The Federal Government has identified inadequate gas supply as the major constraint to achieving its last year’s 6000 MW target of electricity supply. Against this backdrop, it is determined to remove impediments to power generation. At a stakeholders’ conference organised by the National Association of Energy Correspondents (NAEC) in Lagos last week, strategies to improve gas supply was evolved. BIDEMI BAKARE reports.

As the country aspires to be one of the world’s top 20 economies by 2020, the critical issue of adequate power supply remains a challenge. It is expected that a significant level of this key mineral would have to be made available if this objective is to be realised.

In recognition of this fact, massive investments have been made in the power sector by the various levels of governments, moves which stakeholders have described as appropriate.

From less than 3,500MW generating capacity in 2005, the power sector is expected to hit an unprecedented growth which is possibly as high as 15000MW by 2015 based on projections. Expectedly, a significant portion of this power generating capacity will be coming from gas fired thermal power plants. But for these thermal power plants to function at full capacity, a massive investment in gas is required. It is estimated that from a modest gas demand of about 650mmcf/d in 2005, the power sector now requires about 1140mmcf/d by the end of this year and 3000mmcf/d by 2015.This represents a growth rate of 16.5 per cent per annum, compared with the global averages of about three per cent.

This startling revelation obviously formed the plank of discussion at the National Association of Energy Correspondents’ (NAEC) conference 　held last week in Lagos with the theme: ‘Gas to Power-Prospects and challenges.’

The event was attended by stakeholders from the oil, gas and power sectors who had come to brainstorm on the all important issue. The presence of the ministers of petroleum and power, even at short notice underlined the importance of the matter to the government.

The Minister of State for Power, Nuhu Wya, in his presentation, said since it is obvious that the majority of power plants in the country are thermal, there is the need to increase the supply of natural gas from our reserves which is regarded as the seventh largest in the world.

He said: "It is estimated that hydro power plants have an installed and firm capacities of 1370MW and 1312.6MW.The thermal plants have an installed and firm capacities of 4804MW and 1106.75MW, while the National Independent Power Projects (NIPP) thermal plants with ongoing installations have an installed and firm capacities of 4297MW and 4297MW respectively.

Evidently from this breakdown, the thermal plants offer more prospects in power generation than the hydro plants.

Therefore, it is necessary to increase the supply of gas to these thermal plants. Besides its abundance in the country, a short lead time is required to put up gas turbine plants as compared to the hydro thermal plants. Also, thermal plants have a relatively long life span."

Wya, stated that it is for this reason that the Federal Government has put in place numerous strategic policies to improve the supply of gas required to fire the thermal plants.

He said: "Having realised that gas is the preferred fuel for generation, it has been agreed that domestic gas obligation is a policy that is capable of making increased gas supply and power generation possible. This is important for the government and the private investors in thermal plants.

"The policy has, as part of its consideration, the issue of gas infrastructure. Apparently, it has been stated that any infrastructure meant to bring gas to the power plants at various areas of the country should be able to supply power to both existing and intended power plants in these areas.

This is not limited to the transportation of the resource through pipelines, but it includes the gas processing facilities to ensure that our gas, which is said to be rich in liquids, will be processed to high quality dry gas and hence reduce the risk posed to power plants.

"For instance, Chevron, owing to its effective gas infrastructure, is currently the only company that supplies dry quality gas to the West Africa Gas Pipeline (WAGP).

But with gas infrastructure being looked at, the availability of this quality gas from all suppliers will be guaranteed at a reduced cost. This is also true of both equipment and maintenance cost in the running of the power plants."

Secondly, there is the issue of legal and regulatory framework. Right now, a comprehensive legal and regulatory framework is being put in place, which is believed, would promote investors’ confidence and boost attraction in the industry. The enabler needed for this framework is contained in Petroleum Industry Bill, which is expected to be passed very soon.

The minister said the government has established a gas aggregation company to ensure the supervision and execution of gas agreement with Pan Ocean for a start.

The Power ministry, according to him, is also supporting this drive and will advocate an independent regulator to oversee the operations and ensure compliance.

Besides, he added that a comprehensive commercial framework that would ensure that pricing and contractual environment is investor friendly is being prepared to aid the process.

The minister hinted that with the passing into law of the new price regime, the oil, gas and power sectors would now enjoy a breather as gas supply to fire the plants would increase.

