A Review of the Nigerian Energy Industry

Nigeria’s gas revolution evaporates into thin air

EvaporationOscarline Onwuemenyi

06 October 2013, Sweetcrude, ABUJA – In continuation of what has become a sad footnote to government policy-making and implementation in Nigeria, a remarkable trend which has seen grand and ambitious government-instigated projects meet their waterloo even before they are implemented, the much vaunted Gas Revolution Agenda of the Federal government may have evaporated into thin air.

President Goodluck Jonathan had said that the launch of the Gas Revolution: Rebirth of Industrialization agenda was bound to deliver the country from hopelessness and truly reposition it to become the industrial giant of the continent. Almost three years since the grand announcement and elaborate launch, the Gas Revolution Agenda has stymied, mired in controversy, allegations of corruption, inconsistencies and poor implementation.

In August this year, Chevron Nigeria Limited (CNL) and Shell Petroleum, both major players in the nation’s oil and gas industry, pulled out of the consortium of companies promoting the Olokola Liquefied Natural Gas (OKLNG) project, with Nigerian National Petroleum Corporation (NNPC) as the principal partner.

Both companies noted as militating factors against their continued participation to include lack of progress eight years after inception, non-commitment of the Federal Government to pursue the completion of the project and the non-passage of the Petroleum Industry Bill (PIB) by the National Assembly.

A statement by Chevron’s General Manager, Policy, Government & Public Affairs Deji Haastrup, noted that the company effectively pulled out of the project on July 31, 2013. It also confirmed that Shell pulled out of the project the same day.

Mr. Andrew Fawthrop, Chevron Chairman/Managing Director, said the withdrawal affords his company the opportunity to prioritise its investment portfolio. “The business decision to withdraw from OKLNG is based on a review of our investment portfolio, the lack of progress on the project and a reprioritisation of resources to focus on growing domestic gas supply,” he said.

Chevron said NNPC was duly informed of its decision to withdraw adding that the divestment process is being managed in accordance with the provisions of the Shareholders’ Agreement governing the project.
Jobs of an estimated 10,000 construction workers after the pull-out of Chevron and Shell are on the line.

As expected, the management of the Nigerian National Petroleum Corporation, NNPC, has laboured to allay fears that the recent decision of Shell and Chevron Nigeria Limited to withdraw from the Olokola Liquefied Natural Gas Project, OKLNG, may derail the President Goodluck Jonathan’s Gas Revolution Agenda launched in March 2011.

In a release released to newsmen, Tumini Green, Acting Group General Manager, Group Public Affairs Division of the NNPC, the Corporation stated that the Gas Revolution Agenda was not only intact but has since taken off with significant progress in gas supply for power generation and industrial usage. “The Gas Revolution Agenda which is an integral part of the Gas Master plan cannot be derailed just like that. NNPC can confirm that the exit of Shell and Chevron will not impact on Mr President’s Gas Revolution Agenda. In fact, very good progress is being made with domestic gas supply which has reached the highest level of 1500mmcf/d from about 500mmcf/d about three years ago,” Green said.

She noted that over 70 per cent of this gas is being directed to the Power sector pursuant of the Gas Revolution Agenda.
Green explained that the gas based industrialization agenda of Mr President planned for Ogidigben in Delta State has teed-off with site data gathering activities noting that major new heavy gas based industries such as fertilizer, petrochemicals etc. would come on board to create the much needed jobs.

“All these are very much under way and unaffected by the recent exit of Shell and Chevron from OKLNG. Similarly the Brass LNG project is unaffected by this exit as shareholders of the Brass LNG are different,’’ the NNPC spokesperson stated.

She noted that in line with the transformation agenda of the Federal Government, the NNPC is determined to continue to work with partners and stakeholders to ensure that Nigeria continues to be the desired location for gas based investments. “In a changing global gas market, OKLNG inevitably has suffered a setback as a result of the exit but effort will be intensified to secure other willing investors. NNPC and the Federal Government remain committed to this project,” she said.

But, analysts have panned the NNPC position, citing various reports of inconsistencies and policy lapses that have impeded the progress of the project.

Recently, the Nigeria Gas Association, NGA, declared that the gas revolution agenda was still very far from meeting the expectations of Nigerians more than two years after it was launched with fanfare, adding that more works needs to be done to actualize the objectives of the project.

