The financial viability of the Nigerian Electricity Supply Industry (NESI), remains the most significant challenge threatening the sustainability of the power industry.
Despite having a far larger population, Nigeria generates less electricity relative to other major African economies and failed to expand its power generation along with its growing population.
The Nigerian gas market has been evolving in recent years as demand in the unregulated market increases.
Gas is sold in a hybrid market: a regulated environment in which the price is set at $2.50 per million British thermal unit (mBtu), and supply is scarce and generally limited to power plants producing for the national grid ; and an unregulated one in which gas sellers individually negotiate supply deals with major users, for instance industrial customers.
The liquidity challenge is partly attributed to the non-implementation of cost-reflective tariffs, high technical and commercial losses exacerbated by energy theft, and consumers’ apathy to payments under the widely prevailing practice of estimated billing.
Speaking with our correspondent, Dolapo Kukoyi, partner at Detail Solicitors and Lead, power practice of the firm says government’s role should catalyze growth and sustainability.
In her words, “For the gas to power value chain to be commercially viable, there are number of things that need to be done.
“We need to stick to the basic principles of incentivising investment as it is being done anywhere in the world. Government has a huge role to play but its role must be one that enables and catalyses growth rather than just intervening to either meet political ambitions or in a way that is not sustainable so government interventions must be strong, “she said.
Dolapo who sits on the executive committee of the Nigerian Gas Association, the professional body responsible for the promotion and protection of the interests of the gas industry in Nigeria also stated that
“There are many ways that government incentivizes investments.
It could be physical incentive which could be a tax holiday or it could be by building infrastructure and then the private sector comes to operate it.
As an organization, the Nigerian Gas Association is a platform for different gas suppliers and a focal point to basically engage government.
So, we continue to do that , we would continue to talk about these issues, gather stakeholders and talk about these issues until we get the solutions because we are in this business and we are not going anywhere, “she added.
Gas-to-Power” is a phrase that encompasses a trend of projects which involve using gas directly in power generation.
The phrase “gas-to-power” covers both the supply of indigenous gas via pipeline to a power station, and (more typically) “LNG-to-power” where imported LNG is regasified for power generation.
Integrated gas-to-power project involve multiple components, and typically multiple players.
These distinct components must work seamlessly together, and distinct risk mitigation strategies must be put in place for each project component in order for the various project participants to sanction the project.
Delloites in its article ‘Is Gas Utilization Incentive still necessary?’ said the economy is in need of huge capital injection by way of foreign direct investment from foreigners or Nigerians in diaspora into critical sectors or industries.
“It is in need of serious infrastructural investment howsoever can be achieved. And despite the present challenges facing Nigeria’s oil and gas sector, the sector is still very much relevant to Nigeria’s progress.
The pursuit of diversification and growth in the contribution of the non-oil sector to GDP is not and should not be treated as an abandonment of Nigeria’s crown jewel source of revenue.
It is a fact that “Nigeria is endowed with abundant natural gas resources, which in energy terms, is in excess of the nation’s proven crude oil reserve.
Moreso, the gas was discovered whilst searching for crude oil, as no deliberate effort had been made to search for natural gas then.
The current reserve estimate of the Nigerian gas is over 120 trillion cubic feet, with about 50/50 distribution ratio between Associated Gas (AG) and Non Associated Gas (NAG).
Only a small fraction of this quantity is currently being utilized, ” it stated.
This reserve estimate indicates an inherent possibility of exploiting Nigeria’s gas reserves for at least the next 100 years with the potential for a further 600 tcf in undiscovered reserve.