NIGERIA has abundance of natural resources, especially hydrocarbons. It is the 10th largest oil producer in the world, the third largest in Africa and the most prolific oil producer in sub-Saharan Africa.
The Nigerian economy is largely dependent on oil, which supplies 95 per cent of its foreign exchange earnings.
To discuss the opportunities and challenges in the sector, the Nigerian Gas Association (NGA) at its yearly general meeting, brought stakeholders together last week to deliberate on several issues, such as the Petroleum Industry Bill (PIB), gas flaring and others.
Presenting the perspectives of the Oil Producers Trade Section of the Lagos Chamber of Commerce and Industry on the opportunities, challenges, and the way forward for the gas industry in Nigeria, its chairman, Mark Ward, described Nigeria as a nation with big ambitions.
According to him, Nigeria aspires to be one of the top 20 economies in the world by 2020 by developing a large, diversified, sustainable and competitive economy. “Nigeria certainly has the potential to achieve this. The nation is already delivering significant economic growth. Over the last decade, the economy has grown by over eight per cent year on year, unfortunately, this growth has only benefited a narrow segment of its people. But, with the largest population in sub-Saharan Africa and abundant natural and agricultural resources, Nigeria has an opportunity to broaden its economic base”, he added.
Ward noted that Nigeria’s economy was not growing and diversifying fast enough to reduce poverty and unemployment for its fast growing population. “Unfortunately unemployment has increased from 12 per cent in 2006 to 24 per cent in 2011. Additionally, with around 80 per cent of the government’s budget dependent on oil revenues, Nigeria is vulnerable to an oil price shock”, he added.
He pointed out that accelerated and diversified economic growth was critical for Nigeria to meet its vision. “A major step in the direction of diversification will be to build on the potential of Nigeria’s enormous gas reserves to power change”.
He added: “Nigeria is an emerging gas super-power, with the world’s ninth largest gas reserves. We believe these reserves can bring growth and diversification to Nigeria through more power generation, more gas based industrial activity such as fertiliser plants, to boost agriculture and high value exports to bring revenue to the nation.
He said though the country has made some progress, the achievements were only a fraction of the potential and of what must be achieved to support Nigeria’s vision 2020.
He noted: “In terms of power generation, Nigeria has one of the lowest power consumption levels per person in the world – even when compared to similar emerging economies. Regrettably, the nation has only moved from 3GW in 1999 to 3.5GW generation today against a need for 40 GW by 2020. This shows that immediate and dramatic action is needed to help the nation achieve its goals.
“What upstream activity is needed to support these goals? Nigeria needs to produce seven BCF of gas per day to meet these 2020 targets – the equivalent 14 of times the Utorogu gas plants. Today we produce less than 1 BCF to the domestic market from the largest gas reserves in Africa”.
The Deputy Director in charge of Gas Development at the Department of Petroleum Resources (DPR), Okpara Orjiakor, who represented the DPR Director, George Osahon, said that the International Oil Companies (IOCs) were deliberately undermining the PIB to make excessive profits and urged them not to go to the National Assembly to oppose the passage of the bill.
“It is not that what the Federal Government is asking for is too much; it is because the IOCs want to take too much. There is no way we will not make money from our gas. We are not the only gas nation. Other nations are producing gas and if you go to the internet, you will see their fiscal terms. It is not that gas is cheap. Nigerians are paying more to get gas. We are begging for gas, while we have abundant gas resources because the people that want a lot of profit are keeping our gas,” he said.
Orjiakor stated that there was no way the oil companies would be allowed to make the same profit from gas as they have been making from oil, adding however that the federal government would not say that companies should not make profit.
“You end up flaring gas and you are the same people talking about depletion of the Ozone layer and the health hazards arising from that. They are the same people that cannot do the same thing in their home countries,” he added.
Group Executive Director in charge of Gas and Power at the Nigerian National Petroleum Corporation (NNPC), Dr. David Ige, said the greatest challenge facing gas development in the country was the domination of the gas business by four or five IOCs, saying this dominance accounted for the current tension over the PIB.
He said about 90 per cent of the country’s gas reserve was concentrated in the hands of these IOCs.
According to him, such oligopolistic arrangement where oil majors, who were primarily centred around oil or export gas sit on the country’s gas reserves has created tension because the IOCs want the PIB to approach gas at the same level as oil.
He said the two products were different commodities, stressing that the PIB seeks to make gas equally competitive.
Ige defended the separation of the gas business from the oil business in the PIB, saying that globally, consuming nations are moving away from linking gas price to oil price.
“The task today is to delink the price of crude oil from the price of gas because there is a lot of distortion in the price of oil. So, when you use the price of oil to determine the price of gas, you will introduce a lot of inefficiencies,” he said.
Ige said the country’s projection for gas was the most aggressive projection anywhere in the world, adding that if the country achieves this projection by 2017/2018, the combined production of gas in Nigeria would translate to an equivalent of 1.5million barrels of oil equivalent per day.
He said if the country achieves four to five billion cubic feet per day domestic utilisation of gas by 2018, Nigeria would be at par with South Korea in terms of domestic gas consumption.
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