Page 7 - DMEA Week 32 2021
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DMEA COMMENTARY DMEA
the restive Niger River Delta) than to questions about how to achieve full domestic gasification during the Decade of Gas.
But the two issues can’t be separated. The PIB wasn’t drawn up solely for the purpose of placating IOCs; it will also affect domestic fuel and energy markets. Moreover, the new law will provide some concrete support for the Decade of Gas initiative, according to Obo Idornigie, vice president for sub-Saharan Africa research at Welligence Energy Analytics.
“We think the PIB offers support to the ‘Dec- ade of Gas’ initiative,” Idornigie told NewsBase. “For the first time, Nigeria has introduced terms for developing gas under production-sharing contracts [PSCs]. This has been a sticking point for gas fields under PSCs.”
He also pointed out that Nigeria’s new petro- leum law established special tax breaks for gas development “The PIB is also prioritising gas supply to the domestic market, and incentives to support this initiative have been included in the document,” he noted. “For example, royalty [rates] for gas produced and consumed in-coun- try [are] 2.5%, versus 5% for export. Operators who are developing gas projects solely to supply the domestic market can also consolidate the midstream capital investment with upstream operations for the purposes of tax.”
However, Ian Simm, Principal Advisor at consultancy IGM Energy, notes that Nigeria may already be getting ahead of itself with Min- ister of State for Petroleum Resources, Timipre Sylva recently suggesting the renewal of efforts to extend the AKK pipeline across the Sahara to begin piping gas to Europe.
Sylva told press in late June: “The plan is if we can get it to Kano, then it can continue all the way to Algeria at the Trans-Saharan gas pipeline and then link up with the Algerian pipeline and then we move it to Europe.”
Simm contends that “while exports to Europe will be appealing, given the patchiness of domes- tic gas and electricity connectivity, Abuja should seek marginal gains locally rather than becom- ing distracted with a pipeline for which it has no
way of guaranteeing security, particularly when doing this domestically has already proven challenging.”
No guarantee of success
On this point, Idornigie stressed that the PIB would not remove all obstacles to domestic gas- ification in Nigeria.
The bill will not, for example, eliminate the deficiencies in Nigeria’s domestic gas infrastruc- ture, he said. “The lack of gas infrastructure will be a big issue for developing offshore gas reserves for the domestic market, particularly non-asso- ciated deepwater gas fields,” he told NewsBase. “The proposed midstream infrastructure com- mission is expected to help facilitate investment in gas infrastructure, but it is still early days, and it is unclear how this new commission will work.” (He was referring to provisions of the bill that called for establishing the Nigerian Mid- stream and Downstream Petroleum Regula- tory Authority (NMDPRA), an agency that will govern commercial, operational and technical operations in the downstream sector and the midstream sector of the oil and gas industry.)
Additionally, he pointed out that the pas- sage of the PIB had not assuaged all the doubts of the IOCs, which are in a better position than Nigerian firms to fund and operate the projects that will provide the additional volumes of gas needed to achieve Buhari’s goals. “[We] think material gas production is expected to come from the joint venture contracts between the IOCs and NNPC [Nigerian National Petroleum Corp.] ... [and] the IOCs are not likely to com- mit to new joint venture projects until they get clarity on how NNPC will work as a commercial entity, plus how their outstanding liabilities will be paid.”
In short, the PIB is likely to prove an impor- tant source of support for the president’s “Decade of Gas,” and it aims to create incentives for gas development projects that will serve the domes- tic market. At the same time, though, the bill will not guarantee the initiative’s success. Instead, its impact will only become clear with time.
Week 32 12•August•2021 w w w . N E W S B A S E . c o m P7
