The Nigerian Gas Association (NGA) successfully hosted a virtual business forum on Friday, May 8, 2020, to review the impact of the prevailing novel coronavirus pandemic on the Nigerian economy and project strategies on the role of Natural Gas in post-COVID economic recovery.
The theme of the forum was “The Role of Natural Gas in post-COVID Economic Recovery”. The President of NGA, Mrs. Audrey Joe-Ezigbo, delivered the Opening Remarks to trigger the discussions. Mr. Justice Derefaka of the Ministry of Petroleum Resources delivered the Keynote Speech on behalf of the Chairman of the National Gas Expansion Programme, Dr. M. M. Ibrahim; and the General Manager in charge of Production, Mr. Adeleye Falade, stood in for Managing Director of NLNG, Mr. Tony Attah, as Lead Speaker. They formed part of seven panelists carefully drawn from diverse sectors of the economy. Other panelists were the Managing Director of the Nigerian Gas and Power Infrastructure Company, Dr. Salihu Jamari; Chief Executive Officer of Anoh Gas Processing Company, Mrs. Yetunde Taiwo; Associate at Richardson GMP Group, Mr. Dolapo Oni; and Managing Director of EnergyInc Advisors, Mrs. Rolake Akinkugbe-Filani. The session was moderated by Mrs. Maryam Shehu, Head of Gas Commercial, Total Upstream Companies in Nigeria. The discourse was designed to evolve actionable strategies, necessary initiatives, policies, programmes, projects and appropriate legislation to enable the Gas sector position for the imminent post-pandemic era.
Mr. Derekafa in his keynote address mentioned that the world at large is making the shift in its demand for energy from oil to Gas. The almost untapped Gas resources in Nigeria provide agreat opportunity for the country to truly diversify its economy with Gas playing a leading role.Agriculture is one of the most important sectors of the Nigerian economy and with Gas having shown a markedly impressive impact on agriculture in countries like Trinidad and Tobago; it surely is a positive path to exploit for economic growth. He also stressed the importance of domestic utilization in maximizing value and directly improving the local economy whilst also touching on some of the challenges across the Gas value chain that need resolution in order for the economy to enjoy the full benefits of Gas. Mr. Derekafa concluded by painting a positive picture of what might be on the other side of the pandemic with Gas not particularly suffering any major hits but being the key driver of the Nigerian economic recovery.
Mr. Adeleye Falade in his lead speech focused on the opportunities that the COVID-19pandemic presents to players in the Gas industry. Mr. Falade touched how economic disruptions like the coronavirus pandemic and trade wars between nations have impacted on the energy sector and the world at large. He shared the same positive projection of what is to come for the world but added that the new world order would be requiring its energy to be cleaner and more
efficient, thereby creating an opportunity for Gas to take centre stage. He also opined that with countries like Qatar having built so much prosperity on the foundation of a largely Gas-based economy, it is now time for Nigeria to unleash the potential of her Gas.
Dr Jamari suggested that focus must be on Gas infrastructure to ensure that the lines of distribution from the producers to the consumers are better managed. Mr. Dolapo Oni echoed the thoughts of Mr. Justice in asserting that Nigeria needs to focus on a more localized strategy for Gas distribution in the country to aid economic growth.
Mrs. Yetunde Taiwo believed corporate organizations in the Gas sector need to have a longterm sustainability plan to stay relevant in the midst of the uncertainties surrounding the pandemic. She advised that corporates need to cut unnecessary cost and also have a good nose for new opportunities springing up as the new reality unfolds.
Mrs. Rolake Akinkugbe-Filani focused on the need to build local sources of funding for Gas, infrastructure whilst also touching on a variety of policy changes that could help propel the Gas sector, and at the end of the two-hour virtual forum, the following conclusions were reached:
1. The prevailing twin economic headwinds from the COVID-19 pandemic and Nigeria’s weak fiscal position from falling crude oil export revenue, necessitate the urgent need for stakeholders in the Natural Gas industry to collaborate on evolving game-changing and sustainable critical policy steps, industry operations strategies, innovative funding models, and broad fiscal incentives to navigate the anticipated shocks.
2. The Nigeria National Gas Policy and the related Gas Revolution programme, hold potential for deepening the domestic Gas market. Thus, stakeholders could use the current economic challenges to permanently position the domestic Gas industry for energy transition by optimizing Gas export revenue, diversifying the local economy with environmentally sustainable heavy industries, and switching home cooking from dirty fuels to cleaner-burning alternatives.
3. The forum agreed that national policy on Gas should focus more on deepening domestic consumption capacity by supporting the development of Gas-based industries, Gas-fueled transportation systems, Gas delivery infrastructure and Gas-driven industrial hubs. The case study of Qatar leveraging its Gas endowment for revolutionary development and growth of its domestic economy was cited as the way to go.