He said: "As it stands now, the new price regime will govern the price of gas for the next five years and beyond. By this singular action, most oil companies who were initially discouraged to process dry gas and supply for the power plants would now feel obliged to sell the processed gas as the price is now favourable to them. The gas supply aggregation agreement, which had been executed with Pan Ocean, would be extended to other oil companies as soon the price regime is stable".

Network code is yet another problem which the government is trying frantically to address. On this, Wya said: "It has been realised that the network code which is being finalised, is a critical aspect of the gas to power contractual régime as it defines the transportation regime that allows the power plants to receive gas from the suppliers. Any transporter of gas expects that issues that revolve around this aspect must be resolved before the gas transportation agreement can be signed. This is understandable as it defines risk allocation and other issues.

The negotiation required prior to this agreement is expected to take place because it is an undeniable fact that gas transportation agreement is required before any molecule of gas can be sent out. This must be resolved promptly to enable investors in power sector to deal with the various intricacies associated with gas management.

A transition programme is also intended to be introduced to accommodate the new supply environment. This, no doubt, is an important aspect of the gas to power journey."

The minister assured that the ministry of power on its part is ready to assist to boost generation, transmission and distribution of power.

He said:" We are currently doing everything to review the wholesale power market tariff structure to make the sector more vibrant and productive. For this reason, the National Electricity Regulatory Commission (NERC) has been mandated to consider the upward review of electricity tariff. It is expected that this regulator will provide cost effective tariffs that will enable suppliers of power to cover their costs and provide some profit as envisaged in the Multi-Year tariff Order (MYTO).

Waivers required to aid fulfilment of the conditions precedent on the new contracts would be granted so that they can be operated effectively. Existing contracts that are fraught with discrepancies are also going to be terminated to give way for fresh ones."

On her part, the Minister of Petroleum Resources, Diezani Allison-Madueke, said with the impressive stability and swift growth recorded so far in the last three months in the oil and gas industry, it is evident that fuel supply is going to get a boost while the power sector would be transformationed.

She said: "The oil and gas industry has witnessed considerable growth and stability in the last hundred days of the administration of President Goodluck Jonathan. So far, we have been able to achieve stability in the distribution of petroleum products. This has made it possible for supply to outpace the demand. Currently, the ministry is working aggressively to maintain this supply both in the medium and long terms.

"The Nigerian National Petroleum Corporation (NNPC) on its part has been able to aid distribution as it has increased its hold on retail. Right now, strategic plans are on to ensure that the corporation owns 50 per cent of filling stations in the country.

She said the face of the industry has also changed with the coming of the Local Content Act, adding that various aggressive measures are being taken to improve on the achievements of the Act.

"The Local Content Act that was passed by the Federal Government has been of immense benefit to the industry. It has had far reaching implications as nationals are now being offered immense business opportunities in the industry. We are working tirelessly to build on capacity because we have realised that what is available is not enough for the sector.

‘’But we are not relenting on the gains that have been recorded. We are putting in place machinery that would help determine how investment inflow would drive activities in the post PIB era," she said.

She stated that with the continued and invigorated drive being displayed, it wouldn’t be long that the PIB would be passed. "No doubt, we are leaving no stone unturned to make sure that all obstacles on the way of the PIB passage are removed. We are examining the misgivings of the international oil companies toward the bill and working towards addressing them. When this is done and the bill is passed, the industry would gain more confidence to help sustain the inflow of investment both in the downstream and upstream sectors.

On gas supply which is required to aid electricity generation, the minister said the current efforts by the Federal Government are capable of engendering the much-needed transformation in the sector.

She said: "With the recent moves by the government, the power sector is bound to witness great changes. First, the government has been focusing more on the review of the commercial framework with an intention of making it more realistic and feasible. This, it has succeeded in doing by granting approval for a new gas pricing regime.

‘’With this in place, there has been a robust agreement among gas producers, suppliers and the consumers. Honestly, it is this kind of agreement that is entered into between Pan Ocean and the Federal Government to provide gas to fire turbines at the Egbin Power station. The revision of the gas price to power has been from the non-commercial level to a more sustainable commercial. To this end, gas-to-power price in Nigeria will over a transition period steadily increase from $2 per million British Thermal Unit (mmbtu) to $3 per million mmbtu.

‘’Secondly, gas facilities are being improved for making power generation hitch free. The y are being refurbished to handle the requirements for gas distribution and transmission. Doing this would, no, doubt aid power generation."