HORATIUS EGUA
Reacting to the volatility of oil price on the international stage, Nigeria and sixteen other countries have established an international gas organisation to regulate natural gas production, with a view to ensuring a stable gas market that delivers fair price to both consumers and suppliers, writes HORATIUS EGUA in Abuja.
Crude oil price in 2008 In 2008, the world saw both sides of running a mono-economy. At one time, crude oil price in the international market rose to an all time high of about $150 per barrel. Then, members of the Organisation of Petroleum Exporting Countries (OPEC) were excited and stocked their bank accounts with billions of dollar from the proceeds of the oil windfall. Investments in the oil sector soared and, for a country like Nigeria, it was time to go sharing the proceeds of the excess crude money. No investments for the raining day!
As Nigeria’s afrobeat maestro the late Fela Anikulapo Kuti would say, “and suddenly”, the price dived to an unprecedented low of $37 per barrel in December 2008. The world was shocked at such a negative turn of fortune from a vital commodity like oil, which is one of the driving forces of the global economy. OPEC members began the almost impossible task of halting the slide in price of the essential commodity.
At first, the organisation went into a crucial meeting in Egypt and agreed to cut crude production by 2.2 million barrels per day (bpd). The decision, instead of halting the crash in price, further aggravated the problem. The price kept sliding down the scale until it peaked at $37 per barrel by the end of December 2008.
OPEC’s extra-ordinary meeting in Oran, Algeria lost its usual pomp and pageantry. Members instead buried themselves in another very crucial meeting and, at the end of the session attended by all the OPEC member countries and Russia, Mexico and Venezuela, another unprecedented two million barrels of crude oil was further cut from the global production quota of 28 million bpd.
In all, OPEC agreed to cut a record 4.2 million barrels of oil to help stabilise the volatility of the price of the crude commodity in the international market. The Oran meeting was yet followed by another energy conference in London, all in an attempt to find a permanent solution to the volatility of crude oil price.
Unfortunately, since the Oran and London meetings, the price has continued to fall below the $45 per barrel benchmark in Nigeria’s 2009 budget.
Establishment of GECF in Moscow
Apparently worried by the unpredictability of the price and the future of crude oil price in the international market, 17 countries including Nigeria and the Russian Federation, on December 23, 2008, in Moscow, formally established an international gas organisation known as the Gas Exporting Countries Forum (GECF). GECF, according to the members, would function in the same way OPEC functions in regulating and controlling natural gas production in the international market.
According to them, GECF will be strictly guided by the framework and agreement which bind member states together. Members of the organisation are expected to share a common purpose to maximise value to their various nations while working towards ensuring a stable gas market that delivers fair price to both consumers and suppliers. The core value emphasised by member countries is to ensure “security of demand.”
Those who joined and formally signed the agreement for the establishment of the GECF in Moscow are the Russian Federation, Nigeria, Algeria, Bolivia, Brunei Darussalam, Egypt, Equatorial Guinea, Indonesia, Libya, Iran, Malaysia, Qatar, Trinidad and Tobago,
Turkmenistan, United Arab Emirate (UAE) and Venezuela while Norway chose to remain an observer country.
Nigeria’s new direction in gas production
Currently, Nigeria has a gas reserve of 184 trillion cubic feet (TCF) and is ranked 5th by the Organisation of Petroleum Exporting Countries (OPEC). However, the United States (US) geological survey estimates that the Niger Delta basin alone has as much as 600 Tscf of gas reserve potential.
Analysts are of the view that Nigeria’s membership of GECF “is a sure way of not only developing and exploring the country’s long abandoned natural gas reserves but also creating an alternative source of revenue for Nigeria outside crude oil revenue.”
They believed that the establishment of an international gas organisation equivalent to OPEC in the regulation of gas price and quota is not only a welcomed development for Nigeria but another opportunity to tackle the intractable problem of gas flaring in the country.
