Wrestling COVID-19 and Lifting Gas

Proshare

Friday, March 12 2021   /06:00 AM / By Proshare Research/ Header Image Credit: EcoGraphics


Proshare Nigeria Pvt. Ltd. 


 

Investors in the gas business are globally on an emotional high as the world becomes increasingly conscious of the need to cut down on carbon-emitting energy sources. The shift of preference to 'greener' energy sources has steadily increased the demand for gas, a trend likely to continue over the next decade.

 

The COVID-19 global health pandemic led to major supply chain disruptions in 2020 this, in turn, led to a global reset with companies ramping up demand for gas as they try to reestablish pre-COVID-19 levels of output. The incline in gas demand will put upward pressure on gas prices thereby resulting in gas producers increasing supply to temper rising price momentum.

 

The 'living with COVID' environment will result in a change in how society interacts and how markets calibrate product value along changing value chains. The gas market would grow but the use of gas would depend on pricing, delivery channels, and regulation. High-handed government policies could either increase prices or cut back supply either of which would hurt the consumer.

 

The key to ensuring that the Nigerian economy moves along the trajectory of global best practices is to allow the principle of a 'willing buyer' and a 'willing seller' to prevail in the price discovery process for domestic LPG, this would require the following:

  • The government allows price-deregulated market operations without the interference of regulatory bodies imposing ambiguous charges.
  • The government preemptively moves against business cartels that potentially create a monopolistic or near-monopolistic pricing structure that allows members to take undue advantage of consumers.
  • Support the building of modern distribution infrastructure using a private-public partnership (PPP) model.
  • Improve domestic security to enable wider gas penetration nationwide. This would improve economies of scale and scope.
  • Upscaling digital integration into the gas production, distribution, and marketing value chain.
  • Weeding out of unlicensed industry operators and monitoring of safety standards and enforcement of standard operating procedures (SOPs) along industry value chains

 

In the previously referenced Proshare oil and gas (O&G) 2021 report, it was emphasized that "The notion that the oil industry will suddenly disappear is wrong, but so also is the belief that oil-producing countries have time to scrape by as the world pivots to new energy sources. The reality would seem to lie somewhere in-between both outcomes."

 

The report further noted that "Oil and gas companies will need to change their business models with less dependence on revenues from oil over the next decade while they also would need to ramp up their development of gas and its various uses in both industrial and domestic settings. With companies increasingly concerned about environmental, social, and governance (ESG) matters, the business environment will sashay towards friendlier environmental and social practices with higher emphasis placed on corporate governance and its consistent attention to best corporate practices".

 

The change in the mix of oil and gas as relevant sources of corporate revenues in years ahead would naturally create a non-statutory sunset period for the dominance of regulatory intervention in price determination in the O&G  sector over the next two decades (see Illustration 15 below).

 

 

Illustration 15:  Changing the Energy Mix, A Migration to the Probable (2018-2040)

Proshare Nigeria Pvt. Ltd.



The gas market (particularly the market for LPG) would see a future free from the stifling arms of public sector agencies which analysts believe presently pass avoidable costs to consumers. The desirable outlook would be a situation where the unit cost of gas declines as economies of scale and scope kick in and make cooking gas noticeably cheaper, thereby spurring higher levels of domestic gas consumption and a reduction in the use of "dirty" energy sources such as dual-purpose kerosene (DPK), coal and firewood.

 

On page 78 of Proshare's January 2021, O&G report the authors insisted that "In muscling forward Nigerian O&G firms must find segments of the new technology-framed energy market to service. In a decade the oil and gas business would be unrecognizable with price determination prised from the fingers of cartels and demand and supply being driven more closely by market forces. Efficiency, effectiveness, and cost-containment will be central to corporate survival. Another major factor would be technical skills and consumer-sensitivity".

