Engr. Justice O. Derefaka is the Technical Adviser on Gas Business & Policy Implementation to the Hon. Minister of State for Petroleum Resources. He is currently the Program Manager –AutoGas, National Gas Expansion Program (NGEP), and Program Manager Nigerian Gas Flare Commercialization
Program (NGFCP) all in the office of the Honourable Minister of State for Petroleum Resources. In this interview with our Associate Editor, Eddy Ochigbo, Engr. Derefaka bares his mind on the policies of the ministry and how his principal, the Hon. Minister is piloting the implementation of life touching programmes. Excerpts:
The Federal Government declared 2020 as “The Year of Gas” and promise to prioritize the development of gas resources and keen on promoting gas with the flagship National Gas Expansion Program (NGEP), what’s with this new scheme?
Recall the National Gas Policy approved by the Federal Government in 2017 foresees Nigeria as an attractive gas-based industrial nation, centred on satisfying local gas demand requirements, and developing a significant presence in international markets. The Policy seeks to define and set the framework necessary to move Nigeria from being a crude oil export-based economy to becoming an attractive, oil and gas-based industrial economy.
So, the FG through the Ministry of Petroleum Resources (MPR) is profoundly, working on the policy goals, strategies and an implementation plan for establishing a framework that will drive the institutional, legal, regulatory and commercial reforms necessary for attracting investment into the gas sector and this is with a view to achieving what our abundant gas resources could offer as a strong option for Nigeria’s economy and attracting the right kind of investment and opening the economy for gas related business.
You will recall that as part of the Federal Government strategy to reposition the oil and gas industry, the Ministry of Petroleum Resources (“MPR”) commenced the implementation of carefully conceived initiatives to foster efficiency and attract investments along the gas value chain as embedded in FG’s policy aspirations for the Gas sector and encapsulated in the National Gas Policy (The Gas Policy 2017) and indeed aligning with the Ministry’s 2019-2023 nine (9) priority project deliverables vis-à-vis clusters for gas resource, rapid growth of the LPG/CNG/LNG market; development of supporting infrastructure, investment, and domestic growth. It also includes the promotion of natural gas usage in Nigeria thereby creating alternative fuel choices for Nigerians. It is expected that this will stimulate economic growth, further improve our energy mix, drive investments, and provide jobs in Nigeria. The policy on Autogas (permit to call them AutoLPG, AutoCNG and AutoLNG) is encapsulated in the National Gas Policy approved by the Federal Executive council in June 2017.
Note also that Nigeria currently holds circa 203 Trillion Cubic Feet (TCF) in proven gas reserves, ranking among the top ten in the world. Despite our huge reserves, current per capita consumption of gas in Nigeria is one of the lowest within the sub-region.
The current policy of Government is to promote the utilization of Natural Gas in Nigeria. It is expected that Natural Gas will provide the much-needed alternative to Premium Motor Spirit (PMS or Petrol) and firewood.
And the Honourable Minister of State for Petroleum Resources – H.E Chief Timipre Sylva is bent on ensuring this come to fruition with the declaration of year 2020 as “The Year of Gas”. Building on that, the Honorable Minister of State for Petroleum Resources (HMoSPR), His Excellency Chief Timipre Marlin Sylva in January, 2020 inaugurated the FG’s flagship programme tagged The National Gas Expansion Programme (“NGEP”) as the mechanism to boost domestic utilization of Natural Gas in Nigeria in the short and medium-term.
National Gas Expansion Programme (NGEP) is a program put in place by the Honourable Minister in furtherance of the domestic gas expansion programme of the current administration. It is designed to reinforce and expand domestic gas supply and stimulate demand in the country through the effective and efficient mobilization and utilisation of all available assets, resources, and infrastructure in the country.
Some of the terms of reference of the NGEP is to establish a comprehensive data bank of all gas relevant assets, infrastructure and facilities both public and private in the country, identify the volumes of un-committed gas in the country and their locations (public and private) which could be used towards achieving the objectives of the program, recommend policy and legislative instruments that will aid in the deepening of in-country production of all gas accessories across the country. And, the deliverables of the program include, development of a strong domestic gas-based economy by leveraging on the nation’s abundant gas potentials, promoting gas as replacement fuel which will also save the nation the much-needed forex expended on imported fuels and provide alternatives to PMS, AGO and DPK for Nigerians.
