Why Oil and Gas Operators should use domestic gas ?

Why Oil and Gas Operators should use domestic gas ?

According to The Nation The Society of Petroleum Engineers (SPE) Nigerian Council has urged the Federal Government to encourage operators in the oil and gas industry to promote the utilisation of domestic gas.

The engineers said gas production has been export-focused with only 15 per cent going into the domestic market, adding that out of 4000 kilometres of gas pipelines in Nigeria, only a third is dedicated to domestic consumption.

To encourage increased domestic gas (domgas) use, they said there was the need to promote buyer-seller market because a free market pricing mechanism should prevail to encourage more investors.

They said there was also the need to incentivise gas investment by reducing or retaining taxation at 30 per cent, rather than an increase to 80 per cent as proposed in the Petroleum Industry Bill (PIB) and pioneer status for the entire gas to market value chain, adding that the government should enter into partnerships with indigenous companies to develop gas transmission but allow the private sector to execute and manage the process. PIB should be re-edited to include fiscal advice for domestic gas projects, they stated.

The immediate past President of SPE Nigeria Council, Mr. Emeka Ene told The Nation that there was the need to redouble efforts in gas discovery based on projected local gas utilisation forecast and sales export to meet growing demand.

He said gas development with the right strategy could achieve adequate power supply by 2017.

According to him, the extent of collaboration for the gas industry will determine the success of the industry, adding that gas to power will generate huge revenue and save money for Nigeria.

He stated that high development cost of gas projects and low oil price is currently unfavourable to the industry, and noted that power distribution pricing to investors must be conducive for investors to improve the power sector.

Ene said regulatory framework alone is not sufficient to address the gaps in Nigerian gas supply. Incentives should be given on investment in domestic gas projects across all components of the value chain. Tax holidays, tax rate reduction, de-rated tax system etc are examples of the incentives needed, he added.

He said duty waiver should start at the beginning of the value chain and cover all the way to the end, while payment of debts to operators is crucial and should be done as soon as possible. Flexibility according to him can be built around take-or-pay gas supply, purchase agreements (GSPAs) especially for associated gas projects. Collaboration is important for the development of the gas resources amongst operators. Companies need to strategically and competitively collaborate to achieve this, he said, adding that gas revenues should be documented nationally by the National Petroleum Investment Management Services (NAPIMS).

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