Nigeria: Stakeholders List Measures to Develop Nigeria's Gas Sector

(file photo).
13 April 2021

Stakeholders in the Nigerian gas sector have listed a number of measures needed to be taken by both the government and operators to attract investments needed to develop the nation's abundant gas resources and boost the economy.

The stakeholders who participated at the recently held 12th International Conference/2nd virtual Industry Multilogue organised by the Nigerian Gas Association (NGA) harped on the need for collaboration between government and operators to deliver Nigeria gas ambitions over the next decade.

According to the communique generated at the conference which centred on: "Powering Forward: Enabling Nigeria's Industrialisation Via Gas", Nigeria must enhance the fiscal and operational policies required to attract the right investments to realise the objectives and aspirations outlined within the nation's gas programmes.

The communique signed by the President of NGA, Mr. Ed Ubong, enjoined the federal government to urgently resolve legacy debts, payment guarantees, and other commercial impediments, including power delivery bottlenecks in the Gas-to-Power programme.

Panelists who made inputs at different sessions at the conference called for the adjustment of royalties on gas supplied and consumed in the domestic environment to encourage more supplies that catalyse more significant development in the overall domestic economy.

They demanded for non-discriminatory pricing mechanisms that offer suppliers equal opportunity for returns on investments and cost-reflective tariff structure across the gas value chain.

There was a consensus among the stakeholders that gas supply industry must be anchored on a willing-buyer, willing-seller framework to unlock further investments in gas exploration and delivery infrastructure.

They advocated for the removal of price controls and concessional gas tariffs for sections of the market that are critical to achieving overall economic growth objectives.

According to them, the scope of the National Gas Transportation Network Codes (NGTNC) should be expanded to fully cover the domestic gas market in line with provisions already specified by the Department of Petroleum Resources (DPR), which regulates the industry.

They emphasised the need for the Central Bank of Nigeria (CBN) and development banks in the country to prioritise the gas industry, underpinned by concessional interest rates and guarantees for dollar-denominated transactions in gas projects to assure lender confidence.

"PENCOM to make the $32 billion pension funds available to Natural Gas investors as priority funding for critical gas infrastructure, to bolster economic diversification and sustained industrialisation in the country.

"The panelists agreed that cost reflective pricing mechanism, favourable fiscal regime, ease of repatriation of dividend/capital, stable exchange rate, financing, and national industrial policy stability are critical conditions for spurring equity and loan in the local gas market.

"It was revealed during the sessions that the BOI has a $500 billion funding arrangement with the Bank of China (BOC) to finance import equipment for flare Gas capture, which requires the intending borrowers to advance about 25 per cent of their funding needs and import their equipment from China," the communique stated.

The stakeholders, however, enjoined players to foster good corporate governance, de-risking loans with equity contributions and mapping out clear funding outlines before initiating a project.

They agreed that gas-based industries such as fertiliser and cement constitute key consumption centres that could grow the country's domestic gas consumption and unlock the much needed economic growth required to take over 90 per cent of Nigerians out of extreme poverty.

They noted the need to warehouse world class local capacity to adapt imported technologies for the local conditions to reduce overdependence on Original Equipment Manufacturers (OEMs), improve local content knowhow, deepen innovations, curtail maintenance costs and the overall cost of production.

"The conference highlighted the need to create and develop regional infrastructure across the West African economies to deliver gas supplies to markets through various marine, rail, road, and pipeline channels.

"They also called for improved regional collaboration on maritime security to arrest the Gulf of Guinea's rising piracy incidents for safer virtual gas shipping through marine transport.

"The process of building industry capacity and retooling professionals from an oil-based economy to a gas-based economy should begin in earnest with the NGA playing a central role," the communique added.

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