The framework objectives of the NGEP also include ensuring that infrastructure is in place to allow continuous availability of LPG (Liquefied Petroleum Gas); make LPG affordable to both urban and rural users, position LPG as an alternative for the eventual replacement of firewood and kerosene as domestic cooking fuel, reduce deforestation, curb desertification, reduce health risks and other environmental issues, as well as ensure safety of use.
Let me mention also that we have measurable impacts. So, in terms of impact, the NGEP will create over 12 million direct and indirect jobs with circa 2million jobs annually and human capacity development nationwide.
Some of the key programmes of the NGEP will include Autogas development for automobiles and other prime movers, domestic LPG penetration, Gas Based Industries (GBI) revitalization, in-country gas accessories manufacturing and ease of doing business in the gas sector.
And I think we have done very well in accomplishing these. For instance, the committee has identified Autogas development as a key deliverable of the NGEP. Consequently, plans have reached advanced stage in line with the ministerial directive and support for the development of LPG, CNG and LNG co-location in NNPC owned and operated mega stations in the 36 states and Abuja.
Under this arrangement retail outlets will offer a full complement of gas products as transportation fuels in addition to existing white products as cheaper, cleaner and more environmentally friendly alternatives. The NNPC and mega retail outlets owners and equipment providers are fully onboard in this objective, and measures are in place to achieve a roll-out of this program by end of this month, November 2020 using select NNPC owned outlets as pilots as well as other third party filling stations.
The committee is also engaging large fleet owners, Nigerian Governors Forum, ALGON, conversion companies and dispensing facility owners to collaborate in the conversion and establishment of refueling facilities nationwide leveraging on already existing pipelines and mother stations with a view to easing the cost burden of conversion which is a major impediment to auto gas development.
To bridge the gas facility deficit, companies engaged in virtual gas movement have been mobilized as well to ensure the development of a virtual gas grid that can serve the emerging domestic gas market. Several of these companies have expressed ability and preparedness to meet the roll out timeline.
Earlier this year, the Federal Government announced plans to promote gas (CNG, LPG, LNG) as replacement for petrol and diesel in automobiles by collocating Autogas dispensing facilities at retail outlets. Where are we on the official rollout of this program?
FG’s decision to deregulate the downstream petroleum industry was announced in March 19, 2020; complete deregulation of the downstream sector is an enabler for private sector investment. Government lost billions of Naira every day to subsidy payment which could have been used in improving the well-being of ordinary Nigerians and rebuilding the economy to generate more employment. So, we expect to save as much as one trillion naira ($2.6 billion) a year after the abolition of subsidies. Fuel subsidies have over the years undermine private and public investment in the downstream sector.
So back to your question on NGEP roll-out. We are on course with the roll-out of the NGEP. Recall the Hon. Minister stated that the FG is rolling out the National Gas Expansion Programme (NGEP) on November 30 to promote the use of gas in place of premium motor spirit (PMS).
The Hon. Minister also mentioned that vehicles in the Presidential Fleet and those of members of the Executive Council of the Federation would be converted to use gas as fuel.
The Hon. Minister has also promised to engage members of the National Assembly to convert their official cars to run on gas. And once we roll-out the initiative, positively, with the example we will show, we will persuade Nigerians to see gas as the preferred and reliable fuel in Nigeria. And we can cite the example of companies like Dangote Group and NIPCo that have already converted their trucks to run successfully on gas. And we have on record that the use of gas as fuel has reduced these companies’ operational cost by about 50 per cent, in terms of fueling cost.
To give fillip to the program and demonstrate the government was serious with its declaration of 2020 as “the year of gas”, the HMSPR directed CEOs and their lieutenants in agencies under the Ministry of Petroleum Resources to convert all their official vehicles to run on Autogas. How important is this directive and what is the compliance level so far?
The Honorable Minister of State for Petroleum Resources (HMoSPR), His Excellency Chief Timipre Marlin Sylva is walking the talk and showing leadership by example as his official vehicles have been converted to use gas as fuel. And for me that deserves commendation.
