Gas Master Plan implementation in progress

The Nigerian National Petroleum Corporation (NNPC) says significant progress is being made in actualising the goals set by the Nigerian Gas Master Plan.

Nigeria has the seventh largest gas reserves in the world with about 187 trillion cubic feet of proven high quality gas reserves. Geoscientists even regard the country as a gas province with some oil in it, while the U.S. Geological Survey says Nigeria has the potential for additional gas reserves of more than 600tcf.

Despite this potential, the reality on ground is inconsistent with the expectations. The Nigerian economy has not benefited proportionately from its huge gas resource. In a bid to address this, the Gas Master Plan was created. According to David Ige, group general manager and senior technical adviser to the NNPC’s GMD, steady progress is being made towards the implementation of the plan.

Domestic gas obligation

He said: “A Domestic Gas Supply Obligation Regulation is now in place. The aspiration is that at a national planning level, the energy requirement for the country will be rigorously determined for various planning horizons – five years, 10 years, and so on. This plan will stipulate power requirements, gas and other petroleum product requirements to meet the long run economic aspirations of the federal government,” Mr. Ige revealed.

The domestic gas supply obligation mandates all oil and gas companies to set aside a pre-determined amount of gas to the domestic market. This obligation aims to deliver about five bcf/d by 2013, “a volume that will drive significant economic growth,” Mr. Ige enthused. But the reality still remains that no commitment will be made to investing in the plan by the companies unless valid gas supply and purchase agreements (GSPA) are in place.

“Gas Supply and Purchase Agreement templates are now in the final stage of development for the Nigerian domestic market. When completed, these templates will specify the terms for gas purchase in Nigeria and clearly stipulate liabilities and obligations of all parties.” Mr. Ige gave the assurance that they will be ready in December.

Another major issue is the lack of a sustainable commercial framework for domestic gas. But the NNPC gas expert revealed that “a gas pricing framework is now in place for the domestic market.”

The framework essentially divides the domestic market into three; the power sector, the gas-based industries, and the wholesale sector. Mr. Ige said each of the sectors has pricing strategy but the supplier gets an aggregate price.

“The aggregate price ensures the commerciality of supply and should attain export parity by January 2011,” Mr. Ige said.

Industry experts are optimistic about the progress made so far by the federal government. The Nigerian Gas Association said it is pleased with the steps taken by the government, but the group advocated for a balanced implementation of the gas master plan for optimum results.

The Nigerian Gas Master Plan

The gas master plan aims to create a structure that will enable Nigeria to leverage on the multiplier effect of gas on the economy, consolidate Nigeria’s position in the high value export markets, and manage the gas asset for national energy security. These objectives are to be achieved through focus on four key areas.

Firstly, a short term gas availability that will focus on meeting immediate power sector requirements, jump-start the domestic gas-based industries and more importantly, provide a base load of domestic gas volumes that will underpin a major investment in gas infrastructure.

It is anticipated that this will set the tune for a sustainable commercial framework underpinned by “credible and enforceable gas contracts, and a price regime that is commercially driven and recognises the long term affordability across different buyers.”

This is expected to encourage investment in building a domestic gas infrastructure that will ensure accelerated supply growth in line with demand growth.

Part of the plan is also to introduce a gas-based economy in the Niger Delta, to drive a rapid industrialisation and ownership amongst the states and host communities.