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Nigeria should charge more for gas to boost production: Oando Gas & Power
A view of the Nigeria Liquified Natural Gas Company (NLNG) near Finima village, during an aerial tour by the Royal Dutch Shell company, in Bonny, March 22, 2013. PHOTO BY REUTERS/Akintunde Akinleye
By Nina Chestney
30/05/2015
LONDON (Reuters) - Nigeria needs to increase natural gas prices for power plants further to help encourage more gas exploration and production, the chief executive of Oando Gas & Power, said on Friday as the country's new president is sworn in.
Nigeria has the ninth largest proven gas reserves in the world at 187 trillion cubic feet (tcf), but exports around 35 percent of its gas production, loses 48 percent to flaring and reinjection and consumes just 15 percent domestically.
However, its domestic gas demand is expected to rise to over 10 billion cubic feet (bcf) a day by 2020 from around 2 bcf/day now and around $55 billion of investment is needed in exploration activities, new processing facilities, pipelines and transmission and distribution networks.
To help encourage increased production by companies, the price of gas for power plants has been increased to $2.50/tcf.
However, this is not enough, Bolaji Osunsanya, chief executive of Oando Group subsidiary Oando Gas & Power and President of the Nigerian Gas Association, told reporters at a briefing in London.
"We don't see a big rush (of activity) even at $2.50. People argue anything upwards of the $3 mark would probably start to incentivise exploration and production. On a netback basis, they argue it should be close to $4 or $4.50," he added.
The new President of Nigeria, Muhammadu Buhari, was sworn in on Friday and Osunsanya hope the administration will speed up measures to bridge the supply gap, focusing on funding, infrastructure and pricing.
Nigeria's electricity generation is often much below capacity. The country's power plants were built before the necessary infrastructure to transport the energy fuel, meaning gas often cannot be delivered, resulting in regular blackouts.
Meanwhile, the long-awaited liquefied natural gas (LNG) projects, Brass and OK, are a long way off, Osunsanya said.
"It will take a long time coming for both projects to take off ... I worry Brass will struggle to ever make a final investment decision," he added.
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