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The other reason Nigerian gas is stuck

  • SOURCE: | qwesa2big
  • West Afria GasWhile Nigeria’s own increasing demand for gas has often been cited, the price Ghana offers for the commodity is fast becoming significant to why the Nigerians are being tight-fisted, as the contractual price is said to be uncompetitive.

    Although the B&FT is yet to ascertain the figures, indications are that the supplier N-Gas, a consortium made up of the Nigerian National Petroleum Corporation (NNPC), Shell and Chevron, is considering better prices offered elsewhere.

    The Energy Minister’s visit to Nigeria last Monday was supposed to have brought good news, as Chief Director of the ministry Thomas Akabza hinted. But the 20millionMMBtu additional volume the minister managed to get is seen as “a drop in the ocean” and will not end power rationing.

    A press release from the Energy Ministry on Friday said: After “intense negotiations” the Nigerians “assured” Ghana “of a constant supply of 50MMBtu/d — up from the 30MMBtu/d or less being supplied in recent days.

    “I am not surprised that the Nigerians are only adding 20millionMMBtu. The price at which Nigeria is selling gas to us today is competitively low, so Nigeria has a different focus,” said Mohammed Amin Adam of the Africa Centre for Energy Policy (ACEP).

    “We need to be serious about developing our indigenous gas resources rather than rely on Nigeria, because is it not a shame that the minister has managed to secure a quantity less than what we use to get? The 50million will still not take away the load-shedding,” he added.

    Ghana is said to be incapable of invoking a breach of contract clause against Nigeria due to a “free flow” agreement the VRA signed with N-Gas, which effectively means that Nigeria gives Ghana what it can spare of the gas.
    Otherwise, the original agreement, signed in 2004, contains a “send or pay” clause, which mandates the supplier to bear the consequences of its inability to supply.

    Another clause, “take or pay”, means that once the commodity is supplied, Ghana — which is the recipient — bears the consequences even if it does not use it.

    It remains unclear why the VRA signed the ‘free flow agreement’ which absolves the suppliers of any breach of contract.

    Industry watchers at the Africa Centre for Energy Policy (ACEP) believe that Ghana will either have to sit down with the Nigerians over the price it offers or “forget it”.

    Ghana currently requires some 400millionMMBtu of gas for VRA’s thermal plants and the privately-owned Sunon Asogli thermal plant.

    Even if the much-awaited Jubilee gas comes on board, it will not meet this demand
    With the country’s probable gas reserves estimated at approximately 5TCF (Trillion cubic feet), there is however potential for self-sufficiency.

    Nigeria, it appears, has a lot of gas to spare as it has launched a US$20billion Trans-Saharan project aimed at transporting about 30 billion cubic metres of natural gas to Europe.

    On 29 January Nigerian President Goodluck Jonathan announced in Addis Ababa, Ethiopia, that Nigeria has already mobilised US$700 million to support the project, which when completed will transport the gas from Nigeria’s Warri region through Niger to North Africa’s Algeria northward to Spain and Europe.

    “We have raised US$450million in Eurobonds and an additional direct equity contribution of about US$250million in support of this project,” he said.

    For want of infrastructure to monetise gas, Nigeria is said to flare the second-largest amount of natural gas in the world, following Russia.

    Reports suggest that natural gas flared in Nigeria accounts for 10 percent of the total amount flared globally and that gas-flaring in Nigeria has only decreased from 575 billion cubic feet in 2007 to 515 Bcf in 2011.

    Source: B & FT

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