Only 25 per cent of the country’s gas reserves is being utilised, the Managing Director of Shell Petroleum Development Company (SPDC) and Country Chair of Shell Companies in Nigeria, Mr. Osagie Okunbor, has said.
He spoke at the Nigerian Gas Association’s Business Forum in Lagos.
Okunbor, who represented Oil Producers Trade Section (OPTS) Chairman, Clay Neff listed some of the problems of the sector’s development to include gas producers debts, poor gas infrastructure, insufficient funding and lack of a conducive business environment.
The Shell boss regretted that though Nigeria has proven gas reserves of 181 trillion standard cubic feet (tscf) as at last year, in excess of oil, the resource is being underutilised as output of gas acreages producing, or being developed is about 46tscf, reflecting just a quarter of available volume.
Okunbor, who spoke on “Re-evaluating the development of the Nigerian gas industry: A prerequisite for re-energising and maximising its potential,” said as a country that has the largest proven gas reserves in Africa, the level of exploitation is very low compared to some African nations that have much less reserves.
He told The Nation on the sideline that the solution to the challenge, lies in “repaying outstanding gas invoice arrears,” adding: “without the assurance of repaying gas invoice arrears, investors will be reluctant to commit additional investments to grow domestic gas production.
“It is vital to settle outstanding debts and establish bankable credit support facilities for future gas sales,” he said.
In addition, he said: “Developing adequate gas infrastructure is critical. Infrastructure remains inadequate along the value chain. Pipelines to deliver gas to off-takers for power generation and other users are important. Therefore, there is need to attract investment in infrastructure development, unbundle the Nigeria Gas Company (NGC) into separate pipeline and gas marketing companies, and complete the critical National Integrated Power Project (NIPP) transmission lines.
He said ensuring sufficient funding is vital, pointing out that unresolved Joint Venture (JV) funding issues limit gas development and production. He said due to the persistent shortfall in funding, viable new projects could not make progress, adding that there was need to implement sustainable solutions which will fully fund the JV budgets, including gas.
He also noted the importance of providing an enabling commercial and fiscal terms, stating that with such terms, gas prices and fiscals must be competitive to appropriately cover development, production and transportation costs and make commercial returns possible.
He said this would promote willing-buyers and willing-seller market place. It would also ensure a power tariff level that provides a commercial return. Government should set globally competitive fiscals for gas, he said.
On conducive business environment, Okunbor said such environment was essential to attract investments and have reliable operations, with efficient and effective regulatory bodies.
He said the government should maintain stable laws and policies, maintain Nigeria’s reputation for honouring contracts, and eliminate structural factors that increase costs as well as ensure security of life and property.