The projection by the federal government to achieve the commercialisation of gas flaring by the first quarter of 2017 and total flare out by 2020 has no doubt received mixed reactions from industry closer watchers.
The announcement of this aspiration by Emmanuel Ibe Kachikwu, Minister of State for Petroleum Resources at a recent International Gas Conference and Exhibition hinged on the fact the government has developed a draft National Gas Policy which set out strategies and implementation plan for medium to long-term targets for gas market development.
Kachikwu, who explained that the policy will promote a competitive business environment for both current and new investors, articulates government’s vision for the sector and sets policy goals.
With first quarter of 2017 only a month away coupled with lack of gas infrastructure and the widespread flaring of associated gas, the Nigerian government has much to catch up if it ever wants to achieve this projection.
Nigeria currently produces an estimated 7 billion scf per day and account for an estimated 182 trillion scf of gas reserve. Among this figures, only 13.3 percent is consumed locally of which 8.9 percent is allocated to gas-to-power.
As laudable as this projection of the minister is, Industry watchers are divided on this issue considering the fact that the desired demand from the industrial, commercial, transportation and industrial sectors will be high.
While some insist that the attainment of these projects will not only broaden the economy; related industries will grow out of these projects, such that jobs and other multiplier benefits will follow.
Analysts maintain that attracting the needed investment to drive the commercialisation of gas should start with the introduction of the domestic gas obligation which imposes an obligation on the oil companies to assign certain percentage of the gas being produced for domestic uses.
“Looking at what is going on in the industry, the future is selling our gas domestically because the international prices are in decline”, they said.
Industry watchers observe that if the issues around credible and enforceable gas contracts coupled with a price regime are not tackled, willing local investors will continue to shy away from putting their money into production of gas for local use.
Ayodele Oni, an energy sector lawyer observes that the aspiration to commercialise gas flaring by government would just be a mere policy statement if managers of the economy does not address pressing issues bedevilling gas sector in the country currently.
Deepak Khilnani acknowledges that the present government is doing a great job in prioritizing utilising domestic natural gas.
He further observes that government is connecting the dots in the power industry by investing in not only power plants, but also the gas fields and the transmission and distribution networks. This is very important to encourage additional private investment in the sector.
The key policy intervention that would be a game changer would be to reduce the retail price of gas to industry to a competitive level, which would foster significant industrial growth.
Industry analysts are of the view that Nigeria’s gas development in the medium term could derive much from local demands as from export, if not in volume but in value.
Analysts believe that achieving the desire result in local gas supply or the lack of it will remain a very sensitive issue with government involvement in unrealistic prices.
They insist that to achieve the commercialisation of gas flaring 2017 projection, the domestic market must be made attractive to investors who need to invest huge capital upfront in gas processing and pipeline for distribution.
To this end, Kachikwu assures that most of the investment required in the sector will be drawn from the private sector as government will set the environment and support investors with appropriate interventions to bring their projects to fruition.
KELECHI EWUZIE
