Synopsis Of The 2017 National Gas Policy

Introduction

On Wednesday, June 28, 2017, the Federal Executive Council (FEC) at its monthly meeting approved the National Gas Policy, 2017 (“NGP”). The NGP, which was first released through the Ministry of Petroleum Resources (“MPR”), as a Consultation Draft in October 2016, is based on a fundamental review of the policy positions of the Government over the last ten (10) years in respect of Nigeria’s gas resources. Notably, the shortcomings of the 2008 Gas Master Plan (“GMP”) in attracting the needed private sector investment for building critical infrastructure and developing a mature domestic gas market by the target-year of 2015, coupled with the Government’s resolve of achieving its policy goals for the gas sector under the MPR’s 7 Big Wins initiative and the recently launched national Economic Recovery and Growth Plan (ERGP 2017–2020); seemingly necessitated the formulation and adoption of a new and better policy thrust for the industry. It is intended that the NGP will be complemented by a National Oil Policy and a Petroleum Fiscal Policy.

Fundamentally, the NGP sets the goals, strategies and an implementation plan for establishing a framework that will drive the institutional, legal, regulatory and commercial reforms necessary for attracting investment into the gas sector. Key components of the NGP are highlighted hereunder:

Strategic Objectives Of The NGP

The NGP envisions Nigeria as an attractive gas-based industrial nation, focused on satisfying local gas demand requirements, and developing a significant presence in international markets. The Policy aims to define and set the framework necessary to move Nigeria from being a crude oil export-based economy to becoming an attractive, oil and gas-based industrial economy.

The strategic objectives of the NGP include the following:

• Separation of the roles and responsibilities of government and the private sector, as it relates to the gas sector;

• Implementation of full legal separation of the upstream from the midstream;

• Implementation of full legal separation of gas infrastructure ownership  and operations from gas trading; 

• Establishment of a single independent petroleum regulatory authority;

• Optimisation of Liquefied Natural Gas (“LNG”) international downstream value;

• Pursuit of a project-based approach rather than a centrally-planned model for domestic gas development;

• Identification of new gas resources from the Niger Delta, offshore, inland basins and at the same time, aiming to achieve a reduction in gas flaring;

• Creation of a conducive environment for investors through the introduction of an appropriate institutional, legal, regulatory and commercial framework for the gas sector;

• Establishment of strong linkages of the gas sector with the electric power, agriculture, transport and industrial       sectors;

• Ensuring compliance with the requirements of the Nigerian Content Act.

The Gas Value Chain

The NGP separates and segments the gas value chain, for the following reasons:

1. Separate fiscal treatment (extensively dealt with in the complementary Petroleum Fiscal Policy), as well as providing  a basis for ending the practice of consolidating midstream costs and using same to offset upstream tax liabilities;

2. Enabling market entry and access for new entrants and investors;

3. Providing a level playing field between existing industry players and new entrants; and

4. Ensuring clarity in the regulation of the midstream sector.

The gas value chain has been identified and segmented in the NGP, as described below: