Costs, policy, and operating environment among others need to be reviewed if the Federal Government must end gas flaring by December 2022, natural gas analyst, Kayode Oluwadare, has said.
According to Oluwadare, the federal government must address the cost differential between local and foreign retail prices, review its gas policy and ensure an enabling business environment for intending gas investors.
Breaking down some of the challenges, he said a metric million British thermal unit is sold for $55 in international markets while the same unit goes for as low as $3.77 in Nigeria. This, he said would continue to discourage potential investors from committing their funds to the initiative.
He said “A lot of gas producers would rather sell their gas to the international markets, rather than keep it for the domestic market. Even before the global energy crisis, it has always made more business sense for producers to sell gas to international markets (an estimated $55 per metric million British thermal units) and earn in US Dollars, as opposed to local/domestic markets which are priced in Naira (an estimated $3.77 per metric million British thermal units).”
He blamed this on the Nigerian Gas Master Plan (NGMP) that mandated gas companies to give waivers/subsidies to power generation plants.
“Another factor to consider is also the Nigerian Gas Master Plan (NGMP), which gives waivers/subsidies to power generation plants to get gas at the lowest possible price under the national gas pricing policy”, he claimed.
Kayode stated that major factors like Business environment, policies, cost, and market factors will have to be addressed for the Buhari administration to end gas flaring this year-end.
He said “If I am an investor and I want to trap gas from a production site, what are the terms for selling to the power plants to make profits? We already know how some power generation plants are unable to meet up with their financial obligations for gas supplies.”
On the issue of cost, he said some crude oil producers prefer to flare gas than process it because of the huge investment involved in trapping and processing it.
He said “There is also an issue of cost on the part of crude oil producers who would rather flare the gas than trap and process it, and the investors who will build gas processing plants, will they think it’s a worthwhile investment due to the fiscal regime that does not protect the gas producers?”
