Introduction - The New Gas Reality
With COVID-19 presenting a great cover story to avoid facing the pre-existing issue of cleaner global energy production and greener use of the environment with lower levels of industrial waste and higher rates of recycling, the journey of gas as an energy source has moved from backroom gossip to boardroom slide decks. The new pivot towards cleaner energy opens unexpected opportunities for Nigeria's fledgling gas market.
Nigeria produces both associated and non-associated gas with a reserve estimated at 202trn standard cubic feet (Tcf) of gas in the ground. Oil and gas analysts project that the country has an extra 650Tcf to 700Tcf of unaccounted gas reserves because of the low base of gas exploration activities in the country, with most associated gas (AG) produced by the oil majors being flared off. However, gas flaring has been reduced from over 65% of production in the late 1990s to less than 20% in more recent sector audits.
Nigeria is ranked ninth in the size of proven global gas reserves. The current size of the nation's gas reserves is expected to last the country at present rates of production and consumption for another 60 years.
Between 1999 and 2019 the Nigerian Liquified Natural Gas (NLNG) Company converted 193.6Bcm (billion standard cubic metres) or 6.84Tcf (trillion cubic feet) of AG to export products showing the rising importance of gas as an export earner and an export earnings risk diversification strategy. As the world goes green with the environment becoming more of a business concern to C-suite executives across the globe, Nigerian boardrooms will also have to address the matter of increasing the proportion of gas use relative to coal and sundry 'white' oils. The rise of the environmental, social, and governance (ESG) framework as part of the boardroom planning process indicates a post-COVID-19 reality that centres on more balanced approaches to business expansion. While profitability will remain an important part of the enterprise puzzle it will not be the only piece that will create the corporate picture of the future.
The world of gas will grow exponentially as commercial and private vehicles shift from premium motor spirit (PMS) or automotive gas oil (AGO) to compressed natural gas (CNG) to power their engines as families move from dual-purpose kerosene (DPK) to liquified petroleum gas (LPG) to cook daily meals. The new world of gas would be cleaner, cheaper, and more sustainable as fossil fuel gradually but predictably loses energy market share.
In its report on the oil and gas sector in 2020, Proshare's Confidential Report on the sector noted on page 76 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 between both outcomes.
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" (see Illustration 1 below).
Illustration 1: A Time of Transition
The Proshare Report further observed on page 77 that "Forward-facing technology will require forward-facing management, the key managerial imperatives in 2021 in the O&G sector will be imagination, strategy, and rethinking. The O&G models of the past will have to be unlearned; the present realities will require new approaches to be learned while the future would need managerial relearning. The big industry agendas of 2021 will gravitate around the energy needs of a climate-sensitive ecosystem that disavow the clunky smokestack factories of the past.
The new business mindset would need to address the cost efficiencies that would make cleaner manufacturing and power generation practical and affordable. Therefore, O&G firms will have to drive operational models that cut costs, reduce time to market, and integrate horizontal and vertical value chains to deliver goods in a cheaper, cleaner, and safer manner. This is not impossible, but it is a massive request to ask from companies that are not familiar with such levels of technological innovativeness, operational efficiency, and cost-effectiveness" (see Illustration 2 below).
Illustration 2: Reimaging Oil, Gas, and Technology
Deriving from emerging issues with the industry's major oversight bodies such as the department of petroleum resources (DPR), the Petroleum Product Pricing and Regulatory Agency (PPPRA), and National Petroleum Investment Management Services (NAPIMS), the managers of these agencies must buy into a new forward-thinking mindset devoid of old biases and ancient loyalties. The template for this new thinking might be seen in the local cooking gas (LPG) market.
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