Real reasons FG, IOCs, signed gas supply agreement – Alison-Madueke

The signing of two critical agreements between the Federal Government and international
oil companies in Nigeria has guaranteed 70 percent supply of the total power sector gas
requirements in the country, immediate past minister of Petroleum Resources, Diezani
Alison-Madueke, has said.

This is perhaps, the last official assignment the minister performed in this dispensation and
is one of the most significant things that has happened to this country. The agreement is
significant in the sense that it would guaranty steady supply of the much-needed electricity to
power the economy.

Furthermore, gas supply agreement negotiations between Chevron joint venture and
Nigarjura fertiliser company has also been finalised to pave the way for the take-off of the
fertiliser project while the Nigerian National Petroleum Corporation (NNPC), Chevron,
Xenel of Saudi Arabia are currently in Houston, Texas; looking at the conceptual engineering
options for the petrochemical and central processing facility.
These new initiatives are part of the several steps taken by the Ministry of Petroleum under
the leadership of Diezani Alison-Madueke to ensure that the Nigerian petroleum resources in

the last one year are maximally utilised to the benefits of Nigerians through the creation of
employment, steady supply of fuel and economic growth, and by extension increase the gross
Domestic Product (GDP).

There are plans that additional 20 refineries are being conceived for implementation by the
government. "While the execution of the Pan Ocean/Egbin gas supply agreement was a
major achievement last year, the latest agreement is even more significant. The significance
of today is in the fact that we are executing gas supply agreements between the top two
gas supply joint venture (JV) in Nigeria namely the NNPC/SPDC and NNPC/CNL JVs.
Collectively, these two JV's will be supplying about 70 percent of the total power sector gas
requirements.

"In essence, having fully negotiated the terms between these two JVs and an anchor power
plant- Egbin, we are now in a position where we can very rapidly replicate these agreements
across all other power plants that will be supplied by these JVs namely Olorunshogo,
Sapele, Omotosho, Alaoji, Delta, to name a few. Although it has taken a while to close
the negotiations, the knock on effect in terms of other agreements that can be immediately
executed is phenomenal," the former minister said. All these together will ensure supply to
power sector in a sustainable manner and more importantly ensure that the journey toward
creating over 500,000 jobs as promised by President Goodluck Jonathan has begun in earnest.

Alison-Madueke further said one other thing that no one can take away from this
administration is the fact that fuel supply to all parts of this country has been sustained and
sold at same price all over. Commenting on the gas agreement which involves the following-
Gas sellers' aggregate agreement (GSAA) and the sellers' representative agreement, Osten
Olorunsola, vice president, Gas Shell Sub-Saharan Africa, noted that the new agreement
means that SPDC would supply 90 million standard cubic feet of gas to Egbin which would
translate to improved electricity supply in the country.

The Shell boss informed that the multilateral agreement also involved the World Bank's
international development association (IDA) which would specifically provide credit
enhancement in support of the agreement through its partial risk guarantee programme.
The GSAA was signed between Egbin PHCN, Shell, Total and AGIP while the sellers'
representative agreement was signed between NNPC, Shell, Total and AGIP. "The positive
impact of this agreement more than justifies the investment in time and resources by all
parties," Olorunsola said.

Unfolding the agenda on gas last June, Alison-Madueke had stated that the Federal
Government was now more focused as ever to ensure expeditious implementation of the
Nigerian Gas Master Plan to attain clear-cut short-term and some medium-term objectives,
as well as to position Nigeria as a major player in the global gas market by securing the
Final Investment Decision (FID) of the Brass Liquefied Natural Gas, while refocusing on the
Olokola Liquefied Natural Gas project.

The former minister had listed the objectives of the two-pronged action for gas to include
sustainable supply of and delivery of gas to the power sector, implementation of a sustainable
commercial framework for domestic gas through a review of the gas pricing to encourage
investors by enabling them secure bankable agreements and the transformation of Nigeria
into a regional hub for gas-based industries by signing up world class investors in the
petrochemicals, methanol and fertiliser sectors.

Explaining the newly approved gas pricing regime, she said: "Currently, the price of gas to
power is two cents ($0.2) per mmbtu of gas, and that by the end of last year, the price of gas
would increase to $1/mmbtu. The price would graduate to $1.50/mmbtu by 2011 and $2/
mmbtu by the end of 2013, adding that beyond 2014, it would increase based on inflation
rate."

Speaking on the local content act in relation to efforts of the present administration and the
future of the industry's growth, analysts readily recall that it was only in the last one year that
the Nigerian Content Act which had been clamoured for, for almost 10 years could only sail
through the legislative processes and finally passed into law.

The passage of the Act into Law, interestingly, was to mark a significant landmark in the
Nigerian oil and gas industry. The former minister, who incidentally doubled as the chairman
of the governing council of the Nigerian Content Development and Monitoring Board, had at
several fora restated that the Nigerian Content Act was not intended to indigenise the industry
or nationalise assets of investors in the Nigerian economy.

Rather, the Act sets out provisions that guaranteed that investments made in facilities within
the country will be fully utilised and that will ensure that the rights of every investor was
protected under the laws. The targets set out in the Act presented substantial opportunities to
establish new facilities in Nigeria, upgrade existing yards and develop human capital to take
advantage of the imminent expansion of the industry, following the expected passage of the
Petroleum Industry Bill (PIB).

The implementation of the Act in the past one year has, therefore, provided immense
inspiration and the confidence to adopt the various pilot schemes which are already making
positive and immeasurable impacts. With job creation now a priority of President Jonathan's
administration, the Nigerian Content implementation has pledged to create more than
300,000 direct and indirect jobs

Author: nmmin

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