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Development of Domestic Gas Supply and Utilisation Prices for Effective Gas Distribution in Nigeria

Received: 7 May 2021     Accepted: 27 May 2021     Published: 16 June 2021
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Abstract

Every resource produced by a country should by necessity satisfy the needs and demands of its populace before consideration is made for export. This will ensure that a country is sufficient in production and allocation of its resources. While Nigeria is regarded internationally as a major gas producer in the world, her local consumption of natural gas is limited due to unavailability of gas for domestic utilisations fuelled by large margins between domestic and international pricing of natural gas. At the international markets, the gas attracts higher price due to market conditions while the prices are relatively lower at the domestic level probably due to limited routes of utilisation of the resource. Because of this, gas producers prefer to sell their commodity at the international market creating scarcity at the local levels. This has heralded underdevelopment of the manufacturing sector and indigenous companies in Nigeria that thrive on natural gas. This situation can be ameliorated by developing a gas price model for effective utilization and distribution of gas in Nigeria. The model will determine the optimum price that producers should sale their gas to make profit and also make gas available locally. In this study, emphasis is made on the development of a domestic gas supply and utilisation price model for effective gas distribution in Nigeria. The model incorporates the cost of producing a unit volume of gas by the gas producer, the energy value of the gas and the quantity of the gas demanded locally. The model is based on the gas produced, utilised, flared, domestic gas requirement and the aggregate price of gas produced for the various companies. Results show that the total revenue accruable from flare is $1.877B/yr which is higher than the total revenue accruable from DGSO deficit which is $0.595B/Yr. Thus, it is better that companies resort not to flaring. Analysis of the results also shows that companies are provided incentive by the model which closes gas deficit gap through a reduction in gas penalty price. Therefore, it serves as direct incentives to companies who meet with their DGSO. The results show that the gas deficit and flare penalty price has a direct impact on the flare penalty.

Published in International Journal of Oil, Gas and Coal Engineering (Volume 9, Issue 2)
DOI 10.11648/j.ogce.20210902.12
Page(s) 17-23
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2021. Published by Science Publishing Group

Keywords

Gas Supply Price, Gas Master Plan, Gas Volume, Gas Processing, Gas Production

References
[1] Malcolm, B. (2004), “The vital role of gas in a sustainable energy future”, paper presented at CERA conference, Houston.
[2] Kupolokun, F. (2005), Growth Projection for Nigeria’s gas sector. An article published in the Nigerian Guardian, 9th may, Lagos.
[3] Nigeria National Petroleum Corporation (NNPC). (2019). Annual Statistical Bulletin.
[4] Oyewunmi, Tade (2015) 'Natural Gas Exploration and Production in Nigeria and Mozambique: Legal and Contractual Issue 13 (1) OGEL Journal 1.
[5] Kazeem L. A., Amam, S. and Yang, J. (2006), “Between Gas Flare-out and Sustainable Oil and Gas TS2” Gas Utilization “SPE 105963, presented at 30th Nigerian Annual International Conference and Exhibition held in Abuja, Nigeria.
[6] OyewunmiTade, Iwayemi Akin (2016) Gas Supply to Power Markets in Nigeria: A Regulatory and Economic Assessment. The 9th NAEE/IAEE International Conference, Abuja Nigeria.
[7] Morgan L. and Chinwo, C. N. (2006), “Sustainable Gas Utilisation and the Clean Development Mechanism: The Nigerian Perspective” SPE 105968, presented at 30th Nigerian Annual International Conference and Exhibition held in Abuja, Nigeria.
[8] Emejulu, O, FUTO Consult Nigeria Ltd, (2009), “Development of Gas Aggregation and Allocation Models in the Domestic Sector of the Economy” A paper presented at Gas Stakeholders Forum in Abuja.
[9] Neeka, B. J, MPR Nigeria, (2010), “Gas Aggregation and Allocation in the Domestic Sector of the Economy” A paper presented at Gas Stakeholders Forum in Abuja, 15th February.
[10] Nduka K., Anyadiegwu C. I., Duru, U. I., Obibuike, U. J., Ekwueme, S. T (2020). "Development of Domestic Gas Supply Obligation Model for Efficient Gas Utilisation in Nigeria", International Journal of Oil, Gas and Coal Engineering.
[11] Nduka, K., Obibuike, U. J., Udechukwu, M., Mbakaogu, C. M., Igbojionu, A. C., Ekwueme, S. T. (2020).“Development of Revenue Model for Optimum Gas Distribution and Utilisation in Nigeria", International Journal of Oil, Gas and Coal Engineering.
[12] IkeanyibeOkechukwu Marcellus (2020). "Managing post-privatisation challenges: a review of Nigeria’s electricity sector", Journal of Contemporary African Studies.
[13] Okerie, G. A, (2009), “Economic Sustainability of Gas for domestic growth” publication on Oil and Gas Journal (OGJ).
[14] Imoudu P. B. and Igbatayo, S. A. (2006), “Developing Nigeria’s Gas Industry for Regional Economic Integration: The West African Gas Pipeline Project” SPE 105967, presented at 30th Nigerian Annual International Conference and Exhibition held in Abuja, Nigeria.
[15] Okparaojiaku, O. C, DPR Nigeria (2008), “Domestic Gas Supply Obligation Status” A paper presented at Gas Stakeholders Forum in Lagos.
[16] Prasad V. S. N. Tallapragada, (2009). ‘Nigeria’s Electricity Sector- Electricity and Gas Pricing Barriers’. First Quarter IAEE Energy Forum, 29–34.
[17] Ogwo, U. J. O, DPR Nigeria, (2007), “Equitable Gas Pricing Model” SPE 111897, presented at 31st Nigerian Annual International Conference and Exhibition held in Abuja, Nigeria.
[18] Ogwo, U. J. O, DPR Nigeria, (2008), “A Survey of Existing Gas Prices and Tariff Models in Nigeria” A paper presented at Gas Stakeholders Forum in Abuja.
[19] Ogwo A. E, PetroGas Ltd, (2010), “Instruments for the Implementation of Domestic Gas Supply Obligation” A paper presented at Gas Stakeholders Forum in Lagos, 24th February.
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  • APA Style

