Shell attributes rising gas output to pricing reforms

Shell Nigeria Gas (SNG) credits recent reforms with driving growth in domestic gas production and investment, citing clearer pricing frameworks and reduced policy uncertainty as key factors.

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The introduction of gas-focused policies, notably the Petroleum Industry Act, marked a turning point. By reinforcing the role of gas in Nigeria’s energy and industrial strategy and embedding instruments such as the Network Code, a critical framework that governs the operations of the domestic gas market and ensures transparency and stability, and the Domestic Gas Supply Obligation, which compels gas producers to allocate gas to the domestic market, the PIA significantly reduced policy ambiguity around gas development.

At a business forum in Abuja, Shell Nigeria Gas Managing Director Ralph Gbobo, represented by Head of Gas Distribution Chukwuka Amos-Ejesi, explained that the introduction of gas-focused policies, particularly the Petroleum Industry Act (PIA), has been a significant turning point for the sector. The PIA reinforces gas's strategic importance and establishes critical frameworks such as the Network Code, which governs domestic gas market operations with transparency and stability, and the Domestic Gas Supply Obligation, compelling producers to supply the domestic market.

Gbobo noted that these policy shifts have substantially reduced ambiguity surrounding gas development. Furthermore, pricing and licensing reforms have enhanced investor sentiment, motivating producers to invest in domestic gas projects. "The introduction of clearer pricing frameworks for gas supply and transportation and a more transparent and competitive licensing regime has also strengthened market confidence," he stated. These measures, he added, signal the government's strong commitment to utilizing gas as a driver of industrial development.

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The introduction of clearer pricing frameworks for gas supply and transportation and a more transparent and competitive licensing regime has also strengthened market confidence. Together, these measures have improved producer confidence, particularly for domestic gas projects, and signalled the government’s strong commitment to gas as a driver of industrial development.

Reflecting on SNG's early investments in gas distribution over 20 years ago, Gbobo acknowledged that demand was initially low, and the economics were not perfect. However, a "leap of faith" anchored on Nigeria's industrialization trajectory proved correct. Sustained investment, despite initial challenges, has helped create industrial clusters and attract long-term capital, demonstrating the importance of aligning demand, supply, and infrastructure development for a sustainable market.

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When SNG started in Agbara–Ota over 20 years ago, demand was nowhere near what it is today. The economics were not perfect, but there was a leap of faith anchored on Nigeria’s industrialisation trajectory. That decision has proven right.