Patrick Ugeh
27 November 2007
Abuja — President Umaru Musa Yar'Adua has said that the Federal Government is coming up with a new gas policy designed to boost domestic supply.
Speaking in Abuja at the first Nigeria Gas Stakeholders Forum yesterday, he also disclosed that it would require about $10 billion, up from $4.5 billion, annually to sustain the growth in capacity for both oil and gas.
According to him, gas flares had reduced to about 36 per cent owing to growth in liquefied natural gas export and demands of the various independent power projects.
He said: "In line with our commitment to properly restructuring the sector, we are coming up with a domestic gas supply obligation and pricing regulation framework. This new regulation, which takes effects soon, mandates all operators in the country to set aside a predetermined amount of gas reserves and production for the domestic market."
Beside the attention on domestic market, he said the policy also "outlines the national gas pricing policy, a sector-based pricing structure aimed at stimulating the growth of both the power and industrial sectors."
A fundamental philosophy of his administration in the regulation, according to Yar'Adua, is the prioritisation of domestic gas over export, adding: "This would have the effect of ensuring the availability and affordability of gas."
He therefore implored participants to focus on evolving a practical roadmap to effectively tackling Nigeria's energy challenges through the efficient integration of gas into the energy mix.
Describing the devotion of the requisite $10 billion to the oil and gas sector as a strain of government resources, he said the alternative was to allow third party investor funds to flow and drive capacity growth.
The president noted that in resolving the domestic gas supply situation, it was important to position the country's gas sector effectively for market opportunities in key export markets.
"Our strategy," he said, "must be a dual approach which emphasises effectively meeting domestic demand, while also vigorously maximising the huge export potentials of our gas sector. Balancing this dual objective should be one of the key considerations of this forum."
He said while vigorously pursuing the gas flare-out target of December 2008, the recently created National Energy Council would provide policy direction and the requisite political will to reposition Nigeria as a major player in the global gas market.
President Yar'Adua stated that Nigeria currently exports about 18 million tons per annum from Bonny NLNG, which he described as the world's largest LNG facility.
Noting that massive supply growth had been recorded in NLNG, he however lamented that the achievement had not been replicated in the domestic market.
He said while the power and non-power sector demand had grown steadily, growth in domestic supply was lagging behind and therefore called for a holistic approach to solving the problem.
The president also stated the government's support for the speedy implementation of the gas master plan, which he said, was critical to the development of the holistic framework.
Minister of State for Energy (Gas), Mr. Emmanuel Odesina, remarked that until recently, domestic gas demand was very low, but that it had since attained the significant growth of about 700mmscf/d mainly because of the demand by the power sector and the rising gas price in export markets.
He said: "As a result, domestic gas demand is forecast to grow to as high as 10bscf/d by 2012 from the current 700mmscf/d. This is a growth rate of about 25 per cent annually compared with global average of about 3-5 per cent."
He added: "Given the concurrent growth in both domestic and export gas demand as well as the pricing distortion that arises from a very high price in export markets versus a relatively lower price in the domestic market, I have now proposed to Mr. President, a domestic gas supply obligation regulation."
The regulation, which he said awaits Yar'Adua's assent, is expected to take effect in January.
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