Market prices can help develop Nigeria’s gas reserves

Aug 03, 2004 02:00 AM

Nigeria can develop more of its natural gas reserves by liberalizing prices and breaking the government's monopoly, the CEO and group managing director of Nigeria National Petroleum Corp. (NNPC) said.
Speaking at the opening of a three-day international oil and gas conference in the capital, Funsho Kupolokun said Nigeria must also develop a new fiscal regime to encourage investment in gas projects, and also create a separate regulator for the downstream of the gas sub-sector.

Kupolokun stressed that the current low price of gas in Nigeria's domestic market is a disincentive to the full development of the gas sub-sector.
"The price of gas is extremely low, perhaps the lowest in any part of the world," he said. Kupolokun also said the current structure in the industry, where there is one major consumer, is also a disincentive to investors. According to him, the National Electric Power Authority, Nigeria's power monopoly, fails to pay for gas supplied to it by the Nigeria Gas Company, the country's sole supplier of gas.
"It's a disincentive for investors," he noted.

Kupolokun said NEPA's inability to pay for gas supplies has led to a subsidy of about $ 90 mm annually by the government. NEPA uses the gas supplies to run its thermal plants located in the western Niger Delta for power generation. He said NGC will be unbundled into gas transmitting and supply companies. NGC is a subsidiary of NNPC.
Kupolokun described Nigeria's Niger Delta as a "gas region with some oil," to stress the significance of Nigeria's gas reserves there, currently put at about 187 tcf. The Nigerian government has set a target of deriving as much revenue from gas as from oil by 2010. Nigeria currently produces about 2.4 mm bpd of crude oil.

On fiscal measures for the oil and gas industry, Kupolokun said the current measures were originally designed for oil and therefore are inapplicable to gas. He said a new national gas policy being formulated by the government seeks to provide for a new fiscal regime and production sharing contracts for gas.
In the gas policy being developed, he said, government will remove all indirect levies applied to the cost of gas projects, except where it's politically impossible to do so.

Source: Dow Jones
Market Research

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