One year after its inauguration, Emmanuel Addeh examines the impact of the Nigerian Gas Transportation Network Code, a set of rules to deepen access to transportation of natural gas in the country
In August last year, the federal government through the Department of Petroleum Resources (DPR) officially launched the Nigerian Gas Transportation Network Code (NGTNC), meant to open up gas delivery to the Nigerian market.
While Nigeria sits on roughly 206 trillion cubic feet of gas, the supply of the commodity has been hampered any a number of factors, including a lack of a policy tool that ensures penetration of gas to the local market.
Although that huge reserve places Nigeria as the number one gas producer in Africa and the ninth globally, it has largely not been able to tap into this to supply its market.
But the new policy announcement, the government said at the time, would help grow gas infrastructure, expand gas utilisation, curb gas flaring, and provide codes to standardise the gas value chain in line with global best practices.
In addition, it stated that it would deepen the supply of domestic gas-to-power, gas-to-industry, and gas-to-manufacturing, as well as reduce the challenge associated with the age-long flaring of gas molecules in the country.
At the launch last year, Minister of State, Petroleum, Timipre Sylva, assured stakeholders that the new arrangement will attract more investment opportunities in the nation’s gas value chain and help achieve the presidential mandate on gas penetration, given the current movement away from dirtier fuels.
In essence, the effective implementation of the network code gas transportation system was expected to boost the performance of the entire domestic gas value chain through the efficient linkage of the supply points to sources of gas and to all the demand as well as off-take points.
Since then, the DPR has coordinated the implementation process of the code through the alignment of all players in the industry, development of operationalisation procedures for the code and adaptation of critical technology enablement for the administration of the code.
Some of the key actors within the programme include gas suppliers, who are licenced upstream oil and gas producers and the network operator, who is a licenced midstream gas transportation entity that delivers gas from the upstream gas producer to a gas off-taker.
Forming a major arm of the system are the shippers who have entered into arrangements with suppliers and the transporters to purchase and transport gas for use in the downstream segment of the gas value chain.
There are also agents under the network code that fast-track the business of gas transportation between the transporter and shippers and ensure that all the terms of conditions of the network are strictly complied with.
The code further introduced a gas transportation regime where all shippers of gas are offered a fair, transparent and a non-discriminatory access to the licenced pipeline capacity of the transporter.
Drawing $500m Investment
One year after inauguration, the DPR said in this short time, the launch of the programme, which provided more clarity for the gas sector in Nigeria, had already attracted investment proposals of over $500 million.
Some of these investment proposals are for power generation, ammonia for fertiliser, domestic liquefied natural gas, methanol, virtual gas pipeline systems, new gas hubs and the establishment of Nigeria gas trading exchange.
One leg of the programme is also to reduce gas flare through the Nigerian Gas Flare Commercialisation Programme (NGFCP), from about eight per cent to five per cent in the country.
“We are looking at an additional $500 million in just one year since we introduced the code. The request is over 500 mmscf per day and this is just for one year; you can imagine how much investment we would attract if we continue with this,” Sarki Auwalu, Director of DPR, said.
He noted that with the gas code which ensures non-discriminatory access to pipeline systems, guarantees secure, available, reliable and safe gas transmission systems and ensures cost reflective tariffs for pipeline services, investors are now more interested in the activities in the gas subsector.
A key enabler of the Nigeria Gas Master Plan (NGMP), the DPR said the plan is already stimulating the multiplier effect of gas in the domestic economy, positioning Nigeria competitively in high value export markets while also guaranteeing the long-term energy security of Nigeria.
While there’s now an effort to conduct the transmission and distribution of natural gas through global industry best practice, it has further eliminated discriminatory access to gas transportation in the domestic gas market.
Although the NGTNC was announced in February last year, it took the existing users of the gas network agreement about six months to migrate, thereby pushing the formal launch to August.
To put it succinctly, the initiative is a contractual framework between the gas transportation network operator and gas shippers that specifies the terms and guidelines for operation and use of the gas network.
Evolving Gas Market
The Nigerian hydrocarbon industry came into the 21st century with a national strategic intent of deepening the value optimisation of its extensive gas resource and developed a blueprint in the first decade of the millennium known as the Nigerian gas master plan for accelerating the growth of the gas sector.
The gas master plan strategically considered, reviewed and presented a comprehensive domestic gas market development roadmap that will allow Nigeria to derive maximum value from the use of its abundant gas resources for supply of energy to where it is needed.
The plan supports an accelerated development of the Nigerian domestic gas sector; ensuring gas availability/affordability through the use of the Domestic Gas Supply Obligation (DSO), providing required gas infrastructural capacity across the entire gas demand points in the sector.
In addition, it emplaces a mature gas market where gas activities are carried out in a fully commercialised manner that supports optimal returns on all investments made in either gas supply, transportation or utilisation, recently culminating in the declaration of the decade of gas from 2021-2030.
The various means of safe and efficient transportation and distribution gas includes pipeline and non-pipeline better known as virtual pipeline systems.
