Nigeria is often regarded as a gas province, but unfortunately, government’s unseriousness over time has led to lack of infrastructure that would have enabled the country to benefit maximally from its gas potential. This situation has been a clog to the wheel of success.
Though 2021 to 2030 has been declared a decade of gas by this current government, what one is witnessing in the sector still suggests that the country still has a long way to go, if it is to attract the necessary investments to the industry.
Let’s take a look at the gas infrastructures that are lacking and are serving as drawbacks for investors to reap good benefits on their investment.
Several factors act as barriers to the growth of the Natural Gas industry – Some of the challenges are:
The dearth of investment in Exploration and Production activities: Production activities in Nigeria are largely focused on Associated Gas – That is Gas associated with the exploration and production of crude oil; whereas our reserves hold more non-associated Gas. The federal government has a very large role to play by creating an enabling and incentivized environment for investors. Robust transportation infrastructure will go a long way in not only helping to distribute the gas but also deepening the market and providing efficient means of evacuating gas from the platforms.
Security Risk: Most of Nigeria’s gas is concentrated in the Niger Delta region, and this region experiences security challenges occasionally. Added to this is pipeline vandalization.
Inadequate gas distribution/transportation infrastructure: Without adequate infrastructure, there will always be a shortfall in meeting domestic gas needs. The key infrastructure deficit in the sector is primarily on the gas transmission network. A robust pipeline network will enable more connectivity, growing demand, and lower the cost of gas.
Low consumer awareness: There is generally low knowledge of the economic benefits, the cost-effectiveness, and safety of Gas utilization, especially at residences and as Auto-Vehicle fuel.
Pricing. Exemptions of taxes on Natural Gas fuel, duties/taxes on compressed Natural Gas (CNG) conversion kits, and capital imports. This would provide incentives for investments from new players in the industry
There is also low human and technical capacity:
To tackle the infrastructural challenges in the natural gas industry, especially the huge capital outlay necessary for transporting natural gas from the producing fields to consumers, a key focus of the federal government and some players in the industry are on expanding the transportation infrastructure, adoption of enabling policies by Government to make the sector more attractive for investors. Furthermore, the Government has gone a step further by declaring this decade as the decade of Gas, and also declared Gas as our transition fuel as we move towards a net-zero carbon economy.
For private investors to come in and participate actively, what are their expectations?
There is no doubt that investors such as NiPCO Gas and others are improving access to gas as energy fuel by users – industries, etc?
However, whilst investments into this space by NIPCO Gas and other players have begun yielding fruits for the nation and its stakeholders. There is still so much room for growth and so much work to be done.
Natural gas is profoundly critical to Nigeria’s economic development. It has a diverse range of applications, such as power generation, auto-gas, petrochemicals, fertilizers, industrial heating amongst other uses. It is, therefore, important that the government’s policies, including tax policies, are geared towards encouraging investments in gas development. The Federal Government has a major role to play in incentivizing investors by way of promulgating attractive policies.
Some possible policies that can enhance expansion and deepen the Natural Gas market are as follows:
Import Duty / Tax exemption: The Nigerian Government has declared this decade as the decade of Gas. The intention is to make the Natural Gas business in Nigeria viable and sustainable by expanding the domestic market. However, if Government were to go a step further by reducing or waiving import duties on equipment, Gas-powered Generators, and parts, this will go a long way in attracting investors.
Policy Stability: Typical Natural Gas contracts range from 1 year to 20 years. The long tenured nature of contracts ensures that producers can make adequate long-term projections that are critical to them in making the investment decision.
Frequent policy changes could be detrimental to such investments.
Subsidy on Premium Motor Spirit: The huge subsidy bill accruing to the Government is not only a burden to the government, but also acts as a barrier to investment in the Natural Gas industry. Removing the subsidy and deregulating PMS will increase the demand for Natural Gas as it is cheaper and more cost-effective for the consumers. Users of Natural Gas tend to have significantly more cost savings.
Rising Cost of AGO: With the rising cost of AGO, and the absence of a subsidy on AGO, have resulted in a growing demand for Natural Gas. The cost savings on Natural Gas usage over AGO can be upwards of 50% monthly.
The benefits of a deepened domestic gas market are huge. Some of the benefits of Natural Gas are:
For The Federal Government.
- Promote jobs by creating gas infrastructure.
- Reduces dependence on imported oil.
- Saves valuable foreign exchange.
- Reduces subsidy burden on the Federal Government.
- Enables utilization and optimization of Domestic Gas.
- Globally, the Natural Gas industry is increasing its focus & effort to support natural gas transportation. But policy and regulatory support is needed to create programs and incentives on par with those for other fuels
- Reduces road maintenance costs and road congestion because natural gas is normally supplied via pipelines.
For Industries
- It is relatively environmentally friendly in comparison to fossil fuel (Diesel).
- More economically affordable compared to the other liquefied fossil fuel.
- Natural gas is abundantly available in Nigeria, and hence is a readily available alternative to costly imported fossil fuel.
- Natural gas is less prone to theft, unlike liquid fuels.
- Natural gas is lighter than air and therefore is safer.
- Most available solutions for the clean, secure, and sustainable future.
For The Vehicle Owner.
- Promote jobs by creating gas infrastructure.
- It is more economical as there is the cost savings element. Usage of CNG for vehicles attracts cost savings of over 100% against diesel vehicles, a saving of about 30% against PMS vehicles.
- Lower maintenance cost.
- It is cleaner, as such it reduces the owner’s carbon footprint
- It is a healthier and safer fuel option.
Natural Gas Applicability – A case for investment in the Nigerian Natural Gas Industry
Apart from the use of Natural Gas as a fuel for Power Generation and CNG Vehicles, it has wide applicability across various industry sectors, and in residences as cooking Gas. Some of its applications are Heating – Boiler, Thermic Fluid Heater, Furnace; Cooling- Absorption Chiller; Power- Gas Engine and Gas Turbine; Process- Heat treatment, dryers, furnace, oven, etc.
The market is a growing one with huge upsides and potential verticals. Also, with the rising costs of deregulated AGO (Diesel), and the global shift to EVs and net-zero carbon economies – with consequential effects on PMS, Natural Gas is the preferred fuel for Nigeria’s future.
