L-R; Patrick Olinma, Asset Manager of Total, James Odiase, Assistant Director, Domestic Gas, Abel Ansa, Engr. Dada Thomas, Wilson Delandro, Former Director of Department of Petroleum Resources and Consultant to National Assembly, Osten Olorunsola. Group Managing Director and Chairman of Oilserv, Emeka Okwuosa, Senior Manager, Gas Commercial of Seven Energy, Dr. Ben Asante, Sanjay Narasimhalu.
Nigeria is one of the oil rich countries with huge gas reserves and low consumption, experts in the industry posited that challenges in the sector majorly lie in infrastructures. Lack of infrastructure is regressing the gas sector.
Chief Executive Officer of Axxela Group, a renowned gas company, Bolaji Osunsanya noted that there are five main bottlenecks for gas. The market versus infrastructure in supply assurance, reliability and overall robustness. Policy, regulation and bankability of projects. There are issues bothering on project execution delivery, cost, delay and disruptions. These issues should be untangled going forward.
On his part, Chief Operating Officer, Gas and Power, Nigerian National Petroleum Corporation (NNPC), Saidu Mohammed, emphasized on feed structure industries, gas to export and NLNG Train 7. He stated further on expansions which the corporation will soon embarked on and “This is the time for gas and stakeholders should not misuse the opportunity.”
Although there are issues bothering gas in Africa, some countries have success stories. Wendell De Landro, High Commissioner, Trinidad & Tobago (T&T) talked about how successfully the country turned things around positively in terms of gas. T&T exploited the use of gas to electricity and ammonium, gradually, it progressed to iron and steel. Methanol, oriel and LNG were added as well. He spoke on the tremendous interventions by government including the structure of the gas industry which Nigeria can take a cue from. De Landro stated extensively about the success factor being collaboration and strategic partnership with regional outlook for development. The country has well established framework policy and enhanced fiscal environment. The industry revolved around skill workforce, competitive pricing and liberalization of gas network.
Patrick Olinma, Asset Manager of Total, said the company has experience in developing pipeline infrastructure for domestic gas supply. Total has a different view by interrogating and auditing existing infrastructures to see if it is optimizing their uses.
Olinma pointed out that apart from developing infrastructure, there is need to look at other bottlenecks, “If they are not dealt with, no matter the infrastructure inputted into the system, there will be no progress.” In terms of security of supply and upstream gas, from Total’s OML 58, the company evacuate associated gas to NLNG. This is important because if oil is not evacuated, gas cannot be produced.
The Asset Manager of Total made it known that the company has built multimillion pipeline to deliver gas to Alaoji in 300 billion scf of gas but at present, the company is not able to supply up to 10% to the pipeline.
He added that domestic gas cannot be emphasized on without the power sector, “If you look today at the NEC report, if you look at the aggregate technical, commercial and collection losses it is over 58%, so, it means in effect that the power that is produced is less than 5000 Mega Watts not up to 50% if it is monetized. Olinma also stated, “If you don’t monetize the power that is produced, how are you going to pay? Let alone the issue of Cost Reflective Tariff. Even at today’s tariff, we are not monetizing up to 50% of the power that is produced, how do you then pay for gas and pay for all the subordinate infrastructures.” Beyond developing additional infrastructure, the operation of the power plants should be considered. Some of the plants are working at 20% in their installed capacity which has nothing to do with additional infrastructure.
Olinma observed that there should be a deeper focus on the challenges which have been highlighted by operators in the gas industry. These challenges go beyond developing new infrastructures. The Total Asset Manager argument was based on utilizing existing capacity first, before building or extending facilities.
Senior Manager, Gas Commercial of Seven Energy, James Odiase, spoke from the stand point of Seven Energy, a midstream company which has invested almost $8 billion in the Nigerian domestic market with 200 million scf a day processing capacity and a pipeline network of 260 kilometers.
