FG Saves $1.8bn In Forex As Dangote, Others Sign Gas Supply Deal
The Dangote Group, the Nigerian National Petroleum Company Limited (NNPC), Shell, Nigerian Agip Oil Company Limited (NAOC), Total Energies as well as the Gas Aggregation Company of Nigeria (GACN) yesterday signed a Gas Sale and Aggregation Agreement (GSAA) in Abuja.
The agreement which took place on the sidelines of the ongoing Nigeria International Energy Summit (NIES), Economic Confidential learnt would see the companies supply 70 million standard cubic feet per day of natural gas to Dangote Fertiliser Limited (DFL) to ramp up operations at the plant.
Natural gas is a feedstock of the Dangote Fertiliser plant, with the gas supply agreement expected to guarantee the availability of the major raw material needed to run the plant.
The deal coincided with a statement by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), releasing a new Domestic Gas Demand Requirement (DGDR) for 2022, and pegging the figure at 4.4 billion standard cubic feet for the country.
Nigeria represents one of Africa’s heavyweights when it comes to hydrocarbon exploration and production, with over 206 trillion cubic feet of natural gas, but has a huge gas supply deficit despite rising demand.
The African Energy Chamber (AEC) recently put Nigeria’s annual production capacity of gas at 1.450 billion cubic feet, as the country recovers from 2020 low production levels due to COVID-19.
But despite boasting of huge reserves and topping major countries, Nigeria’s per capita consumption of gas, Nigeria’s Ministers of State for Petroleum Resources, Timipre Sylva, recently lamented, remains one of the lowest in sub-Saharan Africa.
But speaking during the contract-signing event which was witnessed by the chief executives of all the organisations, the Founder of the Dangote Group and Africa’s richest person, Alhaji Aliko Dangote, said the deal would save the country a whopping $1.8 billion in foreign exchange.
Dangote stated that aside Egypt, Nigeria was the topmost fertiliser producer in Africa, explaining that the Dangote plant, Notore and the one belonging to Indorama have a huge combined production capacity on the continent.
The business magnate explained that aside meeting the domestic demand for fertiliser, the Dangote group was working hard to ensure that Nigeria retains a large chunk of its foreign exchange.
“I want to thank the Group Managing Director (Mallam Mele Kyari) for his leadership. Without him, this wouldn’t have happened. I also want to commend Shell, and most of all Bala Wunti (Group General Manager, National Petroleum Investment Management Services (NAPIMS) for pushing and making sure this becomes a reality.
“This additional gas will help bring in more foreign exchange into the country, especially with the current energy crisis. With our fertiliser plant, Notore, and Indorama, we are second in Africa. Apart from Egypt, no other African country has our capacity.
“We will meet domestic market and also export and we are talking about $1.8 billion (savings) in terms of foreign exchange coming into the country,” he stated.
Kyari said the contract was perfected within a short period based on its importance to the production of fertaliser and agro-economic growth of Nigeria.
“As you are aware, Dangote fertiliser is one of the biggest producers of fertiliser and this deal, which is to offer 70m scuf per day to Dangote fertiliser by the JV, will contribute to the surge of fertaliser production in Nigeria. Of course, it will tremendously be positive to our agro-economy,” Kyari said.
Also speaking, Managing Director of the Shell Petroleum Development Company and Country Chair, Shell Companies in Nigeria, Mr. Osagie Okunbor, described the agreement as the fastest GSAA ever in the country.
He commended the partners for working under serious pressure to ensure that the deal was struck, noting that it remains hugely important for the country.
He explained that the current government takes agricultural production very seriously, noting that as the company which produces the bulk of Nigeria’s fertilisers, the Dangote group was well positioned for the deal.
Meanwhile, a statement earlier signed by the NMDPRA Chief Executive, Mr Farouk Ahmed, noted that the newly released national gas requirement was jointly determined by all the relevant stakeholders.
He stressed that the data was transmitted to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) on Tuesday, with the power sector need pegged at 2.324 billion standard cubic feet per day.
“In addition, the gas-based industries were fixed at 1.125 billion standard cubic feet per day and the commercial sector was set at 1.034 billion standard cubic feet per day while the total domestic gas demand requirement was 4.482 billion standard cubic feet per day,” he stated.
He noted that the document would help the NUPRC to prescribe and allocate the domestic gas delivery obligation among all lessees as stipulated in the Petroleum Industry Act (PIA) 2021.
The downstream authority added that the stakeholders consulted included gas producing companies, gas transportation companies, gas off-takers and key regulators such as the NUPRC and Nigerian Electricity Regulatory Commission (NERC).
It added that the organisation was obligated to determine the domestic gas demand requirement which shall be the total amount of marketable natural gas required for all wholesale customers of the strategic sectors.
NNPC Restate Need for Full Deregulation of Downstream Petroleum Sector
However, concerned about prices Nigeria pays for subsidising petrol consumption, the NNPC and marketers of petroleum products have re-echoed the need for full deregulation of the downstream petroleum sector in the country.
They said that deregulating the sector and allowing market forces to determine the price of petrol would boost the country’s domestic refining capacity as more investors would be willing to invest in building refineries.
Speaking at a session yesterday at the NIES 2022, Group Executive Director, Refining, NNPC, Mr. Mustapha Yakubu, argued that full deregulation of the downstream sector would encourage the establishment of more modular and condensate refineries in the country.
Yakubu said the NNPC has the mandate to protect Nigeria’s energy security and would continue to support efforts geared towards adding value to the nation’s crude oil production.
He said, “We believe that there is need to improve our domestic refining capacity. That is why the NNPC is embarking on total rehabilitation of our four refineries and not just the usual Turn Around Maintenance.
“We are going to have locally refined products after the completion of the rehabilitation.
“We also have the Dangote Refinery coming up in Lagos while the Waltersmith Refinery in Imo is already in operation.
“Other modular and condensates refineries are coming up, and NNPC is supporting private investors in establishing them.”
The NNPC GED appealed to Nigerians to show understanding with the NNPC due to the lingering scarcity of PMS across the country, adding that efforts were being made to resolve the issue.
Immediate-past Chairman of Major Oil Marketers Association of Nigeria (MOMAN) and Managing Director of 11 Plc, Mr. Tunji Oyebanji, said the postponement of the full deregulation of the downstream sector was a huge setback to the industry.
Oyebanji said liberalisation of the sector would enable investors across the value chain to have adequate returns on their investments, which was the goal of the Petroleum Industry Act (PIA).
Lending his voice, Chief Executive of OVH Energy Marketing Limited, Mr. Huub Stokman, said increasing Nigeria’s domestic refining capacity would change the country’s economic landscape.
He noted that the current challenge with the scarcity of petrol was a clear indication that Nigeria needed a good emergency plan going forward.
On his part, Executive Director, Rainoil Limited, Mr. Emmanuel Omuojine, said removing subsidy on petrol would add significant value to Nigeria’s foreign exchange reserves on the macroeconomic level.
He said deregulation of the sector would increase competition, operational efficiency, mergers and acquisitions, increase incentives to invest and capital investment inflow.