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Gas: Operator urges FG to hands off sector

By Yemie Adeoye
THE gas sector in Nigeria may not experience development until the federal government’s presence in the sector is no longer present.

This was the position of the Managing Director, Oando Gas and Power, Mr Bolaji Osunsanya when he delivered a paper titled “Empowering Nigeria’s economy through gas projects: the priorities” at the just concluded Nigeria Oil and Gas (NOG) 2010 conference in Abuja.

According to him all existing and subsequent investments in gas projects must be driven by the private sector as this is consistent with ongoing reforms in the telecommunications industry with the attendant gain visible to all.

“Government must come up with a clear programme for privatising its existing footprint in the industry in the shortest possible time frame. Only then can we enjoy the benefit of efficiency and scale.”

The gas expert also used the opportunity to speak on Gas utilization in Nigeria and lamented its low utilisation in-country. “Utilisation remains very low with over 35 percent of produced gas flared and approximately another 20 percent re-injected into reservoirs for production optimization as at 2008. The remainder is channeled into various uses such as oil company operations, sales to downstream customers and liquefied to be exported as Liquefied Natural Gas (LNG).

It is evident from global statistics that there is a strong correlation between energy utilisation and economic growth.  Clearly there is significant headroom for Nigeria to leverage its gas resources for the much needed economic development and to broaden the multiplier effect of this resource in Nigeria”.

He noted that there is a growing gas influence in the country’s power sector and as such  fuel demand for power has predominantly been met by natural gas and hydro supplemented with a huge but un-quantified liquid fuel demand by auto-generators.  “Over the past 4 years, 3,224MW of new power generation capacity have been completed with funding committed for an additional 2,256MW.

Another 1,000MW of capacity is planned to be completed within the next two years by the NNPC-Joint Venture companies. It is noteworthy that majority of the newly conceived power plants are based on gas fuels.  Given that Nigeria has considerable supplies of gas, this is entirely logical and expected.

However, the demand for gas has steadily been on the increase over the past few decades. This is evident in the proliferation of LNG developments globally (source, and destination), and the scale of new trans-country-continental pipelines being developed across the world. Like other fossil fuels, gas has therefore become a major source of foreign exchange earnings, for nations that are endowed.

It is no longer news that Nigeria is considered to be more of a gas basin than an oil reservoir with probable gas reserves being significantly more than the oil reserves in energy equivalence terms.  Our reserve base places us as the seventh largest in the world with just under 200 Trillion cubic feet of proven reserves. Until recently, the oil & gas industry has focused on oil recovery and mostly accorded a nuisance-value to any gas discoveries.  For years, gas discovered in the search for oil was either flared at oil extraction sites or re-injected into reservoirs to maintain pressure.

In Nigeria, our LNG export is growing rapidly with 6 trains of the NLNG operational, and FID already taken on the 7th. In addition, both Brass LNG and Olokola LNG are under evaluation.

The regional interest via the West Africa Gas Pipeline Infrastructure is also advancing with its increasing demand over and beyond the initial commitment. Without a doubt, Nigeria can potentially earn as much from gas as it currently does from oil if the ongoing commercialisation is enhanced and sustained”.

Osunsanya further opined that next to Power, Natural Gas is the key driver to industrialisation, because on account of both its obvious cost advantage and environmental_friendliness, natural gas will continue to play a dominant role as it has unfolded historically in most developed economies. “Gas–based industries are known to locate where you have an abundant occurrence of gas and by so doing have a multiplier impact on the domestic economy.

In Nigeria, only a paltry 3% to 5% of our domestic gas consumption is directed at industrial activities other than power generation. Little wonder our industrial progress is stunted. There must be a conscious effort at encouraging gas-based industries (fertilisers, methanol, petrochemical), and other associated industries to achieve the scale of industrialisation that matches our growth aspirations.


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