 

The gas market will be a central focus of the Nigerian economy over the next few years but it must come from a place of competitiveness, strategic thinking, and the leveraging of technology that is fit-for-business. If the gains of the resurgent gas market are not going to go up in flames all stakeholders must realize that the mistakes made in the white oil business must be avoided. As much as possible the gas business must be domesticated with strongly integrated value chains built into the industry's future with human capital, engineering, and software infrastructure tethered together in a stack of productivity propositions that would make the Nigerian gas sector a global leader. 

 

Proper gas pricing is important but mostly within the context of an industry structure and operating framework that lives off the back of world-class standard operating procedures (SOPs) and best-in-class corporate governance practices. 



Proshare Nigeria Pvt. Ltd.


 

Downloadable Version of Memo to the Market: PPPRA and the Nigerian Gas Market, Avoiding a Robinhood

1.   Full Report: Memo to the Market: PPPRA and the Nigerian Gas Market, Avoiding a Robinhood - Mar 02, 2021


Proshare Nigeria Pvt. Ltd.


Related News

1.      A Guide to an Investor-Friendly Regulatory Framework

2.     The Case for an Investor-Friendly Gas Market

3.     PPPRA: The LPG Onslaught

4.     Gas Market Deregulation: The Nuts and Bolts

5.     The PIB and the Gas Sector - Shaping a New Model

6.     The Nigerian Gas Market: The LPG Mind Shift

7.     The New Gas Reality

8.     PPPRA and the Nigerian Gas Market: Avoiding a Robinhood


Proshare Nigeria Pvt. Ltd.


Related Link

1.      NLPGA v PPPRA - An Originating Summons in the Federal High Court of Nigeria Holden at Lagos  - Jan, 2021


Proshare Nigeria Pvt. Ltd.


Related Videos

1.      Why Full Deregulation is Vital for Nigeria's Oil and Gas Sector

2.     Privatization of NNPC Refineries, Will Attract More Investments into the Oil and Gas Industry - Tominiyi Owolabi

3.     Decades of Nigeria's Oil and Gas Sector: Way Forward

4.     Why Gas Should be Leveraged as A Pivot for Diversifying Nigeria's Revenue - Bambo Ibidapo-Obe

5.     How Oil and Gas Zones can Support Nigeria's Economic Growth


Proshare Nigeria Pvt. Ltd.


Related News - PMS Pricing

1.      Subsidy Removal and Cost-Reflective Tariff: Tough Decisions to be Made

2.     Possible Increase in PMS Price, Stakeholders Call for Fixing of the Non-Functional Refineries

3.     Uncertainty Over PMS Price - A Clear Indication Inflation Concerns Could Linger

4.     Commencement of Dangote Refinery's Production Would Improve Nigeria's Current Account Balance

5.     FG Inaugurates Technical Committee On PMS Pricing Framework

6.     FG: Dangote Refinery Will Sell Petrol at International Price

7.     Is PMS Price Deregulation for Real or a Mirage?

8.     NLC Communicates the Decision of Its CWC on Hike in PMS Pump Price and Electricity Tariff

9.     PPMC Increases Ex-depot Price of PMS to N151.56 per Litre

10.  Policy Directions on PMS, Tariff Hike, Gas and Stamp Duties and Implications on Households

11.   PPPRA Releases Advised Price for PMS for the Month of July 2020; Raises Pump Price to N140

12.  PPPRA Removes Existing PMS Price Cap; Commences Market Based Pricing Regime

13.  The Conundrum in the Retail Pricing of PMS

14.  Petrol: An End to the Subsidy Regime?

15.  The Deregulation Farce; What's The Way Forward?

 


Proshare Nigeria Pvt. Ltd.


