Business Day: Developing Commercial Terms for Natural Gas

The idea that Nigeria is “a gas province with a little bit of oil in it” is commonly heard in oil and gas industry circles. The statement draws attention to the country’s substantial proven reserves of natural gas estimated at 187Tcf (trillion cubic feet). This gas volume confers on Africa’s largest economy the status of the country with the 9th largest gas reserves in the world (BP Statistical Review of World Energy/EIA, 2010). Experts have also concluded that Nigeria has the potential to grow its proven gas reserves to 600Tcf and emerge world’s 4th largest holder of gas reserves.

Despite this huge resource base, natural gas plays an insignificant role in Nigeria’s domestic economy. Particularly unacceptable are reports that the absence of clearly defined commercial terms for gas producers in the country is implicated in avoidable disputes with International Oil Companies (IOCs), with negative consequences for meeting the needs of the partially privatised successor companies to the Power Holding Company of Nigeria (PHCN). It has also been established that there is unmet demand by manufacturing companies for gas. Such industries include fertiliser producers and beverage companies.

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