‘NUPRC Adopting a ‘Phase-Down’ Approach in Utilizing Nigeria’s Energy Resources’- Michael Edem

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In this interview, The Energy Republic talks to Michael Benedict Edem, Mechanical Engineer of Nigerian Upstream Petroleum Regulatory Commission (NUPRC), about the Commission’s New Business Model in driving natural gas development in Nigeria.

Interview: By Ndubuisi Micheal Obineme.

TER: Please tell us about yourself and your work at NUPRC.

Michael: My name is Michael Benedict Edem and I am a graduate of Mechanical Engineering (First Class Honors) from the University of Port Harcourt. I am a registered engineer in the Council for the Regulation of Engineering in Nigeria (COREN), a member of the Society of Petroleum Engineers (SPE), Nigerian Association For Energy Economics (NAEE), and the Nigerian Gas Association (NGA). I worked briefly for Ernst & Young Nigeria as a Tax Associate before joining the Nigerian Upstream Petroleum Regulatory Commission, formerly the Department of Petroleum Resources.

The NUPRC is the technical and commercial regulator of the upstream petroleum sector and is one of the new regulatory agencies created by the Petroleum Industry Act in 2021. In NUPRC, I work in the Central Electronic Licensing, Approval and Permitting System (CELAPS) unit where my job roles include integration of all licensing, approval, and permitting portals to ensure ease of access and administration, online document verification for companies applying for Oil and Gas Industry Service Permit (OGISP), maintaining a compendium of all our service instruments that provide business opportunities, continuous performance review and upgrade of all licenses, approvals and permit platforms.

I am very passionate about the Nigerian Government’s efforts in monetizing natural gas to accelerate economic development, eliminate energy poverty and mitigate climate change.

TER: How would you evaluate the Nigerian gas potential with emphasis on NUPRC’s business model to drive natural gas development in-country?

Michael: The primary responsibility of a Regulator is to provide investment opportunities to prospective investors by creating a conducive business climate through the effective implementation of policies, laws, regulations, and other innovations that will attract investments into the country. The NUPRC strongly aligns with this objective and has identified natural gas as the driver for sustainable economic growth and development in the country.

Gas is gaining prominence in the world because it is environmentally friendly and has multiplier effects on several sectors of the economy such as agriculture, petrochemicals, power, etc. Nigeria has huge gas potential with an estimated 208.62Tcf of proven gas reserves and 600Tcf of reserves yet to be proven. Currently, Nigeria is ranked 9th in the world in terms of proven gas reserves and can become the 4th highest just behind Qatar if the 600Tcf is proved.

Nigeria’s gas production is however about 8 billion standard cubic feet per day (Bscfd) with 42.93% exported to Europe and neighboring West African countries; 18.66% consumed by the domestic market, 29.71% used in-field for utility, gas lift, and pressure maintenance and 8.70% was flared.

The NUPRC is very intentional in increasing gas exploration and development through the implementation of policies such as the

Nigerian Gas Flare Commercialization Programme (NGFCP) to monetize flare gas, mandating incorporation of gas utilization strategies in Field Development Plans to prevent routine gas flaring, allocation of domestic gas delivery obligations to gas producers to deepen gas penetration in the domestic strategic sectors, ensuring competitive pricing of natural gas to the domestic market, providing quality data from the National Data Repository (NDR) to enhance gas exploration, developing cost benchmarks for gas exploration and development to ensure cost optimization and implementation of the incentives in the Petroleum Industry Act to attract investments in gas development.

TER: What’s NUPRC Energy Transition Strategy?

Michael: The global energy transition is a reality that affects us all, both in developing and developed countries. Despite this transition, fossil fuels will still be relevant in the energy mix according to global energy outlook reports by OPEC and GECF. Nigeria is fully committed to the Paris Agreement and has pledged to achieve a net-zero carbon emission target by 2060.

However, this implementation process would have to align with our strategic national interest in energy security and sustainability. Our Commission Chief Executive (CCE), Engr Gbenga Komolafe, who spoke at the Africa Economic Summit on 30th March 2022, said that the Commission will be adopting a ‘phase-down’ as against a ‘phase-out’ approach in exploitation and utilizing Nigeria’s endowed energy resources. Nigeria’s fossil fuels will still be needed in the long term to meet the growing domestic energy demand especially as energy poverty continues to be a major challenge in the country.

The Nigerian Government has adopted gas as its transition fuel and is working towards gas reserves growth, optimizing gas production, increasing gas utilization as well as eliminating gas flaring. Gas is the cleanest fossil fuel and will be pivotal in achieving a low-carbon economy. The Commission is fully aligned with increasing natural gas production to accelerate economic development by serving as an alternative to more carbon-intensive fuels. The Petroleum Industry Act which was passed in 2021 will serve as a springboard for more investments in gas exploration, development, and utilization. The Act makes Nigeria more competitive by providing improved fiscal incentives that will ensure a fair return on investment for investors. Maximizing the utilization of our gas resources will ensure we meet our energy demands, diversify the economy and achieve climate change ambitions.

TER: What are your perspectives on the Nigerian Decade of Gas?