In terms of compliance by CEOs and their lieutenants under the Ministry of Petroleum Resources to convert all their official vehicles to run on Autogas, we are taking the conversion process in phases and this is to ensure safety, integrity as well as quality control and assurance. So as at today all the agencies have commenced the process with the PPPRA completing the conversion of their official vehicles to run in dual fuel.
I’d like to mention also that some of us in the Hon. Minister’s team have converted our generators to run on gas as well.
Note also that Autogas vehicles can operate in dual-fuel mode with switches for alternating between fuels
So, like you rightly said, to make 2020 count as Nigeria’s “Year of Gas”, the NGEP is to reinforce and expand gas supply as well as stimulate demand in the country through the effective and efficient mobilization and utilization of all available assets.
On the implications to the overall economy, it helps with the diversification of the nation’s fuel portfolio & greater use of domestically produced energy resources strengthens national security, creates jobs, and contributes to the economy. Hardly any discharge of carbon monoxide, and compared to petrol and diesel, the exhaust fumes contain less harmful substances. Gas engines run smoother & there is no change in the noise or vibration of the car.
Summing up, The Autogas Scheme will generate millions of Direct and Indirect Jobs and will lead to Economic Growth and Development
Domestic gas shortage is a major issue that may undermine the government’s plan to roll out the Autogas program. For instance, the domestic gas market is currently experiencing severe shortages for power plants, industries and household cooking, a problem that is forecast to last a few more years. How is the government going to deal with this problem?
We do not envisage any shortage with the domestic gas supply that will stand as a major issue to undermine the government’s plan to roll out the Autogas program. Remember Autogas is predominantly propane which NLNG exports.
The National Gas Expansion Programme (NGEP) is designed to address such shortfall, i.e. to reinforce and expand domestic gas supply and stimulate demand in the country through the effective and efficient mobilization and utilisation of all available assets, resources, and infrastructure in the country.
In terms of domestic LPG penetration, the NGEP committee is taking measures to expand domestic LPG availability through the engagement of NLNG for additional 250,000MT currently exported for the domestic market. And the Nigeria Liquefied Natural Gas (NLNG) Limited has approached its board to get a mandate to increase NLNG’s contribution to 450, 000MT from next year, with such commitment to increase its allocation of Liquefied Petroleum Gas (LPG) to the domestic market from 350, 000MT to 450, 000MT by 2021, we see this as a very encouraging contribution from NLNG. Nigeria LNG Limited (NLNG) has also underpinned the Domestic Liquefied Petroleum Gas (LPG) market with a new LPG vessel which will boost volume and availability, as well as consolidate the company’s contributions to deepen the domestic LPG industry and increase consumption of the clean gas. And for Government, we see NLNG’s gesture aimed at supporting the Federal Government’s plan to deepen LPG (cooking gas) penetration in Nigeria.
But we need more from NLNG and the oil Majors (i.e. the IOCs). We need the Oil Majors to comply with their domestic supply obligation (DSO) as well as reduce their export (including NLNG) across board significantly for the domestic market with a view to supporting the FG’s drive for LPG penetration.
We know the issues with the IOCs is guarantee of payment as well as pricing. All of these are being addressed with the Hon Minister’s effort at stabilizing gas pricing with the inauguration of the Committee on Gas Sector-Wide Review of the Domestic Gas Pricing Framework.
We are also looking at the promotion of development of additional production platforms in the Delta-Edo axis by the NPDC/SEPLAT/ASTAYAVIYAK.
The resuscitation of the Warri refinery LPG production facility and 7 kilometres pipeline; The additional volumes will ensure uninterrupted supply of LPG based on anticipated increase following our demand trigger initiatives.
Additionally, the Assa North-Ohaji South project (ANOH) is billed to produce 600million standard cubic feet of gas per day, an equivalent of approximately 2.4gigawatts of electricity for the country. This is part of the FG concerted efforts to ramp up gas-to-industries and gas-to-power in the country,
Let me also mention the forthcoming accomplishment of the pioneering Obiafu-Obrikom-Oben “OB3” gas pipeline project which would facilitate commercialize over 2billion cubic feet of gas per day and generate billions in revenue as well as create thousands of employment opportunities for Nigerians.
