How new gas code will unlock potentials in Nigeria’s domestic gas market

How new gas code will unlock potentials in Nigeria’s domestic gas market

The Nigeria Gas Transportation Network Code (NGTNC) is officially up and running. This marks an important step in making 2020 the year of gas as state- owned oil corporation Nigerian National Petroleum Corporation (NNPC) expects the development to boost Nigeria’s domestic gas market.

Predicated on the need to use the enormous gas deposits in Nigeria to grow the nation’s economy, the NGTNC applies between gas producers, shippers, and their agents.

Its provisions allow a window of six months for legacy agreements to migrate onto the network code while new and intending agreements are expected to align with the new code.

While launching the network code, the Group managing director of NNPC, Mele Kyari, restated its commitment to working with relevant partners and stakeholders in the oil and gas sector to boost delivery of gas to the domestic market.

Kyari said the corporation was at the centre of gas delivery to the domestic market, stressing that it was involved in all the available gas delivery infrastructure in the country either directly or indirectly through joint venture partnership.

The NGTNC was announced in February, but the existing users of the gas network got six months to migrate from existing Gas Transportation Agreements to the network code.

The code is a contractual framework between the gas transportation network operator and gas shippers that specifies the terms and guidelines for operation and use of the gas network. The code aims to provide open and competitive access to gas transportation infrastructure.

Now investors would be assured of best practice in gas transportation and could encourage them to actively look at the domestic gas market.

We will continue to give our support to this process to ensure that the full delivery of this process is achieved. We commit to working closely with the DPR to ensure that the target of the government is attained

The Network Code could help harmonize gas balancing arrangements to support the completion and the functioning of the Nigerian gas market, the security of supply and appropriate access to the relevant information, in order to facilitate trade and to move forward towards greater market integration.

“We will continue to give our support to this process to ensure that the full delivery of this process is achieved. We commit to working closely with the DPR to ensure that the target of the government is attained. This opportunity has provided the right framework for the transportation of gas from the source to the end-user in order to get value,” said Kyari.

He added: “We are happy to have this framework on ground and we are ready to collaborate with all our partners, the gas offtakers, gas producers, transportation companies, shippers, and all those involved in the gas value chain.”

Speaking on the significance of the network code, the minister of state for petroleum resources, Timipre Sylva, said it would help to grow gas infrastructure, expand gas utilisation, curb gas flaring, and provide codes to standardise the gas value chain in line with global best practices.

The Minister said the NGTNC was part of the key reforms instituted by the President Muhammadu Buhari Administration to expand domestic gas-to-power, gas-to-industry, gas-to-manufacturing and mitigate the challenge associated with gas flaring in the country.

He noted that the gas codes would go a long way in deepening economic development, improve gas supply, boost liquefied petroleum gas supply, and attract more investment opportunities in the nation’s gas value chain.

“This Code, together with related interventions, will enable improved gas supply to power, growth of Gas Based Industries (GBIS), domestic LNG, LPG and CNG penetration as well as enhance revenue to government and create investment opportunities for our people,” Sylva said.

Department of Petroleum Resources ( DPR’S) CEO Sarki Awulu highlighted six major game-changing effects the new code will have in attracting more investment into Nigeria’s pipeline infrastructure.

According to Awulu, the new structure will provide a set of rules that govern the gas transportation system, ensure non-discriminatory access to pipeline system, guarantees secure, available, reliable and safe gas transmission system.

“The code will attract more investors into pipeline infrastructure,” Awulu said.

Awulu noted the new code will ensure cost-reflective tariffs for pipeline services, support the development of matured gas markets and provide mechanism for effective handling of contractual disputes.

“The new code will also support the development of matured gas markets, and provide mechanism for effective handling of contractual disputes,” Awulu said.

Nigeria is Africa’s largest oil producer and a strong member of the Organisation of Oil Exporting Countries (OPEC). With around 2.5 million crude oil production capacity, the country has huge gas reserves. According to data from the Nigerian National Petroleum Corporation (NNPC), the country has around 202 trillion cubic feet (tcf ) of proven gas reserves plus about 600 tcf unproven gas reserves.

Up till now, this gas had been largely undeveloped with huge chunk flared, and the governmentowned Nigerian Gas Company (NGC) has been a sole operator providing pipeline infrastructure in the Nigerian gas market.

Salihu Jamari, managing director, Nigerian Gas Company (NGC), noted that his company has been upgrading its facilities in expectation of the launch of the network code.

“We are making sure that metering is available at every point in the network. The NGC is very much aware of its role in the implementation of the network code,” Jamari stated.

As far as intentions go, other stakeholders say the new gas code is a fine policy that is long overdue. A lack of transparency in the industry has led to unfair and often discriminatory access to gas transportation network and has deterred investments.

The absence of this framework has hindered local gas use. The natural gas reserves volume of the operated deep-water acreages in Nigeria is about 21 percent of the country’s total reserves of liquid hydrocarbons according to the DPR. Yet the acreages accounted for about 36.08 percent of Nigeria’s total production in 2018. The absence of a uniform code for gas transport hinders investments.

The government in recognition of the potential of natural gas, has put in place various interventions to stimulate gas utilisation and monetisation.

The reforms were initiated to re-position the gas sector and deliver on government’s key aspirations.

These aspirations include developing a viable domestic market; creating new industry out of the old oil industry; capturing economic value; generating as much revenue from gas as from oil; and ending gas flaring by the year 2020.

In recent years, the government has begun the implementation of a nationwide gas infrastructure blueprint aimed at connecting all key supply sources to markets across the nation.

These interventions and other on-going government reforms in the industry had high prospects that could boost investors’ confidence in the country’s gas sector, industry analyst have said.

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