It therefore means that pipeline systems will now easily flow natural gas from any point where it is produced to the point where gas is utilised in its various forms to create value.
As a background to this, the DPR had licensed over 10,000 km of pipelines for the efficient delivery of gas from the licensed oil and gas assets in Nigeria although additional investments are required in the provision and operation of more pipelines for the delivery of natural gas in the domestic gas market.
On the other hand, virtual pipeline systems are typically deployed to supply gas to demand points where pipeline systems are not available.
Virtual pipeline systems for supply of natural gas include LNG and compressed Natural Gas (CNG) by trucks as is being done in Nigeria to mitigate the infrastructural deficit being experienced in gas transportation.
With the gas master plan, relevant gas policies, regulations, programmes and initiatives governing the development of the domestic gas segment seek to ensure that natural gas is just not available but affordable to ensure that maximum economic rate is derived from the utilisation of the abundant gas resource in Nigeria.
In all, the gas sector in Nigeria has evolved over the years from the pre-plan era where it did not have much depth around a structured gas market to becoming a sector that has all the performance enhancement required for a vibrant domestic gas market segment.
Implementing the Code
The gas infrastructural master plan is being implemented to ensure appropriate coverage of the Nigerian gas market is guaranteed for supply of gas from the rich gas resourced Niger Delta basin to all economic zones across all the geo-political regions of Nigeria.
Stakeholders believe that continuous investment is required in the provision of gas pipeline capacity that will support the maturation and growth of the domestic market.
While outstanding domestic gas market players are yet to be fully brought in, there are plans to on-board the entire domestic gas off-takers (shippers) as the operationalising of the code enters its second year.
In the first year, transporter capacity available in the system hit 4.6bscf/day attributable to the single transporter that is currently providing open access gas transportation in Nigeria.
It is expected that going into the second year, 200, domestic consumers of gas will be able to get 200mmscf/day of gas, the power sector would have 150mmscf/day, while Gas-based Industries (GBI) will hit 400mmscfd/day as the new gas demand volumes get driven by the launching of a functional code.
Impact
Implementation of the code in the first year has helped in upgrading gas transmission into the non-discriminatory open access regime in the domestic gas market.
It has further ensured that natural gas transmission and distribution in Nigeria is conducted only through the global industry best practice regime of the network code, similar to what obtains in Europe, North / South America, UK, Egypt, and South Africa, where it is used in administering open access transportation regime of gas to all the critical segments of their economy.
In addition, it has eliminated discriminatory access to gas transportation in the domestic gas market, using standard, fair, transparent, and non-discriminatory regime for all gas shippers, which is a significant improvement from the pre-network regime where bilateral gas transportation agreements (GTAs) were established between the transporter and shippers.
Moreover, the code has improved investor’s confidence in the evolving domestic gas market, which has shown a positive trend, including receiving specific requests for support and enablement for gas supply for new projects in power, Industrial and commercial sector to the tune of over 500mmscf/d.
There’s now also an improvement in domestic gas market linkage between the downstream demand points and upstream gas supply opportunities, including an alignment between critical demand points for gas and available supply areas.
Through the instrumentality of the code, there now exists technology enablement of the domestic gas market segment, while capacity for effective gas market has been enhanced in the last one year of the implementation of the code.
This has been achieved through extensive stakeholder engagement and feedback from the critical segments of the domestic gas market, capacity building programmes and development of critical market data.
Future outlook
The gas network code has made quite some impact in just one year of its operation in the domestic gas market, despite the difficult challenges of Covid-19, global energy sector volatility and uncertainties, growing climate change pressures being exerted on hydrocarbon and the legacy issues of the domestic gas markets.
However, the implementation of the network code in its second year of introduction into Nigeria seeks to on-board all outstanding gas shippers into the Network Code Electronic Licensing and Administrative System (NCELAS) as well as issue licences to outstanding shippers.
In its second year of operation, the DPR, according to Auwalu, will also renew all licences issued in the first year, migrate all Gas Transportation Agreements (GTAs) onto the network code, expand capacity of the NC to cover more demand points across Nigeria as well as revise the network with all relevant stakeholder feedbacks.
It further aims to upgrade NCELAS for enhanced service delivery for all stakeholders, provide enablement for all investors expressions of interest and enquiries, integrate NCELAS to the Supervisory Control and Data Acquisition (SCADA) system as well as see the launch of the DPR domestic gas market data management system.
In addition, it will consolidate the domestic gas market strategic stakeholder alignment established in year one.
As it is, the optimal performance of the network code is a critical success factor and enabler for guaranteeing gas delivery to all the gas demand points across Nigeria and the African region.
Hopefully, during the second anniversary of the programme going live, which is scheduled for the third quarter of 2022, the network transportation code would have accelerated the realisation of the strategic policy objectives of the gas sector in Nigeria to further boost the economy.
As the DPR Director, Auwalu, put it recently, if the network code has achieved anything, it is the fact that: “ An investor who wants to build anything now knows where the gas is, who is transporting it, and an agent who will source the gas as well as the quality of the product.“