So you can see that the FG through NNPC as an enabler organization has since realized the obvious economic importance of gas and is consistently making determined exertions towards delivering the right infrastructure and commercial structures with a view to deliver value to Nigerians.
COVID-19 has no doubt slowed the global oil industry. What are some of the nine key priority projects/targets of the HMoSPR/government that the pandemic coupled with decline in oil price have affected?
Indeed, the COVID-19 pandemic has affected the industry, but it has not derailed our pursuit of the key priority projects/targets of the HMoSPR. As realized by many, COVID-19 is a medical crisis & not a financial one. At the same time, we do not know if there will be another wave down the road from the look of things
I think the ultimate impact of the pandemic is still uncertain and will depend heavily on whether or not an effective vaccine can be developed. Government is intervening more actively to control businesses and the public.
The use of new technologies to adapt to life under and after lockdown is surging.
Don’t forget the oil and gas industry is super risk-averse but we also need to prepare for the changing world that lies ahead & map out a strategic direction to thrive post-COVID-19 crisis. I also believe that post COVID-19 will Demand New Thinking on Local Content Practice in the oil and gas space.
So, we are adopting a “Rethink approach”
As an industry, we are focusing on reengineering our supply chains for the new world order in which we now must do business. The industry is no stranger to supply & demand shocks, having faced more than a dozen such jolts over the course of the past four decades.
So clearly, as they say, challenging times call for intelligent measures – both traditional & non-traditional. Remember the oil and gas industry has dug itself out of many shocks & proven naysayers wrong in the past. It is now faced with concurrent disruption at an existential, system-wide and best-in-class player level – risks that will truly test its tenacity & durability. Making difficult but informed decisions & following a strategic roadmap, is helping the oil and gas industry through the Nine (9) Priority focused Project deliverables in the oil and gas sector as mandated by Mr. President.
Overall, to alleviate the impact of COVID-19, FG set up an Economic Sustainability Committee to, among others, assess systemic vulnerabilities and develop programs that would make the expected recession short-lived and ensure sustainable long-term growth, so, It is NOT all gloom & doom as there is no indication that growth will not return as Nigeria will still need oil and natural gas to sustain development and drive prosperity.
The Nigerian Gas Flare Commercialisation Programme (NGFCP) which you have been heavily involved, reaffirms government commitment to ending gas flaring from our oil fields and commitment to a national flare-out target by year 2020. What is the current state of the NGFCP?
The Nigerian Gas Flare Commercialisation Programme (NGFCP) is still on course and being implemented by the DPR.
As you know, the NGFCP is a unique & historic opportunity to attract major investment in economically viable gas flare capture projects whilst permanently addressing a 60 year environmental problem in Nigeria. We are currently in bid evaluation stage towards implementing the commercialization of Gas flares; Potential annual revenues/GDP Impact around ~ US $ 1 billion/annum. NGFCP could generate approximately 300,000 direct and indirect jobs. The NGFCP has the potential of generating circa 600,000 MT of LPG per year could be unlocked…giving 6 Million households access to clean energy through LPG.
Gas Business and Policy Implementation portfolio in the office of the Hon. Minister of state is strategic. As Technical Adviser, what are your challenges and achievements so far?
My role as Technical Adviser (TA) – Gas Business & Policy Implementation is to assist the Honorable Minister of State, Petroleum Resources in driving the National Gas Policy Implementation built on the policy goals of the Federal Government for the gas sector.
I think we have done well and also would want to say, we have put a whole lot of machinery in place even as we march forward with implementation.
The Hon Minister has assured Nigerians that the FG will leverage on Nigeria’s gas resources to rapidly accelerate the nation’s industrial growth. The vision of the gas policy is for gas-based industrialization of Nigeria, also to ensure that gas development is undertaken in accordance with Nigeria’s socio-economic development priorities. Essentially, the aspirants of the policy are aggressively being implemented i.e:
(a) Provide an enabling environment for increased private sector participation in the gas sector
(b) Clarify the rules grinding investment in the gas sector
(c) Diversify the gas supply options within Nigeria to ensure security of supply
(d) Extend gas penetration in the domestic market to facilitate the growth of the electric power, agricultural and industrial sectors
(e) Gain a presence for Nigerian gas in international markets
(f) Introduce higher health, safety and environment standard.
