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FG, stakeholders disagree on gas production contract

Stakeholders in the gas sub-sector have disagreed with the Federal Government over the pre-qualification of 13 investors to accelerate the development of gas production facilities in the country contrary to prequalification of 15 companies as core investors in Nigeria’s Gas Master Plan.

gas flaring

According to the terms of the contract, the 13 investors are to utilise associated gas for liquefied petroleum gas (LPG) production and to support the nation’s power generation aspiration. A statement issued recently by Public Relations Unit of the Ministry of Petroleum Resources, gave names of the participating companies to include, Colechurch, Global Energy Refining, Ibeto Group of Companies, Octopol, Petrolog Nigeria Limited, Process and Industrial Development Nigeria Ltd. (P&ID) and Tricity.

Others are: Turan oil – Seven Energy Consortium, Westcom, Gerfin and Remington.
However, stakeholders taking lead roles in the implementation of the gas master plan rejected the action of the government and described the pre-qualification of these 13 firms to collect gas directly from oil fields of multinational oil firms as a contradiction of objectives of the Gas Master Plan launched by the Federal Government in 2008. According to them, the award will discourage investors with programmes of investment in the construction of facilities needed to increase gas supply to the pipelines of the Nigerian Gas Company (NGC).

The flaw as described by the stakeholders will reduce the level of income generation by the NGC as custodian of all the gas pipelines in the country after privatisation by the Federal Government. They added that the collection of natural gas directly from the oil fields of International Oil companies (IOCs) will also discourage new investment in infrastructure required to improve transmission and distribution to market centres in the country.

“The inconsistency in policy framework will make it impossible for the Federal Government to convert abundant natural gas being flared by the IOCs into revenue generation assets for the nation,” they lamented.

In November 2008, the Ministry of Energy (Gas) had invited qualified companies to express an interest to pre-qualify as core investor for one of the three franchises offered by the government. This was followed with the selection of 15 companies out of 48 companies that applied to become core investors in August 2009.

Under these franchises, operators will, in a given area, establish a gas gathering network, build gas processing plants, build liquids storage facilities and deliver dry gas to the nearest transportation infrastructure. The three franchises are: South West Delta, South Central Delta and South East Delta. The Federal Government at that time concluded  that by 2010, each franchise will deliver 500 million cubic feet per day (MMcf/d) of dry sales gas. Evaluation of the candidate companies will be carried out in two stages. The first stage will evaluate the capacity to lead such complex projects and the ability to raise adequate finance. The second stage will feature diversification of sector players and rapid kick-off of a Nigerian gas-based industry.

The stakeholders noted that with the current approval granted 13 companies, it will be difficult for 15 companies appointed initially as core investors to recoup investment being made in building of storage facilities and deliver dry gas to the transmission pipelines of the NGC. This, they claimed will be difficult since most of them are going to use trucks to transport gas directly from the oil fields to the users and in particular, power stations that are largest consumers of natural gas in Nigeria.

According to the stakeholders, the contradiction will further worsen the nation’s road system when several trucks are added to the number of trucks currently engaged in the transportation of liquid fuels from the coastal depots to filling stations in the hinterland.
Dr. Rilwan Lukman, minister of Petroleum Resources in his reaction to the allegation described the proposal by the government as a major step designed at making natural gas available to industries regardless of the location. He said the appointment of the 13 companies is not a contradiction since most of them are smaller companies.

Lukman said: “The 13 companies pre-qualified will cover specific areas and supply the gas to specific locations to specific industries. They are to handle smaller gas projects which are short-term aspect of the long-term implementation of the Gas Master Plan”.
He added that investors in Gas Master Plan were pre-qualified to achieve the long-term objectives of ensuring that adequate gas infrastructure are available to double contribution of gas revenue to the nation’s annual revenue generation.

The aspirations of the Nigeria Gas Master Plan are to reposition Nigeria in the shortest possible time as a regional gas supply hub with concurrent presence in the domestic, regional and export market. To accomplish this, the Federal Government aims to create a fully liberalised market within five years which is underpinned by:

A robust, scalable and fully connected gas infrastructure that supports the three markets concurrently and cost-effectively – gas from any source can get to any market; transformation of the domestic market into a vibrant and fully commercial gas market where the gas price stimulates investment in supply and the sustainability of the market compliments the other regional and export LNG markets, enabling a balanced portfolio.One of the aspirations is also to attract a more widespread participation by new players so as to stimulate competition and efficiency.


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