    Kenneth Nduka, Ubanozie Julian Obibuike, Ifeanyi Michael Onyejekwe, Anthony Kerunwa, Stanley Toochukwu Ekwueme. (2021). Development of Domestic Gas Supply and Utilisation Prices for Effective Gas Distribution in Nigeria. International Journal of Oil, Gas and Coal Engineering, 9(2), 17-23. https://doi.org/10.11648/j.ogce.20210902.12

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    ACS Style

    Kenneth Nduka; Ubanozie Julian Obibuike; Ifeanyi Michael Onyejekwe; Anthony Kerunwa; Stanley Toochukwu Ekwueme. Development of Domestic Gas Supply and Utilisation Prices for Effective Gas Distribution in Nigeria. Int. J. Oil Gas Coal Eng. 2021, 9(2), 17-23. doi: 10.11648/j.ogce.20210902.12

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    AMA Style

    Kenneth Nduka, Ubanozie Julian Obibuike, Ifeanyi Michael Onyejekwe, Anthony Kerunwa, Stanley Toochukwu Ekwueme. Development of Domestic Gas Supply and Utilisation Prices for Effective Gas Distribution in Nigeria. Int J Oil Gas Coal Eng. 2021;9(2):17-23. doi: 10.11648/j.ogce.20210902.12