(g) End gas flaring through the NGFCP being implemented by the DPR and address environment issues and seek values addition in downstream high markets.
You also need to know that to realize the full benefits of gas as a catalyst for economic growth & diversification, several challenges across the entire gas value chain need to be resolved.
I will focus on only four (4) of these challenges related to the development & production of gas i.e. infrastructural deficit; gas pricing; fiscals, legacy debts & the challenging business environment.
Addressing these elements will help in attracting the required private investments which would strengthen existing off-takers & ultimately lead to emergence of new buyers & suppliers
Suggestions have been made for the gas sector to transit into a liberalized market based on the ‘willing buyer, willing seller’ principle & ensure the existence of a competitive fiscal regime to support upstream gas development.
The commercial & financial structures of the gas-to-power commercial value chain remain weak with growing arrears & uncertainty in the payment system which disincentivizes gas investors.
A conducive business environment is essential towards achieving a diversified economy. legislative framework in line with global standards (dispute resolution, contract sanctity) would promote investor confidence & significantly improve Nigeria’s ease of doing business towards growing & diversifying the economy.
To address the above issues, as a Government, we are implementing the policy objective for the midstream i.e. to attract as much investment as possible through: Liberalized entry into the midstream, Support for virtual Pipelines, Incentives for investment in infrastructure. Demarcation of upstream vs midstream, Unbundling/Legal separation, Each activity ring-fenced for tax & non – tax purposes, Open access/Network code, Anti-trust regulation, Cost benchmarking & Utility regulation for infrastructure and need to revise the Gas Infrastructure Blueprint to take account of new realities.
FG’s declaration of 2020 as Year of Gas is now being pursued through the National Gas Expansion Programme to deepen Gas penetration and avail Nigerians options for alternative fuels and cleaner environment.
Having started on a positive note, we are converting the massive amount of gas being flared at the moment to energy for Nigerians at affordable rates with the commencement of the Nigeria Gas Flare Commercialization Program (NGFCP); therefore a significant network of additional gas pipelines is a priority, hence the flag off of the construction of the Ajaokuta-Kaduna-Kano (AKK) gas pipeline is the first important step in this direction and Go-Live of the National Gas Transportation Code; The Marginal Field Bid Round which will bring in additional gas molecules; we believe that premised on increased gas production, stable and predictable gas pricing framework, Nigeria would be able to attract further investment into the sector and our effort at stabilizing gas pricing with the inauguration of the Committee on Gas Sector-Wide Review of the Domestic Gas Pricing Framework is commendable plus the National Gas Expansion Programme (NGEP) to deepen Gas penetration and avail Nigerians options for alternative fuels and cleaner environment etc.
No doubt gas is the future of our country with its huge deposit. All hands must be on deck to sustain all endeavour to safeguard it. We have enough gas to drive development and for export
Thus, considering the many feats we have accomplished as a Nation in the gas space within the year under review and undeniably making the year of gas count, more work still needs to be done within the gas sub-sector, and gas being central to nearly every major challenge and opportunity the Nation faces today – be it for jobs, security, climate change, food production or increasing incomes; utilization of our natural resources is indispensable. For instance, what we are doing within the infrastructure space (a foundational challenge) is significant and it is a work in progress which we all must support
So overall, our assessment of 2020 as “The Year of Gas” is hinged on two things – The National Gas Policy provision and the implementation strategy of H.E. Chief Timipre Sylva (The Honorable Minister of State for Petroleum) geared towards harnessing Nigeria’s vast gas resources by removing the barriers affecting investment and development in the gas sector and driving the institutional reforms and regulatory changes necessary to evolve into a gas based industrialised nation.
