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Private Sector Fund Raising As Option To Crystallise Gas Devt



Nigeria’s oil and gas development is clearly forward looking as government identifies the potentiality of private equity funding of infrastructure to especially unlock opportunities in the gas sector.
At the just -concluded 2018 Nigeria Gas Association (NGA) summit, it was clear to stakeholders that the country’s energy crises would not abate if investments in critical infrastructures was left in the hands of government. Government officials also agreed that the industry can only subsist if private equity funding was allowed to flow freely into the system. The NGA has over time provided a veritable platform to discuss way forward towards harnessing the country’s huge gas potentials, and this years forum indeed opened honest discussions on future of the industry. At the conference which is in its 11th edition, minister of state for petroleum resources, Ibe Kachikwu, admitted that Nigeria was currently going through a full blown energy crisis, and could experience this for a long time if it fails to articulate a sound policy framework that focuses intensely on its gas sector. Indeed gas is currently the major topic of discussion in the industry because it holds the future of the country in many respects.
On the export level, Liquefied Natural Gas, (LNG), would soon be Nigeria’s major foreign revenue earner while it is a commodity with capability to invigorate the power sector.
Kachikwu, who spoke through his senior technical adviser on upstream and gas, Mr. Gbite Adeniji, regretted that the country’s continued dependence on oil alone to run her economy was hurting her and she would need to quickly refocus attention on her abundant gas resources.

In his remarks on Nigeria’s energy situation and government’s plan to address it using new policy instruments, Kachikwu said, “To set the scene, the policy (National Gas Policy) highlights the following headwinds confronting Nigeria currently and in the coming years: Nigeria is going through a full blown energy crisis in spite of its abundant gas resources.”  He explained that Nigeria no longer enjoyed priority attention from oil and gas investors, adding that southern and eastern African countries now compete especially for investment in liquified natural gas (LNG) with her. “Secondly, there is a much more constrained international environment with the mounting new LNG suppliers coming on stream globally and Nigeria is competing for investment with Southern and Eastern Africa. “Prices of oil are forecast to fall after 2030, and stay low for a long period after that with a possibility of absolute fall in demand for oil and a related impact on price of gas,” the minister noted. He stated that there were also domestic challenges the country has to clear to develop her gas industry and overcome the energy crisis she was going through. According to the minister, “There is the challenging domestic environment with security of supply risks, the sector governance and business environment issues. We could add more to these headwinds based on the recent reports of the Nigerian Bureau of Statistics, the World Bank and IMF who have made it their business to track our micro economics.

“Based on these headwinds, Nigeria has a challenging future and must therefore broaden its economy beyond oil, hence the thrust of the gas policy is that we need to refocus our economy using the comparative advantage of our gas towards achieving gas-based industrialisation.” He said the policy recognised the possibility of export revenue from gas utilisation, and that Nigeria’s location makes it better positioned than any other country to provide cheaper gas for fuel to countries across the world. Kachikwu equally informed the audience that the country has commenced the review of the 2008 National Domestic Gas Supply and Pricing policy, as well as the overall issue of gas pricing in order to present a clearer signal to investors. He said the government would expect operators in the country’s upstream oil sector to support its gas policy and not stand in its way, and added that the stability of the country’s power sector would be critical to the overall success of the government’s gas policy. However, on the positive side, the Nigerian National Petroleum Corporation (NNPC), spearheading a transnational gas pipeline with Morocco which is currently gaining momentum with plans to sign the Front End Engineering Design (FEED) contract for the project. On that project, the group managing director of the NNPC, Dr. Maikanti Baru, confirmed that a feasibility study for the Nigeria and Morocco transnational gas line has been done, thus paving the way for the project’s FEED contract to be signed.Baru , who also spoke at the NGA forum said, “In June 2018, Nigeria signed a Memorandum of Understanding with the Kingdom of Morocco on a regional gas pipeline that will supply gas to most of West African countries and extend all the way to Morocco and Europe. “The feasibility study has been completed and we are about to commence the optimisation of the study outcomes to be followed closely with the FEED.”

He added that the challenges of the country’s power sector has continued to ensure that up to 500 million metric standard cubic feet per day (mmscfd) of gas meant to generate about 2,000 megawatts (MW) of electricity was shut in.  On his part, the president of NGA, Mr. Dada Thomas, said Nigeria could be better served with a regional and not just a national gas development plan, with countries around the West African region tapping from gas lines and volumes from the country.  “It is indisputable that the countries in the West African region and the ECOWAS community are intimately linked to each other in many different ways. Thus, there is a need to initiate the dialogue at the national and business levels of how to develop a West African regional gas master plan that would serve as the roadmap for each member country to develop or modify and roll out its own gas master plan,” said Thomas.  However, to fully harness the industry’s full potentials, government is making frantic push to attract investors, both indigenous and foreign, to revamp dilapidated infrastructure in Nigeria’s oil and gas industry.  LEADERSHIP learnt that government’s thinking was to encourage investors to come in with equity financing, who would also be expected to develop a business model that makes sense for the country.   Throwing light on this, Kachikwu said this necessitated his strategic visits to International Oil Companies (IOC), with the aim of galvanising support and mobilising funds for the Nigerian petroleum industry.  “I embarked on strategic visits to the IOCs and the reason was simple: If we do all we want, in terms of the policy drives, in terms of the need to increase production, in terms of the need to increase infrastructure; but a large amount of those funds comes from abroad.

“We visited all of them in their headquarters, held meetings and aligned them to a lot of the initiatives we have.Initiatives in terms of gas expansion; initiative in terms of crude oil production stabilisation; in terms of a new funding mechanism to deal with the cash call problems that we had and initiative with local content drive,” Kachikwu said. He added that these travels and one-on-one discussions helped placed Nigeria on the investment table of most chief executive officers globally, and that when investments are being considered, Nigeria was one of the countries where the chief executive could say they had spoken to the minister and were willing to provide the much-needed support.  He said, “With all these, what can we do in terms of international collaborations? Quite a bit more. We need to get into the financing corridors and be able to find the funding to develop our infrastructure. As we move from a public sector driven oil sector model, private sector financing is key. “We need to be able to find investors, who on the basis of equity investments can come in and massively change some of the dilapidated infrastructure that we see here and create a business model that makes sense for this country. We will like to see production go up, at cost that makes a lot of sense.  “We will like to hold conversations with a lot of people and be able to look at the Production Sharing Contract, PSC, terms and get the very best value for this country.”
Kachikwu added that the federal government reassessed its membership of the Gas Exporting Countries Forum (GECF), which enabled it to align some of Nigeria’s gas policies, allowing it to bring out some of the international best standards and to begin to attract very solid investment into this sector. “One of the fallouts of this is the decision of the Nigerian LNG Limited now to take it 7th train and therefore, increase substantially, the gas production in Nigeria; move Nigeria to about the second or third largest gas exporter in the world. That is a substantial move and it is a huge amount of investment and huge amount of investors’ confidence in this country,” he noted.



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