Michael: The Nigerian Government declared 2020 as the “Year of Gas” and the next decade as the “Decade of Gas”. This was a deliberate move to put natural gas on the front burner as natural gas is the fuel of choice and will become the dominant fuel in the energy mix by 2050. The Decade of Gas declaration was greeted with a lot of optimism by stakeholders because natural gas is pivotal to diversifying the economy away from oil and will create job opportunities, increase government revenue, and ensure sustainable economic growth. The Nigerian Government has implemented several gas investment initiatives aimed at stimulating gas production and utilization in the country. The Nigerian Gas Flare Commercialization Program (NGFCP) is designed to eliminate gas flaring through technically and commercially sustainable gas utilization projects developed by competent third-party investors who were invited to participate in a competitive and transparent bid process. The program has the potential to create 300,000 jobs, produce 600,000 MT of LPG per year, and generate 2.5 GW of power from new and existing IPPs, as approximately 700mmscf/d is flared at 178 flare sites in Nigeria.

The National Gas Expansion Program (NGEP) was launched in 2020 to reinforce and expand gas supply as well as stimulate demand in Nigeria through effective and efficient mobilization and utilization of all available assets, resources, and infrastructure in the country. NGEP has the capacity to reduce poverty by making gas-based fuel available, affordable, and accessible to mostly under-served communities in the country, thus contributing to job creation and human capital development through new investments in the gas sub-sector.

To drive the implementation of NGEP, the Central Bank of Nigeria has provided a ₦250 billion intervention facility to qualified companies to establish mid-stream and downstream gas facilities that will utilize gas. The Nigerian Gas Transportation Network Code (NGTNC) was launched in 2020 to establish a legal and contractual framework between transportation network operators and gas shippers, that provides a set of rules for efficient operation, open access, availability, reliability, and use of the gas pipeline system. The code will promote investments in the gas sector, entrench specialization and professionalism in the gas business, eliminate gas flaring, stimulate domestic gas utilization in Nigeria, and boost revenue generation for the country.

The Ajaokuta-Kaduna-Kano (AKK) gas pipeline which is undergoing construction is a 2Bscf/day, 48” and 614km gas pipeline connecting Lokoja, Abuja, Kaduna, Kano, Zaira, and Katsina states. AKK will boost economic activities in Northern Nigeria by providing access to gas. The Obiafu-Obrikom-Oben (OB3) is a 2Bscfd, 48” and 127km gas pipeline that links the eastern and western regions of the country and is undergoing construction.

Export gas pipelines such as the Nigeria Morocco gas pipeline and Trans-Saharan gas pipeline are critical gas infrastructure that when completed will make Nigeria a major gas supplier to Europe and West Africa.

The Petroleum Industry Act which was passed in 2021 will provide a competitive investment climate for gas with several fiscal incentives that will attract cashflows into the country.

Some of the incentives in the PIA are the establishment of a Midstream and Downstream Gas Infrastructure Fund, reduced royalty rates for gas production, the establishment of cost-reflective pricing for natural gas to the domestic market, exemption of hydrocarbon tax on gas production excluding production of crude oil, liquid NGLs and field condensates derived from associated gas upstream of the measurement point, application of section 39 of the Company Income Tax Act and extension of renewal of tax-free status for pipeline investors by 5 years.

These initiatives underscore Nigeria’s readiness to transform the economy into a gas economy in the decade of gas and beyond.

TER: Recently, Nigeria, Niger, and Algeria have signed an agreement that will see development resume on the $13 billion Trans-Saharan gas pipeline project, an opportunity to diversify the European Union’s gas supply in Africa. What’s your assessment on the potential of this project?

Michael: The Trans-Saharan gas pipeline (TSGP) was conceived in the Nigerian Gas Master Plan as a critical enabler for an increased supply of natural gas to West Africa and Europe. The pipeline will connect the Ajaokuta-Kaduna-Kano (AKK) gas pipeline once completed, via Niger, to the In Salah development area gas pipeline in Algeria and ultimately to Europe.

The Russia-Ukraine crisis has opened new opportunities for Nigeria to supply gas to European Union countries and this infrastructure will help us actualize this objective. Currently, Nigeria provides about 4.8% of the EU’s natural gas needs through LNG export by the Nigerian Liquified Natural Gas Limited.

This contribution can be increased once this pipeline comes on stream and will reinforce bilateral cooperation between Nigeria and the EU. The local economies in Nigeria, Niger, and Algeria will also benefit immensely from this project through job creation, capacity development, accessibility to gas, and an increase in gas utilization facilities. We expect that the EU will invest in gas exploration and development in Nigeria to ensure sufficient gas supply through this pipeline to meet the EU’s gas demands.

TER: What is your analysis on the opportunities in adopting new technologies to improve the safety and productivity of such pipeline infrastructure in the region?

Michael: The NUPRC is open to exploring new technologies that will enhance the safety and value creation of pipelines and other infrastructure. We have a Technology Adaptation unit in the organization which is saddled with assessing novel oil and gas new technologies for adoption in Nigeria, monitoring the deployment of new technologies across the oil and gas project life cycle, and reviewing research initiatives that reveal opportunities to improve oil and gas facilities’ system design.

The wealth of experience and expertise in this unit will be applied during the engineering phase of the Trans-Saharan gas pipeline to evaluate new technologies that will ensure pipeline integrity and security along the Right of Way.

We will also leverage the successes of the West African Gas Pipeline when selecting technologies suitable for this project.