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Natural Gas As Strategic Tool For Nigeria’s Economic Revolution

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Recently the Nigerian National Corporation (NNPC) signed new deals with multinational and local companies to boost gas production in the country. In this piece, FESTUS OKOROMADU writes that stakeholders hope the new moves will be a turning point in the nation’s oil and gas sector.

Arecent report by the World Energy Council indicates that global natural gas production has hit a new record of 3.768 trillion cubic metres in 2017, as it rose by 3.6 per cent compared to 2016 and constitutes the largest increase since 2010.

It added that natural gas production has been rising since the economic crisis of 2009 with a compound annual growth rate of 2.6 per cent.

On the demand side, the report stated that global demand for natural gas increased by 3.2 per cent compared to 2016, rising to 3.757 Trillion cubic metres. This was the eighth consecutive year of increase.

The report further explained that since 1990, global natural gas consumption has grown at an average of 6.3 per cent per year. China consumption grew even stronger averaging 13.1 per cent per annum over the past 20 years.

These figures are indicative of where the global energy market trend is heading to and the need for Nigeria which has been ranked 9th globally in terms of proven natural gas reserves.

According to the International Energy Agency (IEA), Nigeria as at 2014, had 5.111 Trillion cubic metres (Tcm)  of proven natural gas reserves.

“This gave them the ninth most proved natural gas reserves in the world and the most proved reserves in Africa,” the IEA report stated.

However, the report was quick to also point out that, “Nigeria’s overall natural gas production is relatively low based on their large amount of proved natural gas reserves. Nigeria produced 43.8 bcm of natural gas in 2014, which only made them the world’s 19th largest producer of natural gas globally.”

It added that, above stated natural gas production represented a 6.6 per cent growth compared to the previous year, stressing that country’s proven natural gas reserves illustrate that the opportunity to further grow production in the future exists.

If this potential recognized by global institutions is accepted, one cannot, but agree that the best time to strategically position the country for that future is now.

It becomes even more obvious, as the present administration continues to show its determination to diversify the country’s economy. It therefore makes a lot of sense to leverage on natural gas as a tool for meeting the domestic market energy needs as well as generating necessary foreign income.

Policy Initiatives

In what can best be described as moves designed to reposition the hydrocarbon industry in Nigeria to face the global market realities, the present administration through the Federal Ministry of Petroleum Resources initiated the 7 Big Wins project.

According to the Minister of State for Petroleum Resources, Dr” Ibe Kachikwu, apart from growing the country’s hydrocarbon industry, the initiative is aimed at developing a stable and enabling oil and gas landscape with improved transparency, efficiency, stable investment climate, and a well-protected environment.

To actualise the vision, the minister promised to unveil a set of enabling policies and regulations that will jumpstart the gas industry through the establishment of robust infrastructure, gas based industries – petrochemicals plants, fertilizer, methanol and LPG/CNG programs.

As a follow up, on June 28, 2017, the minister presented the National Gas Policy to the Federal Executive Council and got approval for implementation.

The Policy defines the federal government’s position in respect of the country’s natural gas endowment, establish its medium to long-term targets for gas reserves growth and utilisation and record strategies to be pursued to ensure the successful implementation of the policy in accordance with Nigeria’s national socio-economic development priorities.

Marshaling The Plans

The Nigerian National Petroleum Corporation (NNPC) in an effort to align with the 7 Big Wins project for energy sufficiency of the Economic Recovery and Growth Plan (ERGP) articulated and initiated a plan known as the 12 Business Focus Areas (BUFAs).

In terms of natural gas, the group managing director, NNPC, Dr. Maikanti Baru said the BUFAs plans incorporated a 7 Critical Gas Development Projects (7CGDP) is targeted  to deliver about 3.5bscfd of gas to the domestic market by 2020.

Domestic gas market according to the NNPC boss will focus basically on the retail market and the industrial need with special attention to electricity generation. He has therefore, set a target of supplying enough gas to generate up to 15GW of electricity to the power sector by 2020. The implication of this will simply be the stimulation of gas-based industrialization.

To actualise this, the NNPC has embarked on partnership ventures both at the level of infrastructure development and gas production. While acknowledging the enormous but necessary task of harnessing the gas base economic revolution, Baru said, the domestic demand for gas in Nigeria is unprecedented.

According to him, the current daily realistic gas demand of 4,000mmscfd and is expected to grow exponentially to about 7,500mmscfd in the next 5 years. He is however, optimistic that with the Joint Ventures Partners model been deployed the corporation is committed to increasing natural gas availability from the current 1.5bscf/d to about 5bscf per day in 2020.

