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Nigeria Needs Quick Investment Drivers for Her Gas-to-Power Business

01 Jan 2013

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Senator Cale Case of Wyoming region, one of the largest energy producing regions in the United States, speaks with Chineme Okaforon the need for Nigeria to adopt quick measures to improve her gas-to-power framework. Excerpts:

It appears you are abreast of reforms in Nigeria’s power sector. Could you please assess the efforts made so far?

I don’t know if I am exactly the right person to do this but it is very encouraging. My job here is to actually train the NERC staff and give them exposure to world regulatory standards because they are new, I didn’t come here to evaluate the Nigerian reform process but I am a student of utility regulation and so I am encouraged and impressed with what is happening in Nigeria. I know it must be frustrating because all these reforms seem like they take forever and are not getting anywhere as soon as expected but when you look at it all, quite a lot of progress has been made and you can be proud of that.

It sounds like there is more and I am very encouraged by that and I know it has been a very long time but there is probably a lot happening behind the scene that we don’t know about and it seems to have started again to move in a positive direction and I hope it continues that way.

With regards to Nigeria’s gas-to-power framework, what should the country be doing to bridge severe gaps in the framework?

It is true that there is shortage of gas available for power production and in fact there are gas plants that have been constructed and completed that don’t have gas supply and some that are not operating fully because of lack of adequate gas supply. It is very difficult for people to understand why there isn’t gas available when it is obviously been flared here and that is a terrible thing happening but it takes a lot of investment to make that happen in terms of compressing stations, pipeline capacity and what I am trying to make clear is that without consistent regulatory framework for investment, you won’t get private money to come forward and build those facilities and you have left the government to build all these things but I am sure the government has different priorities, if you want to encourage private investment in the sector, you have to have an effective regulatory package that will allow the process.

So, what is Nigeria not doing right in the value chain?

You don’t have a means of encouraging private investment in the sector as well as a regulatory structure and that is all encapsulated in the Petroleum Industry Bill as I understand and I have looked at it; it is still a work in progress but that piece could provide the key and I said could because we don’t know what the outcome would be but it could be one of the keys to making gas flow into this sector.

But why are operators in the petroleum sector critical of gas commercial framework in the PIB?

I am actually a Senator of the Wyoming State in the US and we are a gas producing state, we produce a considerable amount of natural gas and I know that when things are been debated in the legislature, it is often advantageous for different proponents of pieces of that to explain it in a particular way; it is not always true and I honestly cannot evaluate these arguments because I am not close enough to do that but I honestly look forward to learning more about it. What you have to understand however is that it is possible for people involved in developmental legislature to always put out a posture through various strategies but I do know that allowing for gas to be valued appropriately will be right because the biggest determinant of value for gas in the future for Nigeria is going to be the use of gas to produce power and when gas becomes valuable in terms of using it to produce electricity, investment will follow and it will be that way once there is an effective regulatory framework for private investment to come as well as local partners, you will see investment come into the market. You also need competitive suppliers if you want the market to be as competitive as possible and not a single supplier, that way; you will eliminate mischief in the market.

You have had interactions with NERC. Do you think the agency is ready for the regulatory tasks before it in the sector?

Well, they have to start from somewhere and they are very talented people that are asking the right questions all the time. It is not an easy thing to establish a regulatory agency and usually the problem is that people want to try to do too much but I assure you that you have a very capable regulatory agency; this I can tell because I have taught different regulatory agencies in about 12 countries and I can tell that there is a lot of skill and understanding here and I am sure that in your own way, there will be a lot of debate to move forward but let me stress that I am impressed.

What should then be the basic obsession of NERC now as the sector evolves?

They don’t have authority over gas but over power production and so they will effect their regulation through encouraging independent power producers to come in but they will not at this time really dictate because they don’t have control over gas supplies and so it will be up to independent power producers to seek out their gas suppliers and what that means is that you won’t be seeing big major pipelines and all these other facilities been developed but power plants cited close to existing facilities and it would be a good beginning without major investments until there is a structured gas supply framework.

In comparison with the operations of the UK Ofgem, does the fact that NERC lacks control over gas affect the growth of the power sector?

The Ofgem is a typical model. There are advantages and disadvantages to both models and I think going forward, you will need to have someone that is able to provide for pipeline investment and tariffs and regulation of pipelines and it doesn’t have to be NERC but maybe a different regulatory agency but that function is needed sometimes in the future to promote investment and I look forward to that but of course we have to wait for the outcome of the Petroleum industry Bill and in my mind, the sooner the better because there is so much needed here and every year that you go without beginning a process is like a year that adds to how long it will take you to get to where you want to be; it is amazing to me that my home state of Wyoming produces more electricity than Nigeria but that is not a fair comparison for such a wonderful country with so much resource base, however, I am excited to be here to at least add to the process of developing the sector.

Would you then say that the PIB holds the key to unlocking the power sector?

In a major way, yes and you can still have incremental development of power plants but without the availability of gas on a broad scale but that way we won’t see major transition and it sounds to me like everybody is talking about major transition and when you talk about 2000 megawatts per year, then that is major but it is only possible when that happens and also when you consider others like coal-fired power plant which are very expensive as well as the hydro plants. I also see on the table the opportunity to take plants that already exists and connect them to the grid as soon as issues that had kept them are sorted; there is really a whole lot of work to be done and you should get down to work now.

BioData

Dr. Cale Case

Dr. Cale Case, born June 2, 1958 is an economist, businessman, and politician from Lander in Fremont County in central Wyoming. Since 1998, Case has been serving in the Wyoming State Senate. From 1994 to 1998, he was a member of the Wyoming House of Representatives. He is considered a principal advocate in Wyoming of individual freedom and limited government.

Cale Case holds a Ph.D. in economics from the University of Wyoming at Laramieand is one of only four Wyoming politicians to have been granted the endorsement of the Republican Liberty Caucus. The late U.S. Senator Craig L. Thomas, Sue Wallis, and Frank Peasley are the others. He has also worked in numerous countries to improve the provision of electric and natural gas infrastructure and other services.

Tags: Business, Nigeria, Featured, Investment, Gas

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