15-12-09 Indigenous integrated energy firm, Oando, said it has invested over N 36 bn in bridging huge infrastructure gap between Nigeria's huge gas reserves and demands in the domestic market.
Executive Director of Oando Gas and Power, Mr Adegbite Folade, poor gas utilization in the domestic market which is blamed for huge flare volumes in the country resulted from significant disconnect between produced volumes and proportions available in the market. In response the need to harness the commodity for application in economic activities, he said, Oando and few other players have taken the challenge of massive investments in providing the industrial and commercial sectors of the economy with reliable, cheaper and more efficient fuel option to cut operating cost and enhance profitability and growth.

He explained that Oando Gas and Power had invested some N 16 bn through its subsidiary, Gaslink, in 100 km of distribution pipeline to service over 90 customers in Lagos industrial centres. Another of the company's subsidiaries, according to him, is pushing investment of another N 20 bn in a separate distribution network of undisclosed length to reach a new set of industries with fuel supply.
These investments, he pointed out, required commercial terms and tariffs that guarantee cost recovery and reasonable margin on the invested funds to not only sustain supplies to consumers but also expand reach to other industries that demand to be connected to the grid.

He said that natural gas supplies would phase out use of the alternative but costly low pour fuel oil (LPFO) also called black oil currently building cost for some companies and making their products uncompetitive in the market. The fuel costs which constitute significant portion of the overall operating cost of the companies that now fire machines and equipment on gas, Mr Folade said, have drastically reduced their fuel bills over the period and increased margins.
He however said the existing investments in gas distribution infrastructure remained inadequate, explaining that the country needed a base distribution grid network of 10,000 km.

Closing the distribution infrastructure gap and meeting the rising domestic demand for natural gas, according to him, would require reinvestment of recovered cost from existing grids and ploughing back operational profits. For this to happen, he argued, consumers of services must appreciate and support the challenges undertaken by the investors in making the products available to them at a marginal cost.
He pointed out that natural gas tariff in Nigeria was lowest in the whole world, adding that a pricing benchmark against the local price of LPFO has been adopted as the standard for tariff determination in order to ensure that natural gas remained the cheapest industrial fuel in the country.

Mr Folade said that establishment of benchmarks in determining domestic gas tariffs was a global practice which, he added, has been adopted in the Nigerian Gas Masterplan as the model for commercial terms. Suchmodels, according to him, must guarantee sustenance of supply services by supporting cost recovery, operating costs and cost of gas procurement from the resource owners.
He made it clear that protesting the commercial terms for gas supply would amount to attacking the basis for commercial investments in providing the commodity in the first instance. He called for support from the manufacturing sector in making investments in commercial gas distribution viable.