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Nigeria drafting new gas policy
President Umaru Musa Yar'Adua has said that the Federal Government is
coming up with a new gas policy designed to boost domestic supply.
Speaking in Abuja at the first Nigeria Gas Stakeholders Forum, he also
disclosed that it would require about $10bn, up from $4.5bn, annually to
sustain the growth in capacity for both oil and gas.
According to him, gas flares had reduced to about 36 % owing to growth
in liquefied natural gas export and demands of the various independent
power projects.
He said: "In line with our commitment to properly restructuring the
sector, we are coming up with a domestic gas supply obligation and
pricing regulation framework. This new regulation, which takes effects
soon, mandates all operators in the country to set aside a predetermined
amount of gas reserves and production for the domestic market."
Beside the attention on domestic market, he said the policy also
"outlines the national gas pricing policy, a sector-based pricing
structure aimed at stimulating the growth of both the power and
industrial sectors."
A fundamental philosophy of his administration in the regulation,
according to Yar'Adua, is the prioritization of domestic gas over
export, adding: "This would have the effect of ensuring the availability
and affordability of gas." He therefore implored participants to focus
on evolving a practical roadmap to effectively tackling Nigeria's energy
challenges through the efficient integration of gas into the energy mix.
Describing the devotion of the requisite $10bn to the oil and gas sector
as a strain of government resources, he said the alternative was to
allow third party investor funds to flow and drive capacity growth. The
president noted that in resolving the domestic gas supply situation, it
was important to position the country's gas sector effectively for
market opportunities in key export markets.
"Our strategy," he said, "must be a dual approach which emphasizes
effectively meeting domestic demand, while also vigorously maximizing
the huge export potentials of our gas sector. Balancing this dual
objective should be one of the key considerations of this forum.
He said while vigorously pursuing the gas flare-out target of December
2008, the recently created National Energy Council would provide policy
direction and the requisite political will to reposition Nigeria as a
major player in the global gas market.
President Yar'Adua stated that Nigeria currently exports about 18 mm tpy
from Bonny NLNG, which he described as the world's largest LNG facility.
Noting that massive supply growth had been recorded in NLNG, he however
lamented that the achievement had not been replicated in the domestic
market. He said while the power and non-power sector demand had grown
steadily, growth in domestic supply was lagging behind and therefore
called for a holistic approach to solving the problem.
The president also stated the government's support for the speedy
implementation of the gas master plan, which he said, was critical to
the development of the holistic framework. Minister of State for Energy
(Gas), Mr Emmanuel Odesina, remarked that until recently, domestic gas
demand was very low, but that it had since attained the significant
growth of about 700 mm cfpd mainly because of the demand by the power
sector and the rising gas price in export markets.
He said: "As a result, domestic gas demand is forecast to grow to as
high as 1 bn cfpd by 2012 from the current 700 mm cfpd. This is a growth
rate of about 25 % annually compared with global average of about 3-5
%."
He added: "Given the concurrent growth in both domestic and export gas
demand as well as the pricing distortion that arises from a very high
price in export markets versus a relatively lower price in the domestic
market, I have now proposed to Mr
President, a domestic gas supply obligation regulation." The regulation,
which he said awaits Yar'Adua's assent, is expected to take effect in
January.