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  • @article{10.11648/j.ogce.20210902.12,
      author = {Kenneth Nduka and Ubanozie Julian Obibuike and Ifeanyi Michael Onyejekwe and Anthony Kerunwa and Stanley Toochukwu Ekwueme},
      title = {Development of Domestic Gas Supply and Utilisation Prices for Effective Gas Distribution in Nigeria},
      journal = {International Journal of Oil, Gas and Coal Engineering},
      volume = {9},
      number = {2},
      pages = {17-23},
      doi = {10.11648/j.ogce.20210902.12},
      url = {https://doi.org/10.11648/j.ogce.20210902.12},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ogce.20210902.12},
      abstract = {Every resource produced by a country should by necessity satisfy the needs and demands of its populace before consideration is made for export. This will ensure that a country is sufficient in production and allocation of its resources. While Nigeria is regarded internationally as a major gas producer in the world, her local consumption of natural gas is limited due to unavailability of gas for domestic utilisations fuelled by large margins between domestic and international pricing of natural gas. At the international markets, the gas attracts higher price due to market conditions while the prices are relatively lower at the domestic level probably due to limited routes of utilisation of the resource. Because of this, gas producers prefer to sell their commodity at the international market creating scarcity at the local levels. This has heralded underdevelopment of the manufacturing sector and indigenous companies in Nigeria that thrive on natural gas. This situation can be ameliorated by developing a gas price model for effective utilization and distribution of gas in Nigeria. The model will determine the optimum price that producers should sale their gas to make profit and also make gas available locally. In this study, emphasis is made on the development of a domestic gas supply and utilisation price model for effective gas distribution in Nigeria. The model incorporates the cost of producing a unit volume of gas by the gas producer, the energy value of the gas and the quantity of the gas demanded locally. The model is based on the gas produced, utilised, flared, domestic gas requirement and the aggregate price of gas produced for the various companies. Results show that the total revenue accruable from flare is $1.877B/yr which is higher than the total revenue accruable from DGSO deficit which is $0.595B/Yr. Thus, it is better that companies resort not to flaring. Analysis of the results also shows that companies are provided incentive by the model which closes gas deficit gap through a reduction in gas penalty price. Therefore, it serves as direct incentives to companies who meet with their DGSO. The results show that the gas deficit and flare penalty price has a direct impact on the flare penalty.},
     year = {2021}
    }
    

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  • TY  - JOUR
    T1  - Development of Domestic Gas Supply and Utilisation Prices for Effective Gas Distribution in Nigeria
    AU  - Kenneth Nduka
    AU  - Ubanozie Julian Obibuike
    AU  - Ifeanyi Michael Onyejekwe
    AU  - Anthony Kerunwa
    AU  - Stanley Toochukwu Ekwueme
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    N1  - https://doi.org/10.11648/j.ogce.20210902.12
    DO  - 10.11648/j.ogce.20210902.12
    T2  - International Journal of Oil, Gas and Coal Engineering
    JF  - International Journal of Oil, Gas and Coal Engineering
    JO  - International Journal of Oil, Gas and Coal Engineering
    SP  - 17
    EP  - 23
    PB  - Science Publishing Group
    SN  - 2376-7677
    UR  - https://doi.org/10.11648/j.ogce.20210902.12
    AB  - Every resource produced by a country should by necessity satisfy the needs and demands of its populace before consideration is made for export. This will ensure that a country is sufficient in production and allocation of its resources. While Nigeria is regarded internationally as a major gas producer in the world, her local consumption of natural gas is limited due to unavailability of gas for domestic utilisations fuelled by large margins between domestic and international pricing of natural gas. At the international markets, the gas attracts higher price due to market conditions while the prices are relatively lower at the domestic level probably due to limited routes of utilisation of the resource. Because of this, gas producers prefer to sell their commodity at the international market creating scarcity at the local levels. This has heralded underdevelopment of the manufacturing sector and indigenous companies in Nigeria that thrive on natural gas. This situation can be ameliorated by developing a gas price model for effective utilization and distribution of gas in Nigeria. The model will determine the optimum price that producers should sale their gas to make profit and also make gas available locally. In this study, emphasis is made on the development of a domestic gas supply and utilisation price model for effective gas distribution in Nigeria. The model incorporates the cost of producing a unit volume of gas by the gas producer, the energy value of the gas and the quantity of the gas demanded locally. The model is based on the gas produced, utilised, flared, domestic gas requirement and the aggregate price of gas produced for the various companies. Results show that the total revenue accruable from flare is $1.877B/yr which is higher than the total revenue accruable from DGSO deficit which is $0.595B/Yr. Thus, it is better that companies resort not to flaring. Analysis of the results also shows that companies are provided incentive by the model which closes gas deficit gap through a reduction in gas penalty price. Therefore, it serves as direct incentives to companies who meet with their DGSO. The results show that the gas deficit and flare penalty price has a direct impact on the flare penalty.
    VL  - 9
    IS  - 2
    ER  - 

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Author Information
  • Department of Petroleum Engineering, Federal University of Technology, Owerri, Nigeria

  • Department of Petroleum Engineering, Federal University of Technology, Owerri, Nigeria

  • Department of Petroleum Engineering, Federal University of Technology, Owerri, Nigeria

  • Department of Petroleum Engineering, Federal University of Technology, Owerri, Nigeria

  • Department of Petroleum Engineering, Federal University of Technology, Owerri, Nigeria

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