Nigeria declared A Decade of Gas on March 29, 2021. We like to think of that declaration in the following areas.
Gas For Power-The most important area is that gas must provide power and electricity for Nigeria. The Gas for homes-we are keen to seeing that Nigeria’s gas is used for cooking.
Gas for industries-The third thematic area is that gas must drive Nigeria’s industrialization.
Gas for Exports– This is very important from a foreign exchange perspective. Nigeria must play in the regional and international markets with respect to gas.
These four areas that are the end products of gas, require three sets of enablers.
The first one, we call it Infrastructure for gas. We must build the required pipelines that would ensure that gas can be utilized in country. We must also support virtual operators that can move gas without pipelines to where it is needed while we are building those pipelines.
We also talk about the OB-OB-OB pipeline, the link between the East and the West, a project that has been going on for maybe over a decade. Significant gas resources sit in the Delta, significant demand sits in the West. As a matter of urgency, we must connect this two.
The second enabler is Regulatory framework, pricing, and security, having to do with the infrastructure and the business climate that supports gas investment. All these must be in place for investors to be able to support us as we move on to the decade of gas initiative.
The third enabler is the human capacity- we must build for the gas sector; train new professionals and retool all professionals who are able to do the switch from oil to gas as we sort of continue the transition.
So, what has happened since Nigeria declared a decade of gas on March 29, 2021?
About Gas to power, the ministry of power has started implementation of the Siemens project. Pricing for electricity has increased (Tariffs have gone up). There are reports by the country’s power distribution companies, called DISCOs, that Nigerians have been paying for electricity, meaning that the receivables have increased. The area we have not had a positive report is that of the payables which is what needs to flow from the DISCOs who collect it to the generating companies (GENCOs) who generate it. That has not increased. What has then happened? We are still between 5,000MW, or slightly above that. But the GENCOs insist that they have installed capacity that is over 12,000MW. There’s a lot of work going on, and lots more to do.
We need a healthy gas-based industry GBI, featuring a good number of companies who compress, transport, and deliver gas at a competitive value to the industrial patch. We are not yet there in that space.
Gas for Home Cooking. The Nigeria Liquefied Natural Gas (NLNG) Limited has made a commitment to increase the LPG it supplies to the domestic market from about 350 to 450,000 tons. But the reality is that cooking gas prices have gone up. The players in the LPG say that there still exists multiple taxation across the LPG value chain that makes it difficult for this pricing to come down. This is the one sector of the gas value chain that is deregulated. So ideally, this is one sector that should work because everybody is talking about regulation but this sector is fully deregulated, and we still see challenges. Foreign exchange supply is a big issue. When you are in the gas value chain, you pay multiple VAT across all the value chains. These are still issues that we need to address and I think the conversations are still going on.
Then we talk about Gas for industries. We’ve seen significant MoUs being signed and led by the Ministry of Petroleum and NNPC on Ammonia production plants, different short-term projects that will need to be built to drive the industrial sector. We’ve also looked around, and no new industrial cluster has emerged. As Shell I’m trying to build an industrial cluster in Bayelsa, I’m being slightly held up by the EIA, but this is a place where you already have the largest gas processing facility in Africa. Getting an EIA should be a tick in the box because that has been done multiple times. What then has the industry been saying over the past three or four months? “We do not have enough gas”.
The message is that we have cranked up significant activity. Because the President has made a declaration, investors have gotten excited, but we need to begin to look at how we close the fundamentals. What has changed in those enablers I spoke about and their significant advocacy work from the Ministry of petroleum resources? The Petroleum Industry Act (PIA) was passed. It is the single biggest achievement of this government from the perspective of the Nigerian Gas Association. And why is this important? Because investors always ask us, “What is the framework that would allow us to work in Nigeria?” And we used to respond: “A Petroleum Industry Bill is being debated at the National Assembly”. But since August 2021, that narrative has changed. We say, “This is a copy of the Petroleum Industry Act. It is your one stop regulation for your investment.” This has taken a significant amount of uncertainty out of that space. We are now in the process where the various parts of that act need to be implemented.
Infrastructure for gas. We have excitedly launched the construction of the AKK (Ajaokuta-Kaduna-Kano) pipeline. Real success for the industry will be when the first leg of the AKK Ajaokuta to Abuja is commissioned. Gas must get to Abuja before 2023. We also talk about the OB-OB-OB pipeline, the link between the East and the West, a project that has been going on for maybe over a decade. Significant gas resources sit in the Delta, significant demand sits in the West. As a matter of urgency, we must connect this two. This project has sat as 98% for a long time. The industry is asking the various parastatals what we need to do to enable the 2% to close so that gas can flow from where there is abundance to where it is needed, connecting supply and demand. The third bit is around the natural gas infrastructure. As we try to build pipelines, we must ensure that the investors who put in 3 or 4Million dollars are the lowest investors on the scale, but they have significant impact because they can compress gas, drop it and transport it to areas where there are no pipelines. We need to enable them and that enabler from what we hear from them, is that they need a pricing. We need a healthy gas-based industry GBI, featuring a good number of companies who compress, transport, and deliver gas at a competitive value to the industrial patch. We are not yet there in that space.
The third bit, the human capacity development which is the final enabler. At the NGA, we have trained about 1000 people and we have virtual online seminars. But it is nowhere near enough and since then I’ve been looking at signing an MOU with OCTAN, the NCD MB and also with the PTF on how we can accelerate those trainings to a wider range of people, and how we can retool some of the investors that are already in. In this limited timeframe we still need to do more.
Abridged version of a paper delivered by Ed Ubong, President of the Nigerian Gas Association and Managing Director of Shell Nigeria Gas (SNG), the downstream gas distribution subsidiary of the UK major. Ubong spoke at the Nigerian International Energy Summit, in Abuja.