Nigeria’s private sector gas invoice arrears hit N100 billion

Power sector gas invoice arrears have grown from a reconciled N40 billion of undisputed arrears in December 2014, to about N100 billion according to Nigerian National Petroleum Corporation (NNPC)’s estimate of May 2016.

Chairman, Oil Producers Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry (LCCI), Clay Neff, who made this disclosure at the 2016 Business Forum organized by the Nigerian Gas Association (NGA) in Lagos, said that repaying outstanding gas invoice arrears has become a serious challenge in the gas sector.

According to him, it is important to settle the outstanding debts and establish bankable credit support facilities for future gas sales.

Without these assurances, he noted, it will be unreasonable to expect investors to commit additional investments to grow domestic gas supply.

Neff stated that Nigeria’s inadequate gas infrastructure, has contributed to the inability to meet domestic gas demand. “Although some progress has been made recently, the growing demand of domestic gas calls for major investments in infrastructure”, he added.

He said that Nigeria’s huge untapped gas resources could underpin government’s vision to grow gas production for power generation and to support industrial uses.

To attract investment into the gas sector, Neff emphasized the need for a conducive business environment.

He listed the components of a conducive business environment include: having efficient and effective regulatory bodies, maintaining stable laws and policies, honoring contracts, eliminating structural factors that increase costs, and ensuring security of life and property.

He said that it is essential to have efficient and effective regulatory bodies to ensure transparent and timely approval of activities such as permits, license renewals, projects, and contracts.

“The Government agencies that regulate the petroleum industry often have duplicative and overlapping functions leading to unnecessary bureaucracy. For example, procurement, contracting approvals take up to thirty-six months, while in many countries similar processes take an average six months. This slows project development and increases costs,.

“There must be a solid tax and legal framework that leads to stable laws and policies in order to attract the required massive investments”, he said.

He emphasized the need for Nigeria to maintain its reputation for honoring contracts. “Businesses need to know with reasonable degree of certainty that contracts and agreements entered into in good faith will be honored, and where disputes arise, that there will be access to an independent and fair mechanism for a timely resolution.

“There is an opportunity for industry and Government to collaborate on opportunities to eliminate structural factors that increase operating and capital costs in the petroleum industry. Industry has made great strides to reduce costs where the opportunities are within their control. However, there is an untapped pool of cost reduction opportunities, which have the potential to position Nigeria as a more competitive basin in the global industry – as it should be given the quality of resources,

He stated: “To fast-track the development of these resources, Nigeria needs to focus on the five key areas highlighted today.

“Government policy should be directed at striking the right balance between seeing gas as a catalyst to drive economic development and as a commodity for revenue generation. This balance is necessary to encourage the required investments for gas development.

“When unlocked, these abundant resources can boost Nigeria’s economy by improving electricity generation, and creating jobs and new industries such as fertilizers, methanol and plastics.