Nigeria’s Gas Industry In Crisis As Drilling Costs Skyrocket To $30m, Operators Warn

Nigeria’s pursuit of leveraging its natural gas reserves for industrialization and development has suffered a setback, as drilling cost for gas wells is climbing to $30 million.

At a media parley and training session for energy reporters, the Nigerian Gas Association (NGA) expressed deep concerns over fiscal burdens and operational challenges that continue to plague the industry, despite the enactment of the Petroleum Industry Act (PIA) two years ago.

Chichi Emenike, Chair of the Study Group on Diversity, Equality, and Inclusion at NGA, highlighted the need for the federal government to revisit fiscal terms within the PIA to attract much-needed investments in the gas sector. Emenike emphasized that the industry requires substantial funding for both drilling gas wells and building infrastructure for distribution.

READ ALSO: Nigerian Govt Still Pays Fuel Subsidy, PENGASSAN Insists

Emenike also criticized the complex regulatory framework, with multiple taxes and fees imposed on operators by various agencies, including the Nigerian Upstream Petroleum Regulatory Commission and the Nigerian Midstream and Downstream Petroleum Regulatory Authority.

The industry also grapples with a regulated pricing regime for gas, which she believes hinders growth. Emenike urged a shift toward a market-based pricing system, allowing producers to set prices based on market dynamics.

The President of NGA, Akachukwu Nwokedi, echoed the call for a review of the PIA, emphasizing the need for a comprehensive stakeholder engagement to address impediments hindering investment and ease of doing business in the gas sector. Nwokedi pointed out issues like multiple taxation within the PIA and the requirement to pay fees in U.S. dollars, urging the adoption of a naira payment option.

Nwokedi also emphasized the importance of developing commercial and fiscal terms for gas development, both offshore and deepwater, to encourage competitive investments and sustain gas supply for the nation’s needs. The NGA plays a pivotal role in advocating for the Nigerian gas industry, promoting investments, and facilitating an equitable energy transition.

As Nigeria aspires to harness its gas resources for industrialization and economic development, addressing these challenges will be crucial to realizing its goals.