Above all… there is light at the end of the tunnel – The Petroleum Industry Bill (PIB) presently at the NASS according to the Minister of State for Petroleum Resources, Chief Timipre will ensure that the nation’s abundant natural gas resources are used to promote national development, and that it will unlock several midstream gas opportunities to further enhance domestic gas utilisation. The minister said, “Our efforts will continue to focus on gas to transmute Nigeria from the conventional dependence on white products for prime movers to a cleaner, more available, accessible, acceptable and affordable energy use in gas. This will not only cushion the effects of current deregulation, but also create enormous job opportunities for Nigerians.
You were recently quoted as saying that digitalization ‘is key to reducing the operating cost (UOC) of producing crude in Nigeria to $10 per barrel. What makes you think that can be achieved next year?
Yes indeed, I did mention that digitalization amongst other especially important and cardinal factors is key to reducing the operating cost (UOC) of producing crude in Nigeria to $10 per barrel. And in terms of achieving this end in 2021, will bring a whole lot of factors to the table.
But first, recall the Honorable Minister of State, Petroleum Resources has severally reiterated the determination of the FG towards the realization of the set Nine (9) Priority Projects in the oil and gas sector as mandated by Mr President i.e. reduce the cost of crude oil extraction by at least 5%’. And this is geared towards achieving UOC of $10/bbl by 2021.
Do not forget also that oil and gas industry has and is still facing an unprecedented shift in its operations and workforce as automation and artificial intelligence (AI) continue to transform the way we operate. Now more than ever, oil and gas organizations are using technology to drive down production costs to improve margins as they fight prolonged drops in oil prices. On that premise, I’d like to give an overview on the MPR focused and strategic priorities of: Increasing Oil and Gas Reserves and Production as well as Increasing Federation Revenue through cost control and improved efficiencies.
I also stated that it is not just about technology, but also upskilling people, changing the working culture, and understanding where digital technologies can significantly boost the sustainability and efficiency of operations. These will be the essential components for making O&G companies more competitive, more efficient, more connected to suppliers and more responsive to the needs of customers, resulting in a broader revenue base and improved profitability.
A Nigerian indigenous E&P company has already achieved $12/bbl. Another local E&P company recently announced that they have achieved single digit UOC in their Q3 2020 report. According to a quote “…It comes at high short-term cost but with long term benefits. Yes, beyond the technical basis for change, it is a leadership call.” And the Hon Minister is on top of this.
By way of wrapping up, could you also throw light on incentives offered by the FG and how that will railroad Nigeria becoming a gas hub in the sub region and open up the sector more and how the policies of the government could play a strategic role thereto?
The Honorable Minister’s focus and approach is inclusion of the diversification of our economy, efficient management of revenues, commitment to local value addition in the gas industry. He believes that Nigeria needs to use gas and invest in critical sectors of our economies such as infrastructure and agriculture to provide a solid base for industrialization, local value addition, economic development, and sustainable growth.
We have seen and working the talk that gas has a leading role as a key enabler to the diversification & growth of Nigeria’s broader economy through adequate power generation, provision of feedstock for value-adding manufacturing, and increased government revenue from LNG. Thus, the development of Nigeria’s vast gas resources & strengthening of the gas value chain is FG’s national priority.
In terms of incentives, I’d like you to first note that the National Gas Policy (2017) also seeks to achieve gas-based industrialization (GBI) via low-cost gas resources that have been identified and dedicated to the Nigerian domestic market. We also used the portfolio management methodologies for prioritization of the development of low-cost gas, with the proportion of that dedicated to domestic markets.
The Policy also seeks to liberalize and incentivize entry into the midstream to enable private sector investors develop gas infrastructure. In that regard, the FG has made available a finance scheme of 250 billion Naira for gas penetration under the National Gas Expansion Programme (NGEP) in the form of stimulus and intervention facility. The objective of the facility include improved assess to finance for private sector investments in the domestic gas value chain; Stimulate investments in the development of infrastructure to optimize the domestic gas resources for economic development; Fast track the adoption of Autogas as the fuel of choice for transportation and power generation, as well as Liquefied Petroleum Gas as the fuel of choice for domestic cooking, transportation, and captive power. Fast track the development of gas-based industries particularly petrochemical (fertilizer, methanol, etc) to support large industries such as agriculture, textile, and related industries. Provide leverage for additional private sector investments in the domestic gas market and Boost employment across the country.
