Gas still in development process – by Sebastian Obasi

No Comments » October 10th, 2013 posted by // Categories: Energy Development Project



Gas still in development process


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As Nigeria marks 53 years of independence today, one of the salient issues bordering the citizenry is the development of its gas resources. This is because despite the abundant gas reserve estimated at about 187 trillion cubic feet and a further undiscovered potential estimated at 600 trillion cubic feet, gas is not yet available to every household or industrial concern in the country.

In the last few years, the country has launched its Gas Master Plan, GMP, aimed at improving its gas supply from the current one billion cubic feet per day to about 10bcf/day by 2020. In spite of the master plan, Nigerians are yet to feel the impact of the policy. Thus eliciting the pertinent question, how has the country fared in its gas development since independence?

Prof. Joseph Ezigbo, managing director, Falcon Petroleum, a company that has handled many gas projects, said the federal government has achieved about 30 percent in its gas development plan since independence. He explained that there is still a lot to be done as gas business in Nigeria is at its infancy. “It is at an embryonic stage. But we need laws. We need policies to drive it. And those policies are not there. The PIB is a good starting point. The moment we provide a level playing field, within two years, it will move from 30 percent to 70 percent. The signs are there,” he said.

Ezigbo also said that the GMP is a good concept that needs to be strengthened with enabling law for it to function properly. “The gas master plan is a beautiful plan, but it also needs the PIB, to give it teeth. You know there is no need to have mouth and you give it meat to eat and there are no teeth to bite and chew it. If we create a beautiful gas master plan, we need the PIB and that would form the teeth to chew the master plan,” he said.

Potential not fully developed

Similarly, the Executive Secretary of the Major Oil Marketers Association of Nigeria, MOMAN, Mr. Obafemi Olawore, stated that Nigeria has not developed its gas potentials since independence, which accounts for low gas consumption in the country. “We have not developed at all. Consumption of gas in Nigeria is below 20 percent. Ghana, Benin and Togo are consuming more gas than Nigeria. It is a shame that in 2013 we still see our women carry firewood instead of gas. If gas is used more in households, the demand for kerosene will reduce,” he said. Olawore also said that in Ghana, Benin and Togo, many vehicles run on gas unlike in Nigeria where vehicles run on petrol.

Mr. Ola Alokolaro, a lawyer and consultant in oil and gas shares a similar opinion with Olawore. For him, the development of gas in Nigeria since independence is less than 10 percent. And to attract investors to the sub-sector, there has to be liberalized fiscal regimes. However, he said that when the production has reached a certain level, taxation comparable to international standards of gas producing nations can be introduced.

According to him, “You cannot start taxing in a comparable manner with established gas producing countries when there are no infrastructure yet. A lot more needs to be done to facilitate private sector-driven development. For a country that is known more of gas than oil, we cannot boast of many gas products,” he said.  Mr. Babatunde Ogun, President of Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, scored Nigeria low in its gas development.

“I will score the country low in this aspect because some of our industrial and manufacturing companies still rely on low pour fuel oil, LPFO, and Automated Gas Oil (AGO) for their production, while the country has not fully harnessed gas for energy generation. This can be fully taken care of if the government and the National Assembly can pass the Petroleum Industry Bill (PIB) into law because the issue of Domestic Gas (DomGas) is incorporated in the Bill,” he said.

Projects’ spread

Furthermore, the few gas projects embarked upon by the federal government is said to be lopsided to the exclusion of certain parts of the country. This has not gone down well with the perceived victims of the marginalization.

For example, a socio-cultural organization under the auspices of The Hilltop Club 1972, Lagos called for a total review of the gas infrastructure in the Nigeria, stating that there is a deliberate plan to de-industrialize and impoverish a section of the country.

The group through its president, Mike Chukwu, and Secretary, Boni Obieze, alleged that the federal government either by omission or commission tends to apply wrong fundamentals skewed against the South-east, and indeed the North-eastern parts of country in its gas master plan for the country.

