Gas network code what is your opinion about this policy?
Well, it depends on which vantage point one wants to look at it from. If one is looking at it from the perspective of trying to bring gas to the fore in alignment to the gas national policy, yes, it is a laudable introduction. But if we are looking at it from the perspective of liberalising the gas sector, am not too sure whether the introduction or this policy should be the priority.
WHY?
I say this because, no 1, I see gas as a standalone product within the oil and gas value chain. Secondly, the reformation process that the country ought to have embarked on has not been done in terms of the passage of necessary laws for the sector. So, if you look at the gas subsector you will find that the government is the transporter and also the regulator. This cannot work. The regulator should be a regulator while the private sector should be able to transact business among themselves in terms of transportation and then the code can now govern the relationship. While the regulator ensures it enforces the necessary rules.
If you are saying reforms should take place first what happens to power plants that need gas for generation?
Ans: Ok, let’s look at it this way. You said the Nigerian National Petroleum Corporation(NNPC) is the largest producer of gas. So it is producing and transporting while Department of Petroleum Resources (DPR) regulates. if anybody is denying other access into the use of the infrastructure available, it could be by NNPC itself or its subsidiary in terms of the Nigerian Gas Transportation Company .So it is important that we allow private participants to participate in the gas subsector.
First and foremost, we need to create gas hubs rather than a blanket network code without any specific gas hub. Once we create hubs and there can be trading between the shippers and transporters within that hub then we can introduce a code to govern the activities in the hubs. At any rate, where is the gas market at the moment?. Predominantly it is the power sector that consumes the highest volume of gas. But are they close to gas stations? Not really. We have to begin to create hubs and create the market and then introduce a code to govern the operations of the markets.
Did you see this enhancing availability of gas?
What are you talking about
The National Gas Network Code?
I don’t think the National Gas Network Code alone would be what would engender a robust gas market. First, we have to treat gas as a standalone product, secondly, we have to ensure that the value chain is properly demarcated so that upstream activity will not be in any way mix up with downstream market. For example, if you look within the industrial area, yes, the Nigerian Gas Transportation Company has the monopoly but often time it gives franchise to other firms just like we see with Gaslink in Lagos. What I would have suggested would have been some independent network code to govern that arrangement and govern the independent players and we begin to grow that first within the dedicated hub before we now transmute to national code. Because if you look at it, we are suffering from the dearth of physical gas infrastructure both in terms of processing and transportation.
What did you think would happen to the gas agreements already signed?
In some scenario, with some of the franchise units, in as much as gas prices are regulated but you find out that gas price is $2.5 but you probably find out that by the time it gets to the market it is $7. So there are some elements of a willing buyer and willing seller arrangement within the market. If that is the case and the cost of transportation is already factored into those prices bringing these arrangements back into the network code with specific pricing would have counterproductive effect on the market that is already doing well. To ask them to move to the national gas network code within six months may affect gas supply to some of the industries. So there is need for greater clarification and understanding of relationships between the government and actual stakeholders.
What would you say is going to be the major challenge that would confront this policy?
I think it is pricing. Pricing is actually critical because anybody could perhaps procure the franchise based on certain economics and would be certain of returns on their investments. So to change the pricing now would throw a lot of those projects into turmoil. Pricing is therefore very critical.
If you are to advise the government on this network code. What would you tell her?
My candid advice is, I mean for us, the gas policy already alluded to this, is to identify gas as a standalone product, legislate around it, embark on Public Private partnership(p pp) arrangement or concessioning arrangements in and around where hubs can be created as opposed to the fanciful plans that we have around. But realistic speaking taking one step at a time is the best thing to do. We can then develop around that. This is the way we need to develop the sector and this is the way to move ahead.
Did you see the Petroleum Industry Bill upturning the whole of this process?
It may not necessarily upturn it. But even with the PIB there is still a need for the bill itself to take congnisance that gas should be a standalone product which it does not. So to this extent, no, the PIB would in terms of governance structure create new regulators but that regulator is going to be regulating both upstream and downstream and still would not be segregated as it ought to be. To this extent, it would be but on the whole no.
The Federal Government recently said Compressed Natural Gas (CNG) is the way to go. What is your take on this?
I think to move the entire sector forward it must be private sector-led while the government becomes the referee so to speak. If you see gas flare commercialization programme and the call for private investors to come and participate, you can see already that the entire transformation of that sector is moving forward towards being led private sector-led.
When you talk about CNG it is a more friendlier product. Some investors have already invested heavily to create CNG plants so as to be able to ensure that gas being a very clean fuel and environmentally friendly is accessible to the entire country. Yes, with the gas flare commercialisation programme I know that a number of people are looking at creating CNG and LNG hubs and because of this, we should see CNG readily available in the eastern and northern parts of the country. CNG might be able to be conveyed from point of production to point of use.
What kind of enabling environment should the government create for CNG operations?
Firstly, the PIB has to be passed to ensure that restructuring of the sector is done. Then we should start to look for a way for gas to be a standalone product. Then we Look at the unbundling of the gas sector gas transportation, distribution and retails and eventually go to privatise the sector but it must not be rushed but has to be phased.
Do you envisage that the arrangements you have enumerated above would be contained in the PIB?
I don’t think the PIB would make case for privatisation but it would make for restructuring of the gas subsector and the governing structure of the industry. In terms of unbundling, yes, it will take care of that but not privatization.
What is your advice to the government regarding the whole of gas value chain?
Let us take from the progress made so far.
In term of gas commercialisation programme this a laudable programme which I hope would utilised some of the gas being flared in the Niger Delta and create more safe and cleaner environment of the area.
In terms of ascertaining the works the gas policy seeks to do. There is a lot of work the Federal government needs to do. I think if there is sincerity of purpose within the next decade Nigeria can truly be a fully indusrialised nation if we are committed to the necessary reform programme, infrastructure, expenditure and liberalise the gas market.
