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Funding Gaps Impair Gas Target Realization

Sopuruchi Onwuka

Inability of government to meet its equity funding obligations in oil and gas exploration, production and sundry projects under existing joint venture operations account for the slow pace in driving realization of key national aspirations in the gas industry. Players who analyzed the challenges that face the ongoing programmes to valorise the nation’s gas resources listed acute funding gaps in the joint ventures operated by major oil multinationals as key challenge in the industry. One of the key policy aspirations in the petroleum industry is to eliminate gas flaring at the nation’s oil production sites through projects and programmes that harness and utilize associated gas for industrial consumption.

Thus, a package of incentives was subsequently evolved under the Nigerian Gas Masterplan to create a robust national gas transmission grid network that would catalyse industrial activities across the country as investors take advantage of sufficient gas supply to fire up production. Subsequently, the Minister of Petroleum Resources, Mrs Diezani Alison- Madueke, enunciated the Gas Revolution programme to give momentum to the masterplan and fast track key targets that would leverage electricity generations   in the power sector.

With the Gas Revolution, government drives a full valorisation process in the gas loop and offers commercial incentives for investments in gas based industries. The overall aim, according to Mrs. Alison-Madueke, is to use gas to stimulate rapid industrialization of the country, and thus deliberately encourage growth of local petrochemical and fertilizer production. From cost savings to job creation, domestic industrialization, technology transfer, revenue generation and many more, “the economic benefits for the country is humongous,” she declared.

Chairman of Shell Companies in Nigeria (SCiN), Mr. Okunbor, who pointed at key problems facing the nation’s gas projects, stated that inability of the Nigerian National Petroleum Corporation (NNPC) to match its controlling equity in the joint ventures with proportionate cash back up was responsible for missed targets in the gas industry. Group Executive Director in charge of Gas and Power at NNPC, Dr. David Ige, agreed that the current provision of about a billion dollars or N200 billion was incapable of meeting the upstream funding requirements that would deliver expected pace of infrastructure and facility development in the industry. He told The UNION exclusively that the current focus of government was to rapidly develop gas infrastructure that would channel fuel to power generation plants across the country, leaving lean and inadequate fraction for upstream gas development, gathering and processing.

He said while impressive results have been recorded in the downstream side of the Nigerian Gas Masterplan, the upstream side remains seriously challenged by funding. Mr. Okunbor who is also the Managing Director of Shell Petroleum Development Company (SPDC) of Nigeria Limited had pointed out that plans and programmes of the industry operators are also still encumbered by lack of fiscal clarity and uncongenial operating environment. He declined to provide explanations on the failure of Shell to deliver its offshore gas gathering projects for nearly a decade now despite pressure for the company to rein in the gas to help meet rising domestic gas demand.

The company is crossed with government over its planned gas liquefaction expansion projects, saying its gas export projects did not hamper prevailing domestic supply obligations handed down on the industry to meet internal demand. He argued that gas liquefaction and export would assist in domestic market development by generating the funds needed for investments in gas gathering, processing, transportation and utilization.

He said Nigeria must adopt the right mix of policy strategies to attract global investment capital in projects that would translate Nigeria’s huge gas resources into factors of production, pointing out that Shell has global technology and robust experience on gas conversion projects. According to him, the company operates the biggest gas utilization projects across the globe and remains the biggest gas investor in Nigeria where, according to him, the company leads key domestic and export gas programmes in compliance with policy directives.

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