Yemie Adeoye
18 November 2008
The lack of a robust and proper regulatory framework has been fingered as one of the main issues hindering the progress and growth of the Nigerian gas sector and which may also make the federal government's desire of making gas the mainstay of the nations economy unachievable.
This was the position of experts and stakeholders in the Nigerian Gas Industry coming under the auspices of the Nigeria Gas Association (NGA) during their recently held 6th annual International Conference and Exhibition in Abuja.
The Association in a communique issued at the end of the conference and signed by its President Engr.Charles Osezua and the Session Chairman Chief Festus Marinho also called on the federal government to partner with the private sector to implement the Gas master Plan (GMP) which provides a general framework for maximization of value from the contracts gas resources and which will lead to job creation and harmonization with export-oriented projects.
Part of the association's recommendation to the federal government is to create attractive fiscal incentives, such as tax holidays, loan guarantees and duty waivers, for developers and investors in the industry and also to appraise the emerging opportunity in the Trans-Saharan gas project.
The federal government was also urged to address the issues of all stakeholders by providing enabling environment and funding to ensure that routine gas flaring is eliminated.
A total of 17 papers were delivered during the following five sessions of the Conference, and these includes Business and fiscal environment, Global gas business, strategies and technology;
Natural gas exploration, production, transmission and distribution; Gas utilization and power generation, and local content and sustainable development.
The stakeholders also observed amongst other issues that global energy demand will increase exponentially in the future, resulting in increases in the demand for gas and this new challenge can only be met by advances in cost-efficient and environment-friendly technology.
"The Nigerian gas sector has evolved very rapidly over the years from a demand constrained situation in pre-1999 to one that is now supply constrained due largely to the ongoing power sector reforms, giving credence to the need for a regulatory body on gas pricing, especially as lack of commercial, legal and fiscal framework for the gas industry discourages investors from participating in the sector. Limited infrastructure also inhibits growth.
There is still a lacuna in the regulation of the gas industry, Limited counterpart funding by government of its joint venture (JV) obligations and the security issues around the Niger Delta question are among the major challenges facing the gas industry in Nigeria today. The funding challenge suggests a need for innovative approaches to deal- structuring, collaboration, flexible and creative financing structure among players in the industry.
Sustainable long_term financing initiatives however depend on good governance, business_friendly environment, macroeconomic stability, human capital development, measures to check corruption, investment promotion, access to technology, special risk mitigation and financing instruments, growth in domestic savings, and the implementation of a public_private partnership model.
The provision of natural gas for the domestic sector is crucial to the realization of the vision 2020 goals and aspirations to grow the GDP, stimulate industrial development and enhance quality of life.
While acknowledging the significant work so far done to facilitate the growth of the gas industry, the Conference further observed that A lot of work still needs to be done to address such challenges as gas flare out, domestication of the gas market to facilitate growth of the power and industrial sectors, and streamlining the permit process for gas projects, the inability of government to fulfill its cash_call obligations to the JV partners militates against growth in the industry.
An effective gas pricing policy should aim at growing the economy rather than achieving cost recovery. In that regard, it is necessary to identify the fastest growing sectors so that earnings from gas would be used to grow those sectors.
Thus the current pricing strategy that allows the power sector to pay the least price for gas is commendable.
Gas will help to diversify government revenue from oil, provide additional substantial foreign exchange earnings, stimulate foreign direct investment (FDI), facilitate development of downstream industries through domestic gas and power supply, support development of new skills and competence, thus creating the much needed employment in the region and contribute to the economic development of the Niger Delta and the nation at large.
Sustainable local content implementation in the gas sector should accommodate concerns and yearnings of stakeholder communities in an all inclusive manner.Stakeholders in the gas industry must learn from the mistakes of the Oil era, and concentrate on finding and building linkages that will generate significant multiplier effects in the overall economy of Nigeria.
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