Insights from an Enlightening Oil and Gas Summit
April 19th, 2023.
The recent Nigerian International Energy Summit (NIES) brought together industry experts and stakeholders to not only shed more light on the ambitious plans of the Decade of Gas, but to also present ways on how to set its course to ensure its realization. With Nigeria being endowed with vast gas reserves, the summit aimed to explore strategies to unlock this potential and propel the nation towards a more sustainable energy future.
The session, Ensuring the Realization of Nigeria’s Decade of Gas, featured a distinguished panel comprising four eminent members, each offering their unique perspectives on Nigeria’s journey towards harnessing abundant gas resources and enabling the market. The delve into the key highlights and discussions from the panel’s insightful discourse began with an echoed applause round the auditorium.
The first panel member was the General Manager of Integrated Gas Development) First E & P DEV.CO.LTD Ms. Yetunde Taiwo. She started by giving the audience her understanding of what the gas masterplan stands for. The decade of Gas is based on the original gas masterplan that was developed decades earlier. In her opinion, it is an update of the gas masterplan. It is the grand masterplan for the country as it probes more into the commercial part of it like the demand, supply, and pricing.
In this regard, establishing transparent pricing mechanisms that balance affordability for consumers and sustainability for market players would enhance domestication of gas market. At this point, it is important to note that the demand, supply, and pricing of gas in Nigeria are influenced by various factors, including government policies, market dynamics, infrastructure development, and investment climate.
Collaboration between the government, industry stakeholders, and investors is crucial to promote investments, facilitate partnerships, and ensure the successful commercialization of Nigeria’s gas resources. By leveraging these opportunities, Nigeria can boost its economy, enhance energy security, and contribute to sustainable development in the coming years.
Mr David Ige, the Managing Director of GASINVEST LIMITED began by stating that there is a similar story at the heart of these master plans from earlier years till now. But he took a few steps back to review a challenging fact that has stared us back in the face. The gas market establishes itself at an equilibrium of around 4.5 gigawatts of power and 1.2 BCF a day of supply. For years, we keep coming back to these numbers. So, it poses a question, how do we establish a new equilibrium?
Still on the previously established point made by Mrs Taiwo earlier, Mr. Ige asserted that the Decade of Gas plan create a pathway towards attaining commercialization of the domestic market and gaining liquidity before establishing a fully liberalized market. However, we are stuck on some factors. So instead of just talking about the plans, stakeholders should invest in specific interventions to create an enabling environment for the thriving of the business. For instance, regulation of pricing in the markets (market-led pricing), and stimulating liquidity as contracts cannot outperform the environment. So, to create an enabling environment for a prosperous domestic gas market, some factors must be put into consideration. Firstly, there must be a proper implementation of the network code.
In the gas business, network codes refer to sets of rules and regulations that govern the operation, management, and access to gas transmission and distribution networks. These codes aim to ensure the safe, efficient, and reliable operation of gas infrastructure while promoting fair and non-discriminatory access to the network for gas market participants. Some key network codes commonly used in the gas industry include;
Gas Transmission Code:
The gas transmission code sets out the rules and procedures for the operation, maintenance, and development of gas transmission networks. It covers technical requirements, capacity allocation mechanisms, network access procedures, balancing arrangements, and tariffs for the use of transmission infrastructure.
Gas Distribution Code:
The gas distribution code governs the operation and use of gas distribution networks. It establishes the rights and responsibilities of gas distributors and customers, including metering, connection procedures, safety standards, quality of service requirements, and tariff structures.
The balancing code establishes rules and procedures for the management of gas supply and demand imbalances within the network. It outlines the responsibilities of gas shippers and network operators to maintain system balance and manage deviations from contracted gas quantities.
Capacity Allocation Code:
The capacity allocation code governs the allocation of available capacity on gas networks, both for transmission and distribution. It sets out the rules and processes for capacity booking, nomination, and allocation, ensuring transparent and non-discriminatory access to network capacity.
The Decade of Gas is aspirational, but as the third panelist, Mr. Felix Ekundayo (MD of Asiko Energy) stated, monetizing and commercializing gas for Nigerians is at the forefront of the plan. Also, as the president of Nigeria’s LP Gas Association, he shared from the wealth of his personal experiences as a deputy project manager on the Qatari Gas Masterplan.
He reported that the Qatari masterplan moved the country from 5BCF per day to 35 BCF per day. They had more investments in implementation and it was long-term. They also worked to resolve issues that attracted investments and this domesticated the industry in their country. Right now, Qatar is established as a global leader in LPG and has adopted energy efficiency measures and the adoption of sustainable practices to reduce environmental impacts. The successful implementation of this have transformed the country’s energy landscape.
Nigeria's gas market can learn several valuable lessons from Qatar's experience in developing and commercializing its gas resources. Qatar has adopted a market-driven approach to gas pricing and contracts, allowing for flexibility and responsiveness to changing market conditions. Nigeria can benefit from introducing market-oriented pricing mechanisms, promoting transparency, and encouraging competition in the gas sector. This can attract investment, stimulate demand, and create a favorable business environment for gas market participants.
Qatar has also prioritized local content development and capacity building, ensuring that the local workforce and industries benefit from the gas sector’s growth. Nigeria can focus on developing a skilled workforce, promoting local participation in gas projects, and fostering the growth of indigenous gas-related industries. This supports job creation, economic diversification, and sustainable development.
Engr. Joseph Nwakwue (Partner, Zera Advisory & Consulting reiterated some of challenges the industry still faces despite being several years into the decade of gas. Nigerian is still energy poor and there is a growing need to domestic consumption. The panelist stressed the need for industrialization of the country, that is, Gas Based Industrialization. But how is that going to happen?
In the last fifteen years, the industry has seen an almost 50% underinvestment in the upstream. From an estimated 22 billion naira a year, the figure is down to 10-12 billion. This suggests that many investors are taking flight. One way to bring the industry from this hole is to use our oil and gas resources to drive change and extensive progress and have independent producers driving the decade of gas.
Underinvestment can result in missed opportunities to capitalize on potential reserves and emerging market trends. In a dynamic industry like oil and gas, failure to invest in new exploration and production projects can impede a country’s ability to seize market opportunities, adapt to changing energy demands, and remain competitive globally. Competitors who invest more aggressively may gain advantages in terms of market share, technological expertise, and cost-efficiency. To mitigate the impact of underinvestment in the upstream sector, governments, industry stakeholders, and investors should collaborate to create a favorable investment climate, incentivize exploration and development activities, foster technological innovation, and ensure a stable and predictable regulatory framework.
Throughout the panel discussion, several cross-cutting themes emerged. Collaboration among stakeholders was deemed crucial to drive Nigeria’s gas agenda forward. The panel members agreed on the need to align with global energy transition goals and to embrace cleaner technologies and practices. They called for government support in formulating and implementing robust policies that create an enabling environment for gas exploration, production, and utilization. On a concluding note, continual efforts to enhance gas infrastructure, promote domestic utilization, attract investments, and ensure favourable pricing mechanisms are crucial for the sustainable growth of Nigeria’s gas sector. Nigeria’s decade of gas also presents significant commercial opportunities that can propel economic growth and diversification. To fully exploit the commercial opportunities presented by Nigeria’s decade of gas, a conducive business environment, stable regulatory framework, and transparent governance are essential.
In the words of the Moderator, Mr Agunbiade Oluwole (Executive Director of Jijowo Publishers), the Decade of Gas must move from being an ambitious slogan to executed actions.
Food for Thought: Are we on the right track? Please leave your comments below.