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Now that oil has terminal cancer, what do you do about gas?



It is time to admit the inadmissible: Nigeria does not have a sustainable gas master plan, whatever the subject of pontification on it. Gas infrastructure policy? Not to worry about that. Who owns the gas? We will tell you. What about the available terms to extract the gas? We are on top of it. How about gas to power policy? We are working on it. Finally, how do you get the local market active and vibrant? Too much questions!

Currently, Nigeria ranks as the largest holder of proven gas reserves in Africa and the ninth largest holder in the world. Production in 2012 was at about 1.2 Tcf of dry natural gas, ranking it as the world’s 25th largest natural gas producer.

But the signs are getting more ominous. Liquefied Natural Gas, LNG, prices are tumbling down as oil price barrels down the tube. LNG benchmark is dropping. East Asia LNG benchmark is trading far under $11 per million British Thermal unit (price as at mid November). Infrastructure contracts on the other hand are being cancelled, the latest being the Petronas $32 billion Canada LNG project. Asian buyers are stalling on new spot contracts. Some countries, like the US, Nigeria export to, have stopped buying or have amassed huge reserves capable of rendering the countries export prospect irrelevant.

The US Energy Information Administration, EIA, for instance, say the country will have a reserve of over 33 trillion cubic feet by the year 2040. So who needs Nigeria’s gas?

The flip side of the question is how has Nigeria been reacting to the unfolding global gas trend? That surely will be interesting to know, at least these days ‘we the people’ hang on the words of our leaders.

Meanwhile global resource developers already see the future in natural gas and governments are seeking them out and putting in place every comfort to assist them come up with the best ways forward. They recognize the opportunities created by the falling LNG price-lower price for consumers and are frenetically putting in place structures, including legal structures to support local demand and consumption.

That demand already exists in the country. Of course, to admit otherwise would be to concede that many of the economic recipes beloved of Nigerian economists are on very shaky ground. If the demand is not there, why are the electricity companies choking because of gas to power their plants.

All the electricity companies are going through what I call identity crisis right now because they don’t have gas to fulfill their potentials, besides their other big challenges. You can rightly say the distribution and generating companies is ‘NEPA’ because their services haven’t changed a bit. Their concern is either about gas pricing or unavailability. Unavailability is again the result of gas infrastructure absence. Most infrastructure development remains on paper or are just mere talks.

Dealing with bottlenecks in the gas to power problems, if you wish, may be a limited weapon against electricity sector challenges. The companies still suffer from limited investment funds to carry out repairs on the broken sector; few have the courage to say they have dealt with their debt problems.

But they need the support to make the gas thing happen; cooperation among legislators, industry members and various other regulatory agencies, in other words, the need for cooperation rather than the demands of competing interests. This is imperative to successfully develop and maximize the benefits of this natural resource.

Here are the edicts of some economists on how to make this gas thing really happen:

-Speed renewal of leases still mired in the Petroleum Industry Bill web

-Identify the country’s vast gas reserves, ring fence them and encourage infrastructure development around them

-Write a commercial deal on two of the country’s biggest gas fields, do a deed on them and you have a gas market

-Co-opt the state governments who are now under severe revenue pressure to think gas

-And then do a legislation that will see greater private sector participation.

These first steps are far more likely to generate interest and admiration than the fat paper work called the gas master plan.

-Charles Ike-Okoh

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