Presently, the processing facility utilization is 50% and the pipeline haulage is only utilized with 20%. Odiase said the problem the company battles with is the market. According to him, “The earlier we realize and galvanize around addressing the issues of the market, the better for Nigeria and also the sector.” He noted that the company has a goal standard payment guarantee from one its supplies but it has not brought necessary comfort because of deep market issues.
Odiase is concerned with the manner some issues on infrastructural blueprint as part of Gas Master Plan are addressed. Seven Energy has about 200 million scf a day processing capacity and it is underutilized. As an industry group, Odiase pointed out that the dominant logic should be challenged that there is an infrastructural problem because it is not as robust as it is. The capacity utilization of the country in terms of gas should be driven.
Speaking further, he said, General economic problems have to be addressed going forward in terms of having viable growth of the downstream projects so as to offtake gas. The recurring growth of market infrastructure is to be promoted. Nigeria has spent so much time and resources to developing large scale projects that have not been realized because of current economic situation. He advocated that Nigeria should leverage on existing infrastructure to define growth of gas market.
The Gas Commercial Manager, stated clearly that take-off pay is standard in gas market but the key problem in Nigeria is for operators to define their projects. Bogus demand and challenges do occur when contracts are operationalized. It is important that when projects are set up, determination on purchase of gas should be liberalized.
Taking his perspective from the mindset of a regulator, Assistant Director, Domestic Gas, Abel Ansa, Department of Petroleum Resources (DPR), noted that what metamorphosed into the 2008 domestic supply regulation which was the framework that basically governed upstream are issues that pertain to reserve. He made it known that from 2008 to 2013 spanning for five years, first projections and allocations, DPR focused on International Oil Companies (IOCs), to know what was their reserves, what they had on records, how much was being utilized and what was being flared. These must be put into consideration before allocation can be given out and administered as well.
Basically, the Assistant Director asserted that when DPR focused on major IOCs which had reserves, ideally, the challenge they had was infrastructure. To manage that, they were allocated DSO based on simple parameters of reserve utilization and flaring. The IOCs were involved in injection and external market of LNG.
Ansa revealed that between 2008 and 2013 provided only 23% of DSO utilization in Nigeria. Going forward, it was expanded to include the independent and marginal field. This is how the DPR manages the upstream.
On the midstream, what is entrenched for the regulator is to promote commerce. Ansa stated that the upstream sector will not generate desired income for government but GDP will be based more on midstream and downstream.
On the issue of network code, DPR network code is entrenched in its policy with open access which means utilization of available infrastructure has to be done in a non-discriminatory manner. It will identify who the producers are including the transporter, shipper and agent to ensure the network code is adhered.
Ansa stated further on regulatory issues that some of the GSAs and GPAs signed have major ingredient on the network code. He observed that some gas companies have not brought molecule of gas into the domestic market. It is a major challenge but DPR endeavours to see how gas could be transported including tariff methodology.
Ansa reiterated on the economic recovery and growth plans of government concerning the network code which is a major deliverable. The code will also be administered on the Escarvos-Lagos Pipeline but the challenge is curtailment hierarchy in case of shortage of gas. Decision on where to supply first either international obligation or power plants to major local institutions must be considered? The curtailment hierarchy gives priority to what should be done should there be shortage of gas.
For pricing, export parity will prevail on how gas should be sold. This is what DPR does for the midstream.
According to the DPR boss, for downstream, before investors can invest, there is need to look at the bankability of available data. The Nigerian Data Repository (NDR) is a division in the DPR, investors can go through available data. Major IOCs and gas producers in the country have been engaged. All through the value chain the regulatory agency has brought stakeholders together in order to promote commerce which has been done in non-discriminatory manner.
Issues and barriers were identified, presenters talked about the solutions to breach gaps of basic infrastructure problems. There is need to review the infrastructural master plan because some segments are implemented while others are not because it is going to affect network code if is not properly done.
There were issues on bankability, project execution, open access to gas infrastructure to integrate operations.