Stakeholders ask govt to remove royalties on locally consumed gas

Stakeholders in the gas industry have asked the federal government to remove all forms of royalties on locally consumed gas.

This is contained in a communique released by the Nigerian Gas Association (NGA) at the end of the second edition of the industry multilogues held in February.

Royalty interest in the oil and gas industry are ownership of a portion of a resource or the revenue it produces.

Babajide Sanwo-Olu, governor of Lagos; Timipre Sylva, minister of state for petroleum resources; Joe Kang, president of International Gas Union (IGU); and Mele Kyari, the group managing director of Nigerian National Petroleum Corporation (NNPC), all spoke during the two-day event.

The event also saw the inauguration of Ed Ubong, as new president for the Nigerian Gas Association, and other new executive council.

The industry stakeholders said Nigeria must enhance both fiscal and operational policies required to attract the right investments to realise the objectives and aspirations outlined within the nation’s gas programmes.

They agreed that the government needs to urgently resolve legacy debts, payment guarantees, and other commercial impediments, including power delivery bottlenecks in the gas-to-power programme.

“The panelists called for the total removal of royalties on Gas supplied and consumed in the domestic environment to encourage more supplies that catalyze more significant development in the overall domestic economy,” the communique reads.

“They demanded non-discriminatory pricing mechanisms that offer suppliers equal opportunity for returns on investments and cost-reflective tariff structure across the Gas value chain.

“The Central Bank of Nigeria (CBN) and other development banks need to prioritise the Gas industry, underpinned by concessional interest rates and guarantees for dollar-denominated transactions, to assure lender confidence in Gas projects.”

The communique noted that PENCOM will make $32 billion pension funds available to natural gas investors as priority funding for critical gas infrastructure.

It noted that cost-reflective pricing mechanism, favourable fiscal regime, ease of repatriation of dividend/capital, stable exchange rate, and national industrial policy stability are critical conditions for spurring equity and loan financing in the local gas market.

“It was revealed during the sessions that the BOI has a $500 billion funding arrangement with the Bank of China (BOC) to finance import equipment for flare Gas capture, which requires the intending borrowers to advance about 25 per cent of their funding needs and import their equipment from China,” it reads.

“Similar arrangements with the US Exim Bank are also available for players that want to import their flare capture equipment from the United States.

“There is a need to warehouse world-class local capacity to adapt imported technologies for the local conditions to reduce overdependence on Original Equipment Manufacturers (OEMs), improve local content know-how, deepen innovations, curtail maintenance costs and the overall cost of production.”