Nigeria’s gas reserve, according to Odein Ajumogobia, minister of state (petroleum) has put the country in the front roll as one of the world’s largest producers of natural gas.
To buttress Nigeria’s current status on gas, he told the 7th ministerial meeting of the GECF, in Moscow, Russia, that the robust state of Nigeria’s gas sector has consequently attracted over 48 companies both within and outside Nigeria, willing to invest in the sector.
He said: “as you may well know, Nigeria has a proven gas reserve of about 184 tscf (OPEC database), making her the 7th largest in the world. The United States (US) geological survey estimates that the Niger Delta basin alone could have as much as 600 Tscf of gas reserve potential. Exploration work is ongoing in six other basins to ascertain their hydrocarbon potentials.”
“Nigeria has a rapidly evolving robust market potential too. The export Liquefied Natural Gas (LNG) market is growing steadily. The Nigeria LNG has expanded rapidly to Train 6, exporting about 22 metric tons per annum (MTPA) of LNG. Currently, there are many other LNG projects being evaluated including the 22 MTPA OKLNG project as well as the 10MTPA Brass LNG. A few other third party LNG projects are also on the drawing boards,” the minister further stated.
He continued: “despite all that have happened globally especially in the energy sector, the economic as well as the credit crisis that has dampened appetite for investment world-wide, I am pleased to inform you that the Nigeria Gas Master Plan attracted an unprecedented level of investor interest from all over the world.
“A total of 48 companies expressed interests, comprising major European utility and gas companies, some national oil companies from Asia, indigenous companies as well as some of the existing IOCs. This level of interest lends credence to the credibility and robustness of governments plan for gas and more importantly, the long-term sustainability of the reform of the Nigerian gas sector.”
He was optimistic that “Gas is expected to be one of the main drivers for the growth in the Nigeria economy. Gas demand (for both domestic and export markets) in Nigeria is forecast to grow from the current level of about five billion scf/d to over 20 billion scf/d by 2012, with the domestic market forecast to grow to about 10 billion scf/d in the medium term. More importantly, the Nigerian domestic market is evolving at a most rapid pace with the power sector revolution and the relocation of gas intensive industries such as fertilizer and methanol industries in Nigeria.”
Reactions to Nigeria’s membership of GECF
A top presidency source who spoke on condition on anonymity said he believed that the country’s economic growth could be anchored on the platforms at which it can deregulate and commercialise its vast energy reserve both for domestic use and export.
“Our ability to catch in on the synergies across our vast country with its huge potential for significant economic transformation abounds,” Leemon Ikpea, managing director of Lee Engineering and Construction Company said.
He noted that the focus on gas exploration other than crude oil is a welcomed development adding that “the new membership of GECF is very timely because the future of this country’s economy is on gas exploration. If you consider the huge gas reserve that we have in this country, I think joining GECF was the right thing to do today,” he added.
Ikpea enjoined the Federal Government to demonstrate to the world that we can be first in gas exploration by fast tracking the process of ending gas flaring in the country.
“We cannot be talking of maximising our gas reserve when we still flare enormous gas. I think both the government and the oil firms in the country should arrive at an amicable solution and strategy for ending gas flaring in Nigeria,” he advised.
Nigeria, on the regional front, has kick-started the supply of gas to the West African sub-region and has also heightened plans for the takeoff of the much contentious Trans-Saharan Gas Pipeline meant to supply gas through Northern African region to countries in the European Union (EU).
The government, in its drive towards the realisation of the domestic gas demand in 2008, launched a Nigeria Gas Master plan designed to develop a workable and efficient gas infrastructure that will concurrently serve the three export markets of exporting, regional and domestic.
The strategy, the ministry of petroleum emphasized, will encourage a more rapid and cost effective access to both the proven and undiscovered reserves.
According to Osten Olorunsola, strategic business adviser to Ajumogobia, the approach “is vital to the sustainability of an energy partnership between Nigeria and consuming countries,” as it will “facilitate growth of reserves in a manner that will encourage export and domestic markets concurrently.”