The activities that are eligible under the 250 billion naira intervention range from Establishment of gas processing plants and small scale petrochemical plants; Establishment of gas cylinder manufacturing plants; Establishment of L-CNG regasification modular systems; Establishment of autogas conversion kits or components manufacturing plants. Establishment of CNG primary and secondary compression stations. Establishment of manufacturing of LPG retail skid tanks and refilling equipment. Developments/enhancement of autogas transportation systems, conversion, and distribution infrastructure. Enhancement of domestic cylinder production and distribution by cylinder manufacturing plants and LPG wholesale outlets. Establishment/expansion of micro distribution outlets and service centres for LPG sales, domestic cylinder injection, and exchange and any other mid to downstream gas value chain related activity recommended by the Ministry of Petroleum Resources.
I am sure you’ll agree with me that all the above will obviously steer the ship towards making Nigeria a gas hub just as using natural gas is already helping to reduce carbon dioxide and improve air quality where it replaces coal or diesel. Gas also supports an increasing role for renewables. This will be important as the use of electricity expands. Gas will also continue to play a critical role in sectors where demand is anticipated to grow, but which are more difficult to electrify, such as the production of steel, cement and chemicals, as well as long-distance transportation of people and goods. Clearly, Gas is what we need as a nation as we face up to a period of profound change.
We are also exploring additional opportunities that exist in leveraging gas to develop industries that use gas as feedstock, to produce methanol and ammonia used in fertilizer production. Take for example Trinidad & Tobago (T&T), a country that has accomplished much with its gas resources. With a small population of 1.4 million and only 11 TCF of proven gas reserves, the T&T has developed a globally competitive petrochemicals industry. Today, T&T is the world’s largest exporter of ammonia & second largest exporter of methanol leading to this industry contributing significantly to the country’s GDP. Nigeria, with significantly larger gas reserves, has the potential to achieve even bigger success compared to T&T.
The Nigerian agricultural sector, probably the largest GDP contributor to our economy, would benefit immensely from greater availability of fertilizer.
Considering the low nitrate concentration in our soil, and gas being the key feedstock for nitrate-based fertilizer, developing the gas industry could contribute to enhancing food security.
Domestic utilisation is rightly the focus & should in no way hamper exports. Domestic utilisation is the only way to maximize value & improve the economy. We have sufficient capacity to do both.
Our intention is that natural gas exports will continue, albeit consistent with Nigeria’s aspirations for domestic gas market development.
The economic & environmental advantages of natural gas are positioning it as the preferred fuel for the future. FG is capitalizing on an opportunity in the gas space to become more self-sufficient, more agile, innovative, & stronger even with the disruption of the COVID-19 pandemic.
Over the long-term, the FG’s Economic Sustainability Plan (ESP) for economic recovery, together with the supportive gas policy, will drive the long-term growth of gas demand in Nigeria & support the execution of gas supply chain projects. To answer the second part of your question, we will indeed pursue the long-term ambitions to develop as a key hub for natural gas supply.
And the CBN N250 billion will in some way help keep people on the job & gas companies from bankruptcy in the short & midterm combined with a long-term view & policy that is worthy of a gas industry. And apart from domestic self-sufficiency, we need to state unequivocally that if Africa and indeed the world needs and wants gas, Nigeria will be a responsible & leading supplier going forward as encapsulated in the National Gas Policy.
The CBN-NGEP intervention fund is also to encourage Gas Projects i.e. Project Based Approach. Recall Gas development was previously based around export gas projects with some local market development as a secondary objective, which did not deliver as anticipated. So we decided that Gas developments will henceforth be on a project-by-project basis but backed by a clear Domestic Supply Obligation (DSO), which means delivery of domestic gas projects will be the primary not secondary objective of project developers. And so, within this regulatory push (of a DSO), gas development will be essentially market-led rather than centrally planned. So, our approach is that rather than trying to continue with a centrally planned national market development, we are running on a project-based and market opportunity-led approach as a more effective way to grow gas markets. And these projects are largely developed by project developers from the private sector. The FG’s role is to set the environment and support investors in gas-based industrial projects with appropriate interventions to bring their projects to fruition.
