A Review of the Nigerian Energy Industry

Lack of independent regulator stifling energy sector development – NESG

18 October 2015, Lagos – Against the backdrop of dwindling revenue from the oil sector, experts in the sector have called on the Federal Government to set up an independent regulatory body for the gas sector arguing that doing so will attract investments into the midstream gas sector, shore up the country’s revenue base and takes care of the issue of gas flaring.

Energy Crisis Threatens the Western Power GridsThe call was part of the position of the breakout session of the Energy Policy Commission at the 21st Edition of the Nigerian Economic Summit which held in Abuja between Tuesday and Thursday.

The Focus Group’s positions which was presented during one of the plenary sessions by Afolabi Oladele of Capital Alliance also noted that the National Independent Power Plant (NIPP) projects were performing far below installed capacity because of the absence of a workable framework on how to get gas to the various plants at the project initiation stage among other factors.

Expatiating on the group’s position, Chief Consultant, Advisory Legal Consultants, Gbite Adeniji, stated that “You can’t run an energy sector profitably without an independent regulator in place.”

Adeniji told THISDAY in an interview that “One thing is clear today, Nigeria has one of the most abundant gas resources in the world. With a population of 180 million people there is a potentially huge internal market for gas today for industrial products, and we know that the demand for gas has been rising over the last few years but the main problem is infrastructure and how to get gas from point A to point B. Without solving that infrastructure issue you cannot meet that demand and what it does is it regresses the country economically.

“Funding infrastructure requires a lot of money which the government of Nigeria today and tomorrow won’t have enough of so the answer is to bring in the private sector to make that investment. When the private sector wants to invest in that sector, because the infrastructure is going to be there for a long time they want to invest in such a manner that the risks to their investments are minimized. And one of the biggest risks is the government risks itself, because when you made that investment, one man comes in tomorrow and says I cancel the contract.”

The group further noted that the investments in the electricity sector was as a result of the setting up of an independent regulator, Nigerian Electricity Regulatory Commission (NERC), and the assurances from government on the safety of investments in the Gencos, Discos and Transco.

“As the petroleum sector is structured today, the regulator is not an independent regulator. DPR reports directly to the minister of Petroleum Resources and it is whatever the minister says that DPR must do. In infrastructure sectors, the best way regulatory structure works is to bring in an independent regulator which is exactly what we’ve done in the power side, the gencos, discos and Transco are electricity infrastructure and because we’ve wrapped all that around an independent regulator investments come into the sector and if you look at the contracts of those investments  you find that government gave assurances that nothing will happen to their investments; that is what you have to do if you want investments going into the midstream gas sector. You must have independent regulator and government support for investors so that over the lifetime of the investment the investor knows that his investment is safe and that is what brings money to the table for the government,” Adeniji stated.

He stressed that when a regulatory body to be set up will come in the context of a regulatory mandate, that its job will be to implement sector policy.

“Clearly one of the prevailing issues in the gas sector is flaring, but flaring is an upstream issue, I am focusing now more on midstream issues, I take for granted that there are enough laws in Nigeria to take care of issue of gas flaring, if they are not implemented Nigerians have to ask why.

“But then, if we have enough investments in the midstream gas sector flaring will die naturally because we would have had infrastructure in place to catch up with gas flaring,” he concluded.


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