Significant investments are required in the midstream and downstream sectors to unleash the immense potential of gas in Nigeria.

Antigha EKALUO Deputy Director - Gas Monitoring and Regulation Department of Petroleum Resources

in figures

Nigeria's gas reserves:5.32 tcm

Average daily production:234 mcm

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August 22, 2016

TOGY talks to Antigha Ekaluo, the deputy director in charge of the gas monitoring and regulation division of the Department of Petroleum Resources (DPR) –­ the Nigerian oil and gas regulatory agency – about the challenges in developing Nigeria’s gas pipeline network, the impact of natural gas pricing on gas development, the factors preventing adequate gas supply for power generation and the issue of gas flaring in Nigeria.

What are the main challenges you see in the supply of gas or boosting gas investments in Nigeria?
Gas development in Nigeria has yet to reach its optimum level. We are still developing as a nation. Although Nigeria is blessed with abundant gas resources, with proven gas reserves at a significant 188 tcf [5.32 tcm] as of January 1, 2015, the state of gas development, supply and utilisation in Nigeria still requires more attention for improvements.
Of the average daily production of 8.25 bcf [234 mcm] per day, about 40% goes into the export market, 11% is still being flared while a paltry 16% is supplied to the domestic market and the balance is used up in the course of oil and gas production. The major gas suppliers are the export-oriented international oil and gas companies that supply Nigerian LNG. We are also beginning to see growing indigenous suppliers who are pushing volumes into the domestic market. The likes of NPDC, Seplat and Seven Energy are notable examples in this respect.
We face a lot of challenges, but we are on top of the situation with a view to providing the needed solutions. From the perspective of the regulator, we know that the dearth of infrastructure and funding constraints for gas projects are the key challenges facing us as a nation. Of course, significant investments are required in the midstream and downstream sectors to unleash the immense potential of gas in Nigeria. This includes investments in pipelines, central processing facilities and gas-based industries, which use this gas as either fuel or feedstock down the value chain where offtakers such as independent power plants also operate.

Will changes to the legal framework improve the gas transportation network?
Definitely. Not only that, structural and fiscal reforms for gas investments are also necessary. The upcoming review of the National Gas Policy will bring about structural and fiscal reforms that will address the challenges associated with Nigeria’s gas development.
Similarly, the Nigerian Gas Transportation Network Code [NGTNC] being championed by the DPR in conjunction with the NNPC, will be a game changer, providing the platform on which a competitive Nigerian gas industry will evolve. The network code will provide the enabling environment for gas transportation services to meet market requirements on a non-discriminatory basis, with common sets of rules to ensure open access and fair competition. In fact, we have come up with the modalities for its implementation, and we have also laid down what the structure of the NGTNC should be.

 

Many gas producers are asking for the price of gas to be raised. Is there a way to find a middle ground or to put a policy in place to raise the prices to incentivise offtakers?
Ideally, the gas pricing regime should be driven on a willing seller, willing buyer basis as in other, fully developed gas markets. However, we have yet to attain that status. For national strategic reasons, the government is implementing a transitional pricing regime for gas. The government is maintaining floor prices for the three gas subsectors as follows: gas to power (USD 2.50 per 1,000 cubic feet [USD 0.09 per cubic metre]), gas-based industries (USD 0.90-3.00 per 1,000 cubic feet [USD 0.03-0.11 per cubic metre]); and then the prices for the commercial offtakers are negotiated with their suppliers. The overall intent here is to achieve minimum base stock gas volumes in the domestic market to trigger the willing buyer, willing seller scenario that will hopefully incentivise both the suppliers and offtakers alike.

What is the root of gas supply problems for power plants?
There are many scenarios playing out here, including issues revolving around pricing, as I have just mentioned, and problems relating to the readiness of the IPPs to offtake gas. The power plants have to be ready in terms of infrastructure, specifically turbines, to take the gas. The IPP facilities have to be functionally and technically ready to accept the feed gas at the right specification before supply is affected.
Some of them are not ready or are only partially commissioned. In some other cases, gas is available but there is not pipeline access to where it is needed. You will even see a case where the gas supply project has been completed, but the IPP construction has slipped or critical parts that require long lead times for delivery did not arrive during project commissioning.
The availability of nearby, existing pipelines is also important to enhance feasible tie-ins for gas supply. The wave of insecurity and attacks on critical gas infrastructure in the Niger Delta region also negatively impacts our gas supply capabilities. In essence, the problems of gas supply to the power plants are multifarious, and therefore require a holistic approach to solve them in a sustainable manner.

Can you disincentivise gas flaring by operating companies by raising the fines for flaring?
As we speak, the provisions of existing regulations are not adequate for the imposition of penalties or fines for gas flaring. The DPR has made some recommendations over the years for increased penalties for gas flaring. Raising the fines for gas flaring may not necessary achieve the desired result of disincentivising gas flaring.
Given the current economic realities in the country and evolving competitive gas markets in other climes, the government is currently employing a carrot-and-stick approach to stop gas flaring. This approach is already yielding results, and we have seen a significant reduction in gas flaring, from 75% before 1990 to 11% in 2015. With this approach, we are hopeful to achieve our zero-routine-flaring targets by the year 2020. Also, with the emerging technologies on gas flare prevention and utilisation, the government is exploring other feasible options that could be employed in the industry.

What steps are needed to eliminate gas flaring?
We believe that the best steps to take to eliminate gas flaring include ensuring that the numerous gas flare prevention projects by the IOCs are implemented. This will be enhanced by adequate provision of the key enablers, such as funding for gas projects. Secondly, there is the need to create third-party access to gas at flare points and locations. In this regard, the DPR has put together relevant guidelines for prospective operators. Thirdly, the DPR is also encouraging the use of modular technologies such as floating LNG, mini-GTLs, virtual pipelines or gas trucking solutions to gather and monetise associated gas from oil developments at remote locations.

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