Nigeria Needs $6 Billion to Fix Gas Supply Gap — Operators

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Gas supply challenges abound in various sectors of the Nigerian economy, as the country needs about two billion standard cubic feet of gas to meet its gas demand, operators in the industry have said.

In order to address gas supply challenges, they noted that about $6bn would be needed for infrastructure development that would include the construction of gas production plants, pipelines, and provision of transportation vessels.

The operators noted that with the establishment of many gas-fired power plants across the country, industrial expansion, as well as domestic demand for cooking gas, the demand for the commodity had been on the increase over the years.

On several occasions, power producers had blamed poor electricity generation on gas constraint, which, according to them, was largely due to limitations in supply as well as vandalism.

For instance, data obtained from the Transmission Company of Nigeria showed that gas constraint to power generation plants inhibited the production of 566 megawatts and 766MW of electricity on December 11 and 13, respectively.

To address gas constraint to power generation as well as in other sectors of the economy, operators noted that a huge capital outlay would be needed from not just private investors but also from the Federal Government.

The Senior Commercial Adviser, Shell Petroleum Development Company of Nigeria Limited, Emmanuel Anyaeto, stated that the demand for gas by power plants, industries, and other users was high, adding that a massive financial investment was needed to ensure adequate supply.

Anyaeto, who spoke on the sidelines of the Gas Aggregation Buyers Forum organised by the Gas Aggregation Company of Nigeria Limited recently in Abuja, however, noted that despite the high demand for gas, producers of the commodity often did not get adequate payments from consumers.

He said, “As a country, we need close to two billion standard cubic feet of gas to meet the demands from industries, power plants, and other users. And the amount of investment required to get this 2bscf of gas is going to be about $6bn for plants, pipelines, and other infrastructure.

“However, what people need to understand is that the way the gas business works, the problem is not mainly with investment because there are producers to do the investment. The challenge, however, is that if they produce, are there customers that will pay? That is the message we are passing to Nigerians.”

Anyaeto disclosed that gas users, including government, owed producers about $500m, explaining that this was why some producers started insisting on payment before supply.

He said, “Most gas producers are being owed a lot of money. Producers are being owed close to $500m today. So, if you are a producer and you’re being owed, will you have the incentive to produce more gas? The answer is no. And some of these power plants that owe gas producers are owned by the government to an extent.

“But the government is not paying. And because they are not paying, the producers are saying, ‘Show us evidence that if we supply gas to you, you will pay us.’ But the government is not doing that and that is one of the reasons why we have gas shortage many times.”

He added, “So, investors are always here and they come into the country to look for opportunities to invest, but the truth is that they run away when they come in and discover that they can’t get their money back if they invest.”

On whether power producers were not paying gas suppliers after receiving the N701 billion intervention fund that was made available by government, Anyaeto said, “That money is meant to pay for electricity generation in the next two years. It is meant to encourage producers and generators to continue to generate.

“Now that money is a loan that will be repaid and it is to last for two years. So does it mean that after two years Nigeria won’t have electricity again? The N701 billion is not a saviour but a bandage to cushion the wound before it heals.”

Earlier this year, the Federal Government provided a N701 billion power generation intervention fund to help bridge the funding gap in the sector, as well as support power producers in their payment for gas.

Also speaking on the high demand for gas and its inadequate supply, the Managing Director/Chief Executive Officer, Gas Aggregation Company of Nigeria, Morgan Okwoche, stated that several constraints had limited the volume of gas that was available in the market.

Okwoche, who also spoke to our correspondent on the sidelines of the recent GACN forum in Abuja, however, explained that the Nigerian gas market was still evolving, as there were many areas of the business that were not clear enough.

He said, “The Nigerian gas market is still evolving and it is in the process of enhancing it that we have called for this forum to interact. There are so many areas of the business that are not very clear, from the buyer’s side, transporter, seller, consumer, etc. The market is segmented, particularly the domestic supply obligation when it came into force.

“We have the power sector with a different price, gas-based industries have a different price and the bulk distribution of gas has a different price too. So, we need to educate our people very well. And also, suppliers are not providing the required volume of gas that should be in the market.

“One of the reasons for this is debt; another is the non-compliance with regulations. Obviously, we need a lot of funds to be invested in the market to effectively bridge the gap in supply.”

On why oil and gas companies were still flaring gas despite the inadequacy in its supply in Nigeria, Okwoche explained that originally there was no plan by government and operators on how to manage gas when it was first discovered in Nigeria.

He said, “If you know the history of gas in Nigeria, it started like an accident. It was when they were drilling for oil that they ran into gas and they didn’t know what to do with it because there was no plan. And so the best thing was to flare it. And that tradition has been on, until recently when there were legislations and NLNG came into being.

“Now, another thing with Nigerian gas is that it is scattered in different isolated fields and difficult to harness. It will never make economic sense where it is located in small volumes. This is because the gas-gathering facilities make it so expensive that it may not be worthwhile to start gathering them.

“You can’t gather them unless we have a mobile arrangement, which is technology evolving, that will enable you to go there to get the gas. So it is difficult and we need to understand this. Also, that is how we have the deposits naturally scattered in different places, but what can you do about it?”

Meanwhile, the Programme Manager, Nigerian Gas Flare Commercialisation Programme, Office of the Minister of State for Petroleum Resources, Mr. Justice Derefaka, stated that the Federal Government had discovered more gas flare sites and was working hard to reduce flaring across the country.

He noted that the country was losing so much money through gas flaring, adding that the NGFCP was designed to help curb the losses arising from gas flaring.

Derefaka said, “We have bankability issues. Bankability in the sense that data is very key for us. Without accurate gas flare data, this programme is dead on arrival. So, what we are doing is that we are going beyond the data that we have at the DPR. We’ve sent a special template we designed with the World Bank and USAID asking for a unique data set from the producers.

“And it will amaze you what we’ve found out. What we know in this country is that we have about 139 or 140 gas flare sites, but by our verification with our partners, we found out recently that we have about 178 gas flare sites. That in itself is not complete because we are around 60 percent; 40 percent of the data is missing.”

He added, “So, we are doing a detailed information request now at the DPR office in Lagos and that figure (178) is going to increase. So in this country right now, we have about 178 gas flare sites out of the 16,000 that we have globally in 90 countries including Nigeria.

“Daily, we flare around 755 to 800 million standard cubic feet of gas and you can imagine how much we are losing as a nation, in terms of cash, the electricity we would have generated, as well as liquefied petroleum gas and the like.”

Source: IWIN

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