Related News - Previous Oilprice Intelligence Report 

1.      Brent Crude Holds Gains Above $65 - OIR 230221

2.     Brent Crude Oil Price Falls Back Below $64 - OIR 190221

3.     How Much Higher Can Oil Prices Go? - OIR 120221

4.     Bullish Sentiment Takes Over Oil Markets - OIR 090221

5.     Brent Crude Surges Towards $60 - OIR 050221

6.     Oil Prices Hit 1-Year High - OIR 020221

7.     Oil Prices Hit 1-Year High - OIR 020221

8.     New Vaccine Hopes Boost Oil Prices - OIR 260121

9.     Oil Price Rally Paused By Chinese COVID Concerns - OIR 260121

10.  Energy Shares Plunge as Oil Rally Halts - OIR 220121

11.   Oil Demand Fears Continue to Weigh on Markets - OIR 190121

 

Proshare Nigeria Pvt. Ltd.



CMOs/Reports on Oil and Gas Sector

1.      Oil and Gas: Working the New Normal in the Time of a Pandemic

2.     The Nigerian Oil and Gas Industry Update: Urgent Need for Reforms

3.     Oil and Gas Update: Downstream Oil and Gas at a Crossroads

4.     Nigerian Oil and Gas Industry Update

5.     Oil and Gas Sector Records 1 Gainer to 7 Losers; Index Dipped By -19.83% YTD

6.     NCM2020 (20) - Oil and Gas Sector - SEPLAT Tops On EPS and PAT Margin As Mobil Tops on ROE

7.     Nigerian Oil And Gas Sector- Q3 2019 Earnings Preview

8.     The Oil Market, 2020 Black Swan, and A Third Virus Wave 


Proshare Nigeria Pvt. Ltd.


Related News on Oil and Gas Companies Latest Results

1.      CONOIL Declares N1.1bn PAT in Q3 2020 Results, (SP:N19.05k)

2.     JAPAULOIL Declares N91m PAT in Q3 2020 Result, (SP:N1.11k)

3.     ETERNA Declares N194m PAT in Q3 2020 Unaudited Results, (SP:N5.00K)

4.     Ardova Plc Declares N1.9bn PAT in Q3 2020 Result, (SP:N12.65k)

5.     SEPLAT Declares N33.7bn Loss in Q3 2020 Results, Proposes $0.05 Interim Dividend; (SP:N420.00k)

6.     MRS Declares N881m Loss in Q3 2020 Results, (SP:N12.45k)

7.     TOTAL Declares N500m PAT in Q3 2020 Results, (SP:N112.20k)

8.     RAKUNITY declares N37m Loss in Q3 2020 Unaudited Results, (SP:N0.50k)

9.     OANDO Notifies of Delay in the Publication of its Q3 2020 Financials

10.  OANDO Declares N13.06bn PAT in Q3 2019 Results (SP:N3.40k)

 

Proshare Nigeria Pvt. Ltd.


Related News on PIB

1.      NNRC Encourages NASS to Prioritize The PIB

2.     Inside Nigeria's 2020 Petroleum Industry Bill

3.       PIB Will Ensure Nigerians Benefit Optimally from Oil and Gas Resources - Ahmed Lawan

4.     PIB: Will the Jinx be Broken This Time Around?

5.     Petroleum Industry Bill - Is There Light At The End of The Tunnel?

6.     Nigeria to Draft Petroleum Industry Bill from Scratch

7.     FG Explains Why Presidential Assent Was Withheld For Petroleum Industry Governance Bill

8.     House of Representatives Passes Petroleum Industry Governance Bill

9.     Senate Passed Petroleum Industry Governance Bill

10.  Analysing the Petroleum Industry Bill

11.   Petroleum Industry Bill - Senate To Receive Final Report on PIGB April 25

12.  Bukola Saraki's Remarks at Petroleum Industry Bill Public Hearing

13.  The New Petroleum Industry Bill and Taxation of Petroleum Products in Nigeria

14.  FG may effect changes in Petroleum Industry Bill

15.  PIB Will Be An Enabler For Increased Investments In The Oil and Gas Sector - Bambo Ibidapo-Obe

16.  Power Sector: How PIB/Deregulation considerations dampens interest in mini refineries


 

Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd.



Proshare Nigeria Pvt. Ltd.

READ MORE:
Related News
SCROLL TO TOP