…ranks number 5 in Africa
The Nigerian Gas Master Plan has recorded unprecedented growth in the Gas Sector.
The strategy paves way for an unprecedented growth potentially making Nigeria’s gas sector number five in Africa in terms of BOE. FGN’s policy thrust through the Gas Master-plan has enabled this growth.
The CEO, GasInvest Limited, David Ige, who is also the former Group Executive Director, Gas & Power, Nigerian National Petroleum Corporation, NNPC, stated this while speaking on the theme: Realising the Potential of Natural Gas in Nigeria, at Stakeholders Forum recently in Lagos.
In order to realise the Potentials of Natural Gas in Nigeria, he said there should be domestic Supply Obligation, Upstream Gas Fiscal Terms versus competing Nations.
Talking of governance, he said, there should be entrenchment of competent Midstream/Downstream Regulator, Open Access to all gas Infrastructure, distinct Mid-stream Gas Sector and rigorous laws against anticompetitive behavior. So also in pricing, unbundle Vertically Integrated Players.
“Realizing Nigeria’s Gas Potentials – 4 Key Levers in a Legislative Bill, such as vibrant Midstream Segment, strategic Gas Based Industrialization, create and incentivize the Midstream segment and there should be special legislation to accelerate establishment of Gas Based Industrial Parks” he said.
While assessing the Nigerian Gas Master-plan in terms of Aspiration Versus Reality, he noted major demographic shift in upstream gas, rise of the Nigerian Petroleum Development Company limited, NPDC, and local Independents who are more focused on domestic gas but have limited investment capacity.
He maintained that the upstream development capacity is further eroded by the Power Sector’s inability to pay for gas supplied.
“DSO Policy enforcement considered only partially successful but weak enforcement coupled with sector structural challenges mitigated impact. Slow demand versus infrastructure capacity impacts bankability of pipeline projects, which requires FGN support. There is still a challenge for pure player in private sector investment. Steady growth in Virtual pipelines, capacity addition is relatively marginal in impact though a Key opener of new frontiers” he said.
“Gradual evolution of pure-player Midstream Gas processing, first two in progress i.e. ANOH GP; Brass Fertilizer. There is continued absence of Regulator and slow pace of competition and liberalization of market and uncertain environment for Midstream. Relatively slow growth in downstream segment and large consumption centres are still scarce”, he added.
“Discounted Power sector due to structural issues, GBI growth quite slow i.e. Ogidigben challenges. So also some growth in the commercial sector but pace is low to modest, hence impact marginal”, Ige Stressed.
He stated that stimulation of downstream segment is not currently included in PIB but the proposal is to include specific legislation that caters to the establishment of GBI industrial park as legislation will enable one point administration of all issues required to facilitate expedited development of parks that can complete globally.
Speaking on Petroleum Industry Bill 2020, PIB, Midstream/Down Stream, he said there should be fiscals and specific incentives to domestic midstream and downstream operators, such as tax holiday, investment allowance rates, accelerated capital allowance rates, fiscal plan to tax Natural Gas Liquids, NGLs, from gas plant under Hydrocarbon Tax, HCT, and extension of Company Income Tax Act, CITA, incentives to other midstream and downstream gas investments.
So also that gas processing, pipelines, GBIs and pipeline tariffs are indicative of need for further incentives to attract private investment.
Looking at governance, regulators, commission and authority, he said, (Midstream/Downstream) authority has wide scope across Technical and commercial regulation and licensing for Midstream and Downstream Operations.
On geographical delineation to protect investments, he said, Midstream demands critical mass of supply to assure richness of gas, so also competition, regulation and unbundling of value chain. “There should be prevention of dominant power and restrictive practices by Dominant players, particularly by players with interests across upstream and midstream”, he warned.
On third Party Access, Transparency and tariff Methodology (admissible costs vs NGC costs), he said, “manage integration where it exists so it doesn’t distort market and trading Rules for Wholesale Gas Supply that will create and stimulate gas trading vis-àvis gas marketing”.
Looking at implications for flexible transportation arrangements and customer protection implications for Midstream and fiscals ‘as is’ do not necessarily encourage Midstream gas development scope for incentives, adding that the role of Regulator will be crucial in creating the bankability of the Midstream investment.
On PIB Upstream, he noted fiscals and clear intent to stimulate investor interest in upstream oil development, so also two Tier tax system including CITA and Hydrocarbon Tax, HCT, and HCT applicable to Crude Oil, Condensate and NGL from Associated Gas, AG, two Tier Royalty system based on production terrain and price and overall government take reduced for Marginal, Shallow Offshore and Land operations.
Some increase in government take in Deep Offshore terrain and Pre-ponderance of focus on creating a level playing field for all gas investments. Elimination of AGFA that negatively impacts gas project profitability and significantly lower government take as an incentive for the development of rich NAG assets.
“Upstream Administration and intent to stimulate more liquid and regular lease administration i.e. more bid rounds. Fiscals ‘as is’ do not encourage upstream gas development as lease administration may stimulate bid rounds but Likely oil majors may not show interest and International independents may or may not show interest. It will likely engender consolidation of local independents in upstream. More of the current situation appears low to modest growth in upstream gas activity”.
Speaking on the implications for Upstream Gas, he said, there should be specific incentives to domestic midstream and downstream operators, tax holiday, Investment allowance rates and accelerated capital allowance rates.
“Fiscal plan to tax NGLs from gas plant under HCT, extension of CITA incentives to other midstream and downstream gas investments, such as gas processing, pipelines, GBIs are indicative of need for further incentives to attract private investment”.
On governance and regulators, Commission and Authority, he noted that (Midstream/Downstream) Authority has wide scope across Technical and Commercial Regulation and licensing for Midstream and Downstream Operations. Geographical delineation to protect investments – Midstream demands critical mass of supply to assure richness of gas competition regulation and unbundling of value chain and Prevention of dominant power and restrictive practices by Dominant players – particularly by players with interests across upstream and midstream.