As stakeholders call for payment of N1trn gas debt by January 2019
By Udeme Akpan
THE Nigerian Gas Association (NGA), has articulated new measures targeted at achieving the sustainable development of gas, power and related sectors of the nation’s economy.
The measures, which include the declaration of a state of emergency, development of intervention plan and liquidation of N1trillion gas debts were arrived at during the just concluded 11th annual International Conference and Exhibition of the NGA in Abuja last week.
In its communiqué sent to Vanguard over the weekend, NGA stated: “The conference noted that the gas-to-power value chain is currently neither viable nor sustainable. The nation is facing an energy crisis.
“The conference calls for the Federal Government to declare a power sector emergency in order to develop a holistic intervention plan to rescue the gas-to-power sector from collapse, and to put in place plans for the immediate liquidation of the over N1trillion debts within the gas-to-power value chain and assurances for payment of generation and gas invoices from 1st January 2019.”
It stated: “The illiquidity crisis in the power sector is exacerbated by added market imperfections which do not provide for adequate incentivisation of the entire value chain, including: a non-market reflective pricing framework; ineffectual securitisation and guarantees; infrastructure deficits; inadequate tariffing; and the current situation in the foreign exchange market which creates significant exposures, losses and value erosion for investors.
“The conference therefore calls on the FGN to urgently review the progress of the incomplete Nigerian Electricity Sector reform and take necessary steps to conclude the process and solve the pending issues. Emphasis was placed on decentralisation of the national grid and making way for catchment power generation across the nation.
“The conference noted that pricing and payment assurance are strong determinants for private sector operators and investors in gas projects, particularly for gas supply to power. The power sector represents the largest gas off-takers in the domestic market and as such, appropriate legislation and regulations should be put in place to set market-reflective tariffs that assure operators can recoup their investments.
“The conference notes the drive to attain parity of domestic gas price to export to encourage entrepreneur investments in the gas sector. However, consideration must be given to the fact that the gas supplied to NLNG, based on export pricing, is unprocessed gas, whereas the requirement for domestic gas supply is for processed gas which requires significant additional capital investment.
“The conference noted that the challenge of a shallow domestic financial market works against the local financing of the sector through high interest rates and shorter-tenured credit facilities and a mismatch of investment currency in US dollars and income in naira.”
It indicated: “The conference is in alignment with the Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu who reiterated the relevance of natural gas in economic development and industrialisation and noted that there is still a huge amount of work to be done in the Gas sector towards actualising the FGN’s aspirations.
“The minister stated that infrastructure development is key and informed the conference of the FGN’s plans to launch the Gas Infrastructure Rebirth which will open up tariffs and create policy positions that enable investment by the private sector in critical gas infrastructure, to progress our national aspirations for gas-based industrialisation.
“The conference calls on the FGN to maintain a concerted push towards monetisation of Nigeria’s gas resources, noting that Natural Gas is a key ingredient for the success of the FGN enunciated ERGP key priority areas of: 1. Achieving Agriculture and Food Security – Natural Gas resource abundance supports increase in fertilizer production 2. Attaining Energy Sufficiency in Power and Petroleum Products – Natural Gas fuelled power generation remains the lowest cost option for immediate and massive increase in national grid power generation as well as increased LPG production 3. Improving Transportation Infrastructure – Natural Gas vehicles will enable in the first instance mass transit and large fleet operations 4. Drive Industrialisation by focusing on SMEs – Natural Gas will provide the fuel and energy required for local manufacturing including Petrochemicals to grow, providing the necessary platform for Industrialisation.”
It quoted the International Gas and Union (IGU), as predicting that Nigeria would become a major gas destination in the world as the Nigeria LNG Limited takes the Final Investment Decision (FID), on train 7 project, targeted at increasing output from 22 million tonnes to 30 million tonnes per year.
It stated: “With the signing of the Final Investment Decision (FID) on NLNG TRAIN 7, the IGU sees Nigeria playing an increasing role in the global energy market. The IGU recommendation is for Nigeria to keep gas development as a key focus area for the economy and leverage its gas reserves for industrialisation.”
Also, Managing Director, Nigeria LNG Limited, Mr. Tony Attah, stated: ‘‘Gas is really a very big opportunity for Nigeria and Nigerians on the back of the multiple potential attraction of more investment value.”
I would like to call your attention to a you tube video a friend showed me recently titled – It’s not about the nail! “ Some critics argued it is not about the hammer either but I would like to align with Richard quest of CNN in his just a penny statement – It is not about how much resource you have; it is about what you do with it. That is why Nigeria LNG was incorporated in 1989 to harness Nigeria’s vast natural resources, eliminate gas flaring and to monetise Nigeria’s gas with a vision of being a global player…helping to build a better Nigeria.
“The company has since its first export in 1999 generated over $100 billion in revenues, paid over $15 billion in dividends to government and well over $6 billion in taxes to date. With the demand for cleaner energy, the time is now for NLNG to increase its output. Our Train 7 project which is currently going through FEED is set to deliver FID to increase capacity by 35per cent from the current 22mtpa to 30mtpa in the next four years. We have to utilise Nigeria’s resources to lift the economy going forward having ridden on the back of oil for the last 50 years, we are set to fly on the wings of gas into the future.”
However, NGA added: “The conference enjoined industry operators to invest heavily in training and capacity building of their indigenous Nigerian contractors to grow their capacity and maintain regular stakeholder engagements with their host communities to ensure the attendant outcomes of curbing vandalism and enhancing community development.”