a mature gas market. “The code will attract more investors into pipeline infrastructure,” said Joe-Ezigbo.

Up till now, the Nigerian Gas Company (NGC) has remained a sole operator providing pipeline infrastructure in the Nigerian gas market.

In his own contribution, Dr Salihu Jamari, Managing Director of the Nigerian Gas Company (NGC) noted that his company has been upgrading its facilities in expectation of the launching of the network code. “We are making sure that metering is available at every point in the network. The Nigerian Gas Company is very much aware of its role in the implementation of the network code,” Jamari stated.

According to data from the DPR, Nigeria has around 202 trillion cubic feet (TCF) of proven gas reserves plus about 600 TCF unproven gas reserves. Over the years, the country’s relatively smaller oil reserves have been the major focus for government and IOCs in the country, who find it easier and more profitable to produce oil rather than gas. Government in recent years stepped up its effort to support gas development, grow the economy by opening the gas market through export and encourage domestic use of gas in power generation and household use.

African countries urged to focus on energy security for citizens

The Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Mele KoloKyari, urged African countries to focus on providing structures that will ensure energy security for their citizens.

He said the NNPC has a framework that works towards ensuring energy security in Nigeria.

“African countries must know that each must focus on building structures that ensures energy security for the citizens. NNPC is committed to that and has a framework to make sure that the needed energy is available for the needs of the country,” he stated.

Kyari acknowledged the global clamour for energy transition from fossil fuels to renewable sources, but noted that hydrocarbons will continue to form the larger part of the energy mix in the foreseeable future.

“Several researches continue to confirm that by 2040, renewables will be contributing about 20 per cent of the global energy mix. This implies that fossil fuels will still contribute at least 70 per cent,” he said.

He therefore urged African countries, which are still mostly underdeveloped, to continue to utilise the hydrocarbon resources available to them to develop energy sources for their populace.

“The focus must be in making sure that the energy is clean. We have to use what we have. Today, oil is being found in unexpected places. This contributes to the growth of middle-class consumers. And so, demand of fuel will continue with increase with population and prosperity. Global demands will remain over 100 million barrels per day” he said, adding that African countries should focus, not solely on the glamour for renewables but largely on the need to deliver energy for the development of their people,” he said.

Chikezie Nwosu, Managing Director of WaltersmithPetroman, agreed that African countries have huge resource deposits, but are very low on resource consumption and consequently, low Gross Domestic Product (GDP) growth. He called on African countries to focus more on consumption against export. “The key thing to do is to decarbonise fossil fuels. Africans must not focus on selling commodities but on converting the hydrocarbons into consumable products,” Nwosu stated.

Also speaking on the development of the gas sector for national economic growth, Mrs Audrey Joe-Ezigbo, President of the Nigerian Gas Association, noted that the power sector is the largest consumer of gas in the country. The power sector, however, she revealed, is “plagued by huge liquidity issues”, asserting that such uncertainty is not attractive to new investors and called for better commercial framework that will attract more investors to develop the gas sector.

Nigerians urged to pay more for electricity

The Nigerian power sector will remain undeveloped if consumers are unwilling to pay for the power that they consume, according to Yusuf Usman, Chief Operating Officer (Gas and Power), NNPC.

He therefore called on consumers to be willing to pay for the power they consume in order to encourage investors in the sector.

“The problem of gas in Nigeria is not pricing but collection,” Usman stated.

He said the inability of the power distribution companies to collect payments for power supplied jeopardises the bankability of power projects.

“We can only deliver power to off-takers if there is a power purchase agreement (PPA). Consumers need to pay for power consumed.”

Mr Osagie Okunbor, Chairman of Shell Companies in Nigeria and Managing Director of Shell Petroleum and Development Company (SPDC), stated that bankability is a way of reducing the risk involved in developing projects. He noted that the availability of resources is just one step in the creation of wealth.

Conclusion

Conclusively, participants urged the government to formulate policy that will encourage more participation by the private investors by liberalising the sector through the passage of necessary bills like Petroleum Industry Bill (PIB), which is expected to free the market and promote favourable fiscal terms for both the government and the operators.

The Executive Chairman, Integrated Oil and Gas Limited, Emmanuel Iheanacho, said such legislation, when passed, will enable more refineries to be built in the country and generate more revenue for the government and provide millions of jobs, both direct and indirectly for Nigerians. Iheanacho, a former Minister of Interior, stated that “we are not investing enough in refineries. Instead of waiting on Organization of Petroleum Exporting Countries (OPEC) to give us a quota of 2 million barrels per day (mbpd), we can produce 4 mbpd and build refineries to refine and add value to our crude,” he stated.

Iheanacho compared the Nigeria downstream market structure and that of the United States of America, a non-member of the OPEC.

“The US has a population of 327 million with a total of 139 refineries with the refining capacity of 16.7mbpd. Texas, a state in the US has a population of 28.7 million with 47 refineries and a refining capacity of 5.7 million barrels per day. Compare these numbers with Nigeria that has a population of 200 million people with 4 refineries with installed refining capacity of 520,000bpd but is only able to refine 5 per cent of installed capacity.”

He decried the plight of the country that has not been able to get things right despite having been in the oil and gas business for over 60 years. He further implored the government to take a second look at the market structure in terms of cost and efficiency.

“Open market competition creates efficiency in the system. In that vein, government must take a look at the subsidy regime and regulation. The subsidies do not really benefit the common people” he said.

SarkiAuwalu, Director of Department of Petroleum Resources (DPR), acknowledged that refining is key to government’s goal of making energy affordable. “Government wants to create the enabling environment for investors to come into the downstream sector,” he said.