4. Post pandemic economic recovery would depend mainly on structural Gas demand in the industrial and service sectors that employ many workers, including textiles, agriculture, and power producers; the ability of Gas infrastructure developers to access funding, and construction schedules for infrastructure projects.
5. The Government should recommit to a robust investment in Gas infrastructure and delivery channels that would encourage investors to take initiatives in virtual pipeline solutions to deepen market penetration and grow domestic consumption. The panel pointed out critical success factors for virtual pipeline sustainability includes pricing mechanism based on market forces; development of skill pools for running the system at different pressure regimes; roles of multiple internal regulators across government agencies; fiscal palliatives
and tax regimes.
6. There is need for robust consultation among all stakeholders in evolving well-articulated policies that recognize and address the needs of players in different niches of the Gas industry, and new tax incentives would be needed to help new and existing investments in the post-pandemic era.
7. The Nigerian Content policies should address structural vulnerabilities in the industry by reinforcing efforts to build domestic Gas supply chains and capabilities and rise to the challenge of full local content capacity.
8. There should be an emphasis on the passage of the PIB to begin addressing the operating environment and trigger the multiplier effect from the petroleum sector to other areas of the economy.
9. AFDB projects that Africa needs about $900 billion for Gas infrastructure development; however, the weakness of domestic banking infrastructure to support long term single-digit Naira funding facilities and the pressures from non-performing petroleum industry project loans indicate that Gas industry projects should explore future funding from unconventional lending systems.
10. Panelists called for strategies that would enable access to the N10 trillion in pension fund
assets for equity and other funding structures for project financing, against the background that Nigeria’s young population demography supports the stability of such funds in the long term.
11. Importantly, Panelists pointed out the need to speed up Gas project funding given diminishing opportunity to attract international finance for fossil fuels projects in the face of intense green energy campaigns.
12. Players are also advised to tap into the midstream Gas industry currently favoured by international development finance institutions that are more disposed to funding Gas-flare monetisation proposals.
13. The forum enjoins the government to provide risk guarantees and credit enhancement policies to enable investors to develop the capability to raise funding and successfully deliver projects.
14. The forum noted that the collaboration between the Ministry of Petroleum Resources and the CBN to evolve liquidity boosts and grants with stringent criteria and repayment plans for the industry is encouraging.
15. The forum also welcomed the information that the Federal Government has contracted Fraco Plc to manage about N15 trillion for infrastructure development projects while advancing separate N500 billion intervention funds for manufacturing and other sectors.
16. The forum also called for the replacement of the present foreign funding partnerships in domestic projects with savings from the local petroleum value chain including reconstruction of the Excess Crude Account and recovery of billions of Naira from fuel subsidy withdrawal. Panelists strongly advocated that recovering these savings would help build vast local financial reserves that could buffer low revenue cycles.
17. The forum also called on players to simplify their funding proposals to make bankable GSPAs eliminate conflicting clauses that scare away funding institutions. This step has become necessary in recognition of the need to build the local banking capacity for Gas infrastructure and make frameworks sustainable and safe for PFAs to invest.
18. The forum agreed that companies should adopt best operations models to support their businesses within the pandemic period, and then prepare for new opportunities in the postpandemic environment. The demand for resilience takes into account the unfolding contraction in the economy, consequent projects delays, lingering debts and likely fall in energy demand.
19. The forum noted that expected demand surge after the pandemic, the promises of increased Gas volumes to the domestic market by National Gas Transportation Network Code, and NNPC’s offshore Gas-gathering projects all present substantial business opportunities for players after the coronavirus plague.
20. The forum was informed that NLNG is seeking partners that would take small scale LNG opportunities in the domestic market as part of collaborative efforts at developing the virtual pipeline segment of the industry to overcome pipeline limitations and reach consumers in locations remote from existing pipeline infrastructure.
President of NGA, Mrs. Audrey Joe-Ezigbo declared during the forum that the organization would continue to play its advocacy roles in the Gas industry by raising strong platforms for policy debate to maximise the benefits of Natural Gas as a critical factor in economic development and diversification agenda of the government.
She emphasized the need to build capacity and domesticate the supply chain, reduce imports and create new markets for Gas while exploring other funding opportunities in supporting the status of Gas as Nigeria’s comparative advantage.
She lamented the Impact of COVID-19 in Nigeria’s unprepared economic environment and pointed at the looming recession, rising inflation, dwindling oil earnings, low capacity utilisation.
She reiterated that Natural Gas has risen beyond the status of a commercial product tobecome an economic growth driver, energy security product, and enabler for industrialisation, job creation and economic recovery. She maintains that all stakeholders have roles to play inutilising Gas for the rapid economic development of the country.