Wednesday, March 25, 2015

Hurdles to Domestic Nigerian Gas Sector’s Liberalization
By Sulaimon Salau on March 25, 2015
Nigerian Guardian

Oil-gasThe quest for optimal utilization of the nations abundant gas resources has continued to unravel the need for more investment and infrastructural facilities that would aid such national agenda.

Nigeria’s natural gas reserves are recently estimated at about 187 trillion cubic feet. The gas reserves are three times as substantial as the crude oil reserves, which were put at 38 billion barrels.

This clearly indicates that a lot of investment opportunities abound in the natural gas sub-sector, even as the Federal Government moves to improve domestic gas utilization.

However, the sub-sector seems to be getting increasing attention, as operators and manufacturer advocate a business friendly pricing regime; regulatory environment and good infrastructure network. These factors, according to them would promote government’s aspirations for the gas sector, which include creating new industries out of the old oil industry; capturing economic value and generating as much revenue from gas as from oil. Others are developing the domestic gas market and, ending gas flaring.

For some years now, the industry has been operating a monopolistic system in terms of gas transportation, which are hitherto channeled through the Nigerian Gas Company. Besides, numerous provisions of gas contracts were creating confusion and indeed making business agreements cumbersome and uninteresting to parties.

Irked by the scenario, Department of Petroleum Resources (DPR) in collaboration with the Nigerian National Petroleum Corporation and the Nigerian Gas Company have put up measures to enhance smooth gas supply deal in the domestic gas market. Indeed, the regulatory agency is championing the course with the designing of a new set of rules guiding the business of gas transportation in the country, aimed at liberalizing the sector for efficiency and entrench an open-market system.

Determined to immediately put the new rules into play, the Department of Petroleum Resources (DPR) recently organized stakeholders’ forum to acquaint the operators with the new regime.

The Director, DPR, George Osahan, who described the Network Code as a set of rules guiding the use of a gas transportation system, said the Nigerian Gas Transportation Network Code (NGTNC) would enable new ways of doing business in the Nigerian domestic gas market.

Osahan, who was represented by the Deputy Director, Gas Monitoring and Regulations, Antigha Ekaluo, said the Network Code would take off with licensing of key players such as suppliers, transporters, shippers and agents in the next few weeks.

Specifically, he stated that the manual implementation of the code goes live in 2015, while transition from manual to auto mode starts in 2016 and full implementation takes effect in 2017.

According to him, the NGTNC, would also entrench transparency in the gas industry, and promote fair and non-discriminatory access to the gas network.

He stressed that the code would promote gas trading and attract investment, promote specialization and professionalism in gas business, and ultimately boost revenue generation for the country.

An executive of the Gas Division, DPR, Wole Ogunshola, said the new rule provides for a contractual framework between the network operator and the users that provides open and competitive access to gas transportation infrastructure through a common set of rules in other to ensure fair competition.

He said the programme presently covers the Escravos-Lagos Pipeline System (ELPS) and Oben-Ajaokuta networks, while it is expected to cover other locations across the country in the nearest future.

The NGTNC, according to him, would break the monopoly of the Nigerian Gas Company (NGC) and unbundle the gas value chain into; gas supply, non-discriminatory open access transmission and distribution pipelines and viable wholesale market.

The General Manager, Gas Pipelines Infrastructure, Gas & Power of the Nigerian National Petroleum Corporation (NNPC), Sam Ndukwe, said the new regime would ensure system security, reliability and safety, adding that tariffs would now reflect the costs of service without intervention from the government.

Ndukwe, who represented the Group Executive Director, Gas, NNPC, David Ige, noted that the phased implementation of necessary IT infrastructure would support electronic transactions and enhance operations.

Shipper can contract transporter to ship gas to a defined destination, while transporter charges shipper a transportation tariff based on capacity and commodity.

A shipper can also appoint an agent to ring-fence the shipper’s activities in terms of accounting and information flow, while transporter can appoint an agent for documentation and invoicing.

The DPR however identified the challenges of implementation of the NGTNC as funding; alignment of all stakeholders on implementation of the code; inadequate infrastructure; transitioning of legacy agreements and commercial framework among others.

The industry watchdog stated that the legacy agreements in the sector would. gradually transit into the network code.

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