25 June 2012

Nigeria: Paucity of Funds Stall Major Gas Supply Projects

Despite repeated assurances by Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, that the problem of inadequate gas for power supply is being addressed, it emerged yesterday that major new gas supply projects may not come on stream as scheduled due to lack of funds.

A Presidency source hinted last night that most of these projects originally scheduled to come on stream between 2012 and 2016, have not even taken off owing to funding issues.

Government had envisaged an unprecedented growth in gas supply for power supply and over 35 percent growth rate annually in power generation between 2010 and 2015, when most of the project would have been completed.

The Domestic Supply Obligation (GSO) plan, which comprises existing and many ongoing gas projects as well as a few major new gas development projects had been planned to meet Nigeria's electricity generation needs.

It was gathered that about 70 percent of the short/medium term plan had been targeted at the Power Sector.

Most of the existing gas-fired power plants had been built without provisions for their gas pipelines and other infrastructure that would aid in delivering gas to them. Last year, the Nigerian National Petroleum Corporation had stated that about N600 billion would be required to build new gas infrastructure to meet the country's power generation needs. The Group Managing Director (GMD) had stated that the corporation submitted a proposal of $1.2 billion.

to the Budget Office of the Federation to fund government's gas-to-power plan, but that it was not included in the 2011 budget. He had expressed fears that the omission might stall government's plans to boost power generation.

The source explained that costs of various projects that would deliver gas to the power stations was put at about $4 billion, and that of other critical infrastructure estimated at $1.2 billion had been submitted to the budget office, but that they were not included in the budget.

The Petroleum Minister had at the 2012 Ministerial Platform organised by the Ministry of Information disclosed that government had spent about $1 billion in the last one year on the development of gas infrastructure meant to fast-track the economic development of the country.

"In the last year, we have made significant progress in gas infrastructure, gas supply growth and stimulation of gas industrialisation. Specifically, in this time frame, we have invested close to a billion dollars in almost 1,000km of gas pipeline development" she said.

Alison-Madueke said the ministry was embarking on a massive expansion of the gas pipelines and facilities, so as to achieve the gas-to-power initiative.

"The 130km, 24-inch Oben-Geregu gas pipeline has been completed and commissioned and this will open up gas access to the Geregu Independent Power Plant (IPP) and Dangote Obajana cement plant. The 50km Ipe Annang-Calabar Pipeline will also open up the Calabar axis to gas and other industries", she added.

But THISDAY investigations have revealed that only a few projects are nearing completion, while most other projects are yet to take off. A source at the NNPC who spoke on the development said government has directed that the private sector should be involved to fund the projects. "We always submit proposal for the projects to the budget office, it has never been included in the budget. Instead what we have been told is to get the private sector to fund the projects, so you can see that an end to the gas issue is not in sight".

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