Operators in the oil and gas sector have listed steps that must be taken for the ‘gas revolution’ project launched by the federal government to make any meaningful impact. They said the atmosphere for the smooth sail of the project cannot be laid in the little time the government has left.
President Goodluck Jonathan had last week launched the project which he said will result in foreign direct investment of about N410 billion over the next three years.
According to him, the full implementation of the entire gas master-plan agenda will result in about $25 billion worth of investments in gas processing, transmission, and downstream gas utilisation projects.
Following the launch, some local companies like Oando have been selected to build central gas-processing facilities at an estimated cost of beteween $2 – $3 billion.
However, Dragan Trajkov, oil and gas sector specialist at Renaissance Capital, an investment bank, said “While we think it is almost impossible for anyone to build a $3 billion project by the end of 2012, we understand that the numbers might be presented optimistically in the light of the ongoing presidential campaign,” he said in a report published this week.
A few observers dismissed the launch of the project at the middle of electioneering campaigns as just another political stunt by the government.
Not so bleak
Despite the illusions of the revolution, some industry watchers say the ‘revolution’, if well executed, would help stop gas flaring and develop the nation’s domestic gas market.
“The gas revolution launched by President Goodluck Jonathan holds the promise of inducing further development and growth of Nigeria’s domestic gas market,” Fola Onasanya, oil and gas expert at Ciuci, a consultancy firm, said.
“With the $3 billion Central Gas Processing Facility (CPF) by Nigerian Agip Oil Company (NAOC) and Oando Nigeria Plc, a huge sink will be created for storing and utilising natural gas resources which otherwise could have been flared, thus providing a boost to the economy both in terms of value generation and job creation,” Mr. Onasanya said.
According to him, so also will the Memorandum of Understanding (MoU) with Saudi Arabia’s Xenel Industries Limited to construct a proposed 1.3 million tonnes/p.a Petrochemical Plant in Warri, Delta State, along with five fertiliser blending factories by Nagarjuna and Chevron.
“However, for these moves to deliver their optimal gains and attract foreign investments, key areas articulated in the Gas Master Plan need to be addressed by strategic decisions and actions of the government,” Mr. Onasanya further said.
Mr. Onasanya said these include the issues relating to the gas pricing policy – which provides a framework for the minimum price that any purchaser of gas can be charged.
“This needs to be tackled in the fair interest of all stakeholders (including the IOCs), the Domestic Reserves Obligation – which aims to ensure the availability of gas for domestic consumption in order to stimulate economic growth – needs to be actualised and the Gas Infrastructure Blueprint – which provides for the establishment of a network of gas hubs which would ultimately reduce the cost of supplying gas – should be implemented in full gear,” he said.
“Overall, the ‘Gas revolution’ is not over-ambitious, provided the government follows through with strategic actions,” he added.
However, a top official of one of the major oil companies operating in the country, who would not want to be quoted because he was not authorised to speak, described the project as rather “ambitious”, adding, “It is a huge project that would require huge foreign investment because it is obvious that the government would not be able to do this alone.”
According to him, there would be need for billions of dollars to cater for professionals and the investment would be required for the plants that would be required to carry out the processing and transmission of the gas. This, he observed, cannot be done in a short term.
Nigeria’s oil assets have been exploited for more than 50 years. However, while oil companies have profited from the resource, local communities in the oil rich but conflict struck areas live with the daily pollution caused by non-stop gas flaring.
The country has lost billions of naira on gas flaring, a process of burning off into the atmosphere, surplus combustible vapours from an oil well, either as a means of disposal or as a security measure to relieve well pressure.
Inability to solve the lingering problem has been increasingly recognised as a huge environmental problem in the Niger Delta region of the nation.