By Fred Ojiegbe
When the federal government approved the Nigerian Gas Master Plan on February 13, 2008, it was expected to position the country as a major international player in the international gas market. The plan was also designed to stimulate the multiplier effect of gas in the domestic economy, position Nigeria competitively in high value export markets and guarantee long term energy security in the country.
But 11 years down the lane, the planned gas to power revolution from the master plan is yet to take off despite the huge investments made in gas production by successive governments. The 13-year delay in approving the contract for construction of the Ajaokuta-Kaduna-Kano (AKK) pipeline showed liquidity constraints on the part of government.
Even Ibe Kachikwu, minister of petroleum resources, acknowledged that the contract delayed for 13 years as a result of scarce resources for government to fully finance the project. The acknowledgment by the minister clearly showed that for the much desired gas to power revolution to happen, the federal government, through the Nigerian National Petroleum Corporation (NNPC), and private investors must develop critical infrastructure in the sector.
The government needs to invest in key pipeline infrastructure and upstream gas developments that would enable gas delivery to the power plants across the country. More projects like the Ajaokuta-Kaduna-Kano (AKK) gas pipeline need to be undertaken by the government, but having resources to replicate such models would be a challenge to the government.
As it stands, for government to achieve the gas revolution, it needs to partner with investors that have the capacity and willingness to develop gas infrastructures. This partnership would create a new funding system that will resolve the NNPC’s funding challenges. It would also increase gas production by optimizing existing operations, as well as accelerating the completion of new gas development projects.
Apart from forming partnership with investors, government as a matter of urgency must attract new investment to further develop infrastructure along the gas value chain. That is the only way to create a more robust pipeline network that would improve reliability and security of supply. The reliability of the existing power transmission also needs improvement.
This is one area that the government needs to focus attention on. For instance, the Escravos-Lagos Pipeline System, ELPS, that supplies gas from Niger Delta to Lagos and its environs is always at the mercy of vandals. The constant attack on the ELPS usually impact negatively on the gas off takers from the pipeline like Egbin Power Plant, Ihovbor Power Plant, Sapele Power Plant among others.
As a result, the generation capacities of these power plants have been limited due to gas shortage. Kola Adesina, chairman, Egbin Power Plc, acknowledged that gas supply is one of the major problems facing the company. Speaking at the Power Sector Roundtable organized by Sahara Power Group Limited in Lagos, Adesina, said: “Whereas, you find an organization like Egbin, which is willing to succeed and give more to the system, but being faced with transmission and gas supply problems. In such situation, can there be a break-even point for a power plant like Egbin?
“I have said this repeatedly; it is those fundamentals that make business economically feasible and bankable to make it financially liquid enough for every form of investment to break even, and we are not there. When we invested in the business, it was at an exchange rate of N157 to a dollar, but down the lane, the exchange rate has doubled. But the tariff did not shift for two years.”
Understandably, lack of investment on the part of government has prevented some gas producers from investing in the sector. As a result of this, gas production in the country has failed to kick-start the gas revolution. Some industry experts believed that government’s interference in pricing regime for gas-to-power is responsible for some of Nigeria’s gas pipeline vandalism issues. They believed that gas production companies are incentivized to vandalize their pipelines to the power sector in order to increase the gas volumes they sell to their industrial consumers who pay almost three times more per unit volume of gas.
But the federal government had in October 2018 said it would invest the gas production. The government is targeting about 3.4 billion standard cubic feet of gas per day to bridge the medium-term supply gap by 2020. Speaking at the 2018 Graduation of Petroleum Training Institute (PTI), Effurun, Delta State, Kachikwu said the federal government had decided to invest in the Seven Critical Gas Development Projects to achieve the feat in 2020.
He said that the government had commenced utilization and monetization of the abundant gas resources of the country. “The federal government has doubled her efforts in providing effective policies that will drive gas utilization and commercialization. We have decided to invest in the Seven Critical Gas Development Projects in Nigeria. These projects will deliver about 3.4 billion standard cubic feet of gas per day to bridge the medium-term supply gap by 2020,” he said.