According to Chima Ibeneche, President of NGA, turning natural gas into a profit-making venture requires huge investments in infrastructure that address the five component areas of gas availability, gas affordability, deliverability, funding, and the legal and regulatory framework.

The NGA boss who was speaking at a conference tagged: The Gas Revolution: Industry feedback on the gains, challenges and opportunities, decried numerous clogs in the government agenda to reposition the natural gas sector to support rapid economic growth, noting that challenges with the policy was making it difficult to achieve effective links between the gas sector and other economic areas such as industries, agriculture and human development through increase local content and indigenous participation.

“Government and operators alike recognize that the first step is to provide a legal and regulatory framework that will enable the removal of all the other obstacles,” Ibeneche stressed.

He added: “For the council and members of the association, it was clear that issues of domestic and export gas commercialization, utilization, pricing, revenue securitization, gas flaring, regulatory and government policy for the sector could no longer be addressed as ad hoc issues or adjuncts to oil industry development.

“So, for us at NGA this is core business and no longer an afterthought as it was in Nigeria just over a decade ago.”

Ibeneche continued: “We, in NGA, believe that we can contribute to the achievement of this aspiration by fostering the continued dialogue of all key players in search of ways to deliver on the key projects, milestones and results of the Gas Master Plan.

“As we all know, the Petroleum Industry Bill or PIB as it is popularly known, proposes reforms so profound that almost every new investment is on hold awaiting the resolution of the questions raised by this legislation,” he added.

Nigeria’s President Goodluck Jonathan had stated at the launch of the agenda in Abuja in March, 2011 that with the full implementation of his administration’s gas master-plan, the country would become the undisputed regional hub for gas-related industries within the next three years.

Jonathan further assured at the launch that the plan which would mark the beginning of the end of gas flaring in the country.

The President said that over the next few years, full implementation of the entire gas master-plan agenda would result in about $25 billion worth of investments in gas processing, transmission and downstream utilization projects.

Highlight of the event was the signing of Memorandum of Understanding, MoU, between the Nigeria National Petroleum Corporation, NNPC, and representatives of two foreign investors, namely Xenel of Saudi Arabia and Nagarjuna of India; and Chevron Nigeria Limited.

Two other companies, Oando Nigeria Plc and Agip Petroleum were awarded contracts for the development of the anchor Central Processing Facility, CPF, to be located in Obiafu, Rivers State and Warri, Delta State.

President Jonathan said: “As a nation, we are continually striving to realize the fullness of our potential. Very few nations can boast of the resources we have, both natural and human. Our proven gas reserves base of 187 trillion cubic feet and a further undiscovered potential of 600 trillion cubic feet, leave us with no excuse for the relatively high rate of unemployment and under-industrialization.

Today we take a small but important step in a conscious effort to reverse that trend. Today marks the beginning of what I believe will be an amazing journey of transformation of our own destiny and the restoration of Nigeria into the league of nations which have leveraged their strength in the abundance of natural gas, to transform the lives of present and future generations of Nigeria.

Regional hub
“By 2014, we would have positioned Nigeria firmly as the undisputed regional hub for gas based industries such as fertilizer, petrochemicals and methanol. We would by then, be producing enough fertilizer to create a self sufficient country and a net exporter of fertilizer and food to the world. We would be the leading regional centre for petrochemical production and manufacture of petrochemical related products both for local and export use.”

Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, said the boost in LPG production from the proposed land-based Central Processing Facilities, CPF, to be located in Obiafu, Rivers State and Warri, Delta State, will result in widespread availability of LPG and significant reduction in LPG price.

She said: “We believe that this will displace as much as 60 per cent of the eight million litres of kerosene consumed daily for household use. The replacement of firewood by the much cleaner LPG will reduce deforestation and desertification. Natural gas will replace fuel oil as fuel for industrial boilers. Above all, this agenda sets the tone for the final stop of gas flaring in Nigeria as the markets created provide a sink for all currently flared gas,” she added.

Alison-Madueke noted that the gas revolution also comprises government’s ongoing effort in gas to power. She said: “Based on the various steps that were taken last year to reposition the commercial framework for gas in the domestic market, I am confident that we now have in place, a more sustainable framework to assure gas availability to Power. The impact is becoming evident as we a great improvement in gas supply performance relative to last years. Our power agenda will create the undertone for even more widespread wealth.”

In this article

Join the Conversation