‘Investment in Gas Extraction, Pipeline Critical Option to Sector Growth’

pipeline

Oil and gas industry analysts have observed that attracting the needed investment for gas extraction should start with the introduction of the domestic gas obligation which imposes an obligation on the oil companies to assign certain percentage of the gas being produced for domestic uses.

If the issues around credible and enforceable gas contracts coupled with a price regime are not tackled, willing local investors will continue to shy away from putting their money into production of gas for local use industry close watchers said.

Recent figures show that Nigeria currently produces 7 billion scf per day and account for an estimated 182 trillion scf of gas reserve. Among this figures, only 13.3 percent is consumed locally of which 8.9 percent is allocated to gas-to-power.

Also the fact that Gas penetration out of the major cities in Nigeria is only 1 percent in a nation with a population of over 170 million people speaks of gas utilisation.

Dolapo Oni, an energy analyst with Eco Bank Lagos opine that of the estimated 8 billion scf per day volume of gas produce in Nigeria, 40 percent are tailored towards export, while 13 percent of gas produced is flared. Nigeria is one of the leading countries with the highest gas flaring activity.

Oni is optimistic that Nigeria electricity generation out-put will receive increase once the federal government and its other joint venture partners intensive its investment commitment to gas gathering projects which will further achieve zero gas flaring in the country.

According to him, “When the estimated figure of 211.836 billion SCF of gas been flared are converted into power, Nigeria could be generating a sizeable amount of electricity for domestic use.

Ayodele Oni, a lawyer with keen interest in oil and gas sector insists that if government doesn’t address pressing issues bedeviling gas sector in the country currently, there will not be one penny investment in gas infrastructure, in gas development, in gas projects in Nigeria in the foreseeable future

Industry experts are of the view that Gas projects will become more profitable if indigenous companies are given access, stressing that it will be easier for local companies with proven track records to attract investors to execute projects that can unlock gas for Nigeria.

They opine that 70 percent of gas projects are in dollars because the technology, the equipment is not resident in Nigeria. You have to spend dollars to get a gas project going. So if government does not address this investment and income currency mix match, there will be no future investment in gas project in Nigeria, there will be no more addition power therefore Nigeria economy cannot grow.

“Infrastructure distributing gas around the country is poor and there need to be a public private partnership in growing this infrastructure because the molecules of gas are over there in the Niger delta while the largest consumers of gas are in the south west and you have to connect the two”. They said.

The foreign exchange issue is at the heart oil why the gas to power value chain will crumble in the next few years if the government does not do something about it. The future in my view is to see that framework for developing gas is made better by the government.

From all indication, Nigeria remains very strong in terms of gas production as production hasn’t drop by any significant margin since the global crude oil price drop started. Industry analysts are of the view that Nigeria’s gas development in the medium term could derive much from local demands as from export, if not in volume but in value.

Source: BusinessDay

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