Infrastructure Development

In May this year, the NNPC sanctioned the $2.8billion, 614Km Ajaokuta-Kaduna-Kano (AKK) pipeline project. According to Baru, the initiative is a demonstration of the corporation’s commitment developing the domestic market anchored on structured gas architecture across the length and breadth of the country. He submitted that the trajectory will continue to be the corporation’s priority in the medium to long term.

Speaking at the Nigeria Oil and Gas Conference in Abuja recently, the NNPC GMD said, “Aside infrastructure, the continued implementation of the gas master plan remains a core focus of the NNPC.”

On the nutty issue of pricing and debts which has hitherto hindered investment to the sector, Dr” Baru said, “Gas pricing has been adjusted to export parity, legacy debt owed by the various sectors to gas suppliers are being paid through an intervention fund arranged by the Central Bank of Nigeria (CBN).

“Gas supply agreements will continue to be made effective with terms that assure bankability to provide the relevant comfort to the producers.  The World Bank Partial Risk Guarantee (PRG) will be sustained to provide securitisation of gas revenues. These interventions are boosting confidence in the gas sector,” he stated.

On the gas export market, he said “Part of our strategic aspiration for gas is to strengthen our footprint in high value gas export through LNG and aim to secure about 10 per cent of global market share of traded LNG.”

Expatiating the prospect of the gas base economic revolution embarked upon the  federal government, NNPC’s Chief Operating Officer (COO) Upstream, Mr. Bello Rabiu, said the country could leveraging its gas resources to diversify its economy.

Speaking at the recent the 42nd Society of Petroleum Engineers (SPE) Nigerian Annual International Conference & Exhibition (NAICE) in Lagos, Mr. Rabin noted that with 5bcfd domestic gas supply, Nigeria will have sufficient gas to generate 15GW of power; 7–10mtpa of fertiliser; 10mtpa of other petrochemical; 5mtpa of methanol and 40mtpa of cement.

According to him with the ongoing reforms in the sector, the country’s gas market is set to operate under a willing buyer – willing seller arrangement. He added that this will lead to the creation of about five million jobs, grow the nation’s Gross Domestic Product (GDP) between $25 and $40 billion; and help her achieve import substitution worth $7 and $8 billion.

“Nigeria will become a hub for gas-based industries and net exporter of fertiliser, petrochemicals and methanol in a competitive global market, thus, generating foreign exchange earnings for the nation,” he explained, adding that, “Nigeria is now well positioned to supply almost 10 per cent of the world’s tradable fertiliser in a few years to come (Dangote, Indorama, Nagarjuna, and Brass),” he told the audience.

Recently, NNPC announced the signing of five agreements with Seplat Petroleum Development Company (SPDC) to expedite the development of a project aimed at delivering about 3.4 billion standard cubic feet of gas per day by 2020.

The development which can best be described as investors’ expression of confidence on the Federal Government gas powered economy is said to be aimed at boosting gas production and infrastructure development.

Tagged the Assa North and Ohaji South (ANOH) gas development scheme, the project is said to be part of efforts to bridge the projected medium-term gas supply gap expected by 2020.

Speaking at the event, group managing director of the NNPC, Dr. Maikanti Baru, explained that a special purpose vehicle known as ANOH Gas Processing Company (AGPC) was being promoted by the Corporation and Seplat to develop, build, operate and maintain the ANOH Gas Processing Plant, with an initial capacity of 300 million standard cubic feet per day in Imo State.

The latest developments is coming on the heels of a similar agreement signed by NNPC/Shell and NAOC JV for the development of the 6.4 trillion cubic feet unitized gas fields (Samabri-Bisseni, Akri-Oguta, Ubie-Oshi fields.

Earlier in July, NNPC, Shell, Total and Eni signed the Front End Engineering Design (FEED) contract of Train 7 of the Nigeria Liquefied Natural Gas Ltd (NLNG) in London.

The event also witnessed the commemoration of the successful repayment of $5.45bn shareholders loan for Trains 1-6 by the NLNG Shareholders.

Nigeria As A Regional Gas Hub

Addressing the 27th World Gas Conference (WGC) in Washington DC, United States recently, Dr. Baru said, “We are focused on jumpstarting and sustaining gas supply to support a rapid growth in power generation, re-positioning Nigeria as the regional hub for gas-based industries such as fertilizer, petrochemicals, methanol, Liquefied Petroleum Gas (LPG), as well as leveraging our enormous reserves position to strengthen our footprints in high value gas export through LNG.”





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