The group said: “The implementation of the gas master plan dramatizes the deliberate attempt of both the planners and the implementers of gas infrastructure development in Nigeria to de-industrialize and impoverish the future of the Eastern zone of the country.

The group argued that the reason why there is hue and cry over the lack of gas infrastructure in the South-east is because investors and entrepreneurs naturally cling to the basic economic principles of citing industries as near as possible to the source of raw materials or fuel.

It added: “Whilst we have heard of a Calabar-Ajaokuta gas pipline for the past twelve years, the project has become the same story as the second Niger Bridge; a mirage, lip service and empty promises. When shall this stop! The pipeline was planned to run from Calabar through the Eastern axis to the North through Benue to Kaduna and Kano but it has now been abandoned as not being priority.

In its place, a pipeline is now planned to run through Oben to Ajaokuta to Abuja straight to Kano via Kaduna thereby denying the Eastern axis, Benue, Plateau and Nasarawa the development opportunities gas pipelines attracts.”

The group further said that if gas can be piped from Escravos to Egbin power station (405km), Ewekoro Cement (428km), Olorunsogo (435km), why can’t gas be piped to Oji River power plant (85km from Oguta gas), Nkalagu Cement (138km from Oguta gas), Onitsha (43km from Oguta gas, Nnewi ( 38km from Oguta gas?

It therefore called on President Goodluck Jonathan to redress what it termed an “anomaly” before it cripples the socio-economic capabilities of half of the country.

New gas plan

President Goodluck Jonathan had in March 2011, launched the Gas Master Plan which he said would result in about $25 billion worth of investments in gas processing, transmission and downstream utilization projects.

According to the President, “Today marks the beginning of what I believe will be an amazing journey of transformation of our own destiny and the restoration of Nigeria into the league of nations which have leveraged their strength in the abundance of natural gas, to transform the lives of present and future generations of Nigeria.”

Two years after unveiling the gas master plan, Nigerians have not experienced the expected benefits, thus bringing to the fore the much held notion that since the discovery of oil, the citizens are yet to maximize the benefits of the abundant gas in the country.  Since independence, Nigeria has focused more attention on oil than gas. For example, four refineries built in the country with a combined refining capacity of 445,000 barrels per day, were put in place to give oil a pride of place in the country.

There was virtually little or no effort to explore for gas in the country, as most gas reserves were discovered while exploring for oil despite the fact that Nigeria is been viewed as a gas province with significant oil accumulations.

Some gas projects

It was not until May 17, 1989 that Nigeria Liquefied Natural Gas Limited was incorporated to produce LNG and natural gas liquids (NGL). Incidentally, the export-oriented project has not met the aspirations of Nigerians to have gas available for their domestic and industrial uses.

The $3.8 billion NLNG facility in Bonny Island, Rivers state, which was completed in 1999, currently processes 23.5 million metric tons per year (mmt/y) of LNG. With six trains now operational, NLNG, which has NNPC, Shell, Total, and Eni as shareholders, says it has long-term supply contracts with buyers in Italy, Spain, Turkey, Portugal and France and also sells LNG on the spot market. NLNG can be considered a major success story by any standard because it is the fastest-growing LNG facility in the world and today accounts for 10 percent of world LNG production and currently contributes over 4 percent of Nigeria’s GDP.

There is also the first major gas project to gather and process associated natural gas in Nigeria, the Escravos Gas Plant-phase 1 (EGP-1), which came on stream in 1997, processes about 150 million cubic feet of gas each day and produces liquefied petroleum gas (LPG) for sale to the international market and pipeline quality gas for domestic use.

Adjacent to the EGP-1 is the Escravos Gas-to-liquid (GTL) project, which converts more than 325 million cubic feet of natural gas a day to GTL diesel and GTL naphtha. The $8.4bn GTL project is an integral part of chevron’s overall gas use strategy, which includes domestic natural gas sales, regional natural gas sales through the West Africa Gas Pipeline (WAGP), and international sales of GTL products.

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