Emerging Prospects in the Nigerian Gas Industry: The $51bn Target

By November 12, 2016 Investment News

Participants at the just concluded 13th Annual Conference and Exhibition of the Nigerian Gas Association (NGA) had a firsthand perspective of government’s intent to turn the gas sub-sector to Nigeria’s bread winner in the new future.

The annual conference and exhibition of the Nigerian Gas Association (NGA) may have come and gone, but the revelation made by the group managing director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Dr Maikanti Baru, that an investment opportunity of about $51 billion exist in the midstream and downstream gas sector to achieve the growth phase in the Industry in Nigeria remains the takeaway from the event.

Prior to that meeting, the minister of state for petroleum resources, Dr Ibe Kachikwu, while unveiling the new roadmap for the petroleum industry with the launch of “The 7 Big Wins,” disclosed that Nigeria is set to develop gas as a stand-alone sector, not consolidated with oil, as it has been in the last decades of oil exploration and production in the country.

As if trying to further confirm his stand on the proposed turn of events in the nation’s gas industry, the minister told the gathering of gas operatives and investors at the event that a new national policy on gas has been worked out to give gas the kind of attention it deserves.

Briefly after Kachikwu’s presentation, Baru took to the podium and told the audience that a $51 billion investment opening was lying idle in Nigeria’s gas sector. According to Baru, the midstream and downstream gas sector of the country are open for investment. He noted that the country’s desire to grow its gas industry were hinged on these two segments getting the right investments.

Also before this conference, President Muhammadu Buhari had, during the launch of “The 7 Big Wins,” stated that government plans to anchor the diversification of the economy on the bases of turning around the petroleum sector.

According to the president, “Oil and Gas still remains a critical enabler for the successful implementation of our budget as well as the source of funds for laying a strong foundation for a new and more diversified economy.”

Meanwhile, Kachikwu had disclosed that the government was about to release a new policy guideline on the sector. The conference offered the minister an opportunity to sell its plans for gas to operators and investors. This is even as it is hoped that the new policy will turn Nigeria into a gas-based nation – producing enough gas for domestic use even as the power sector continue to demand for the product in addition to the prospect of it being used as an instrument for the nation’s industrialisation as well as the expansion of the export market. According to the minister, the planned gas revolution would make the domestic market a priority, completely cut off gas flaring before 2020, and then monetise the gas business as an alternative to income for the country.

“Government has developed a draft national gas policy… the draft gas policy promotes a competitive business environment for both current and new investors, articulates our vision for the sector and sets policy goals, strategies, and an implementation plan for our medium to long-term targets for gas market development. Simply, our vision for the gas sector is to be an attractive gas-based industrial nation, giving primary attention to meeting local gas demand requirements, and developing a significant presence in international markets,” Kachikwu said.

He further disclosed that government would play a huge role in the sector’s evolution, providing the right conditions – regulatory, market and operational – to encourage the private sector as the investment drivers for gas.

The opportunities

Baru on his part, while speaking on the opportunities available to both operators and investors in the gas sub-sector, said, “In the whole, about $51 billion investment opportunities exist today in the midstream and downstream gas sector to achieve the growth phase in Nigeria.”

He then went ahead to do a breakdown thus: “About $35.4 billion investment will be required in the gas exploration and production activities, power plant projects, fertiliser plants, virtual pipelines and flare gas commercialisation initiatives. Other areas with about $16 billion investment include the Free Trade Zones (FTZ) infrastructure development and concessioning, port infrastructure, Central Gas Processing Facilities (CPF), gas transmission, Liquefied Petroleum Gas (LPG) plants, real estate development, pipe milling and local fabrication yards among others.”

Enabling factors

The NNPC boss identified some key enablers that would be required to achieve the envisaged growth in the gas sector to include the new gas policy which Kachikwu talked about.

His words, “It clearly defines the boundaries between upstream, midstream, and downstream sectors as well as opens good access for investment in midstream assets (processing facilities and transmission systems) which will also be governed by a network code where producers can process and transport their gas to the market across the country.”

Other factors he identified include an appropriate pricing structure, guarantees for payment, enabling fiscal regimes, host communities engagement and conducive environment.

“Beyond growing gas for the power sector, there has been a strategic positioning of the sector to support massive gas based industrialisation. The intent is to position Nigeria as the regional hub for gas-based industries such as fertiliser, methanol, petrochemicals, and central processing facilities,

“The first of this effort is the planned 30 square kilometre gas-based industrial park in Delta State. This will be Africa’s largest purpose built gas park supporting gas-based industries,” Baru stated.

He further explained: “As you can see we have a pragmatic roadmap for gas supply development growth to achieve our aspiration of growing current power generation capacity by at least a 3-fold increase within the next four years, position Nigeria as the African regional hub for gas-based industries and maintaining a 10 percent market share in global LNG trade with dominance in regional gas pipeline supplies.”

Source: <Nigeria Today>