The benefits of the over $18 billion investment in Nigeria’s gas sector in the last six years are beginning to manifest in the significant reduction of gas flaring, while improvement in power supply is expected to follow shortly stakeholders say.
The bulk of this investment went into infrastructural development which will add value to the associated gas ssupply from crude oil.
BusinessDay gathered that government and oil and gas firms have invested up to $3 billion annually in the last six years, in an effort to add value to the associated gas that has been flared for years, as well as provide infrastructure.
Also, the volume of gas flared has dropped drastically in the last six years from 2.5 billion standard cubic feet per day (SCF/D) to about 800 million scf/d.
Another impact of the investment is that gas is now been used to generate electricity, as well as to drive the manufacturing sector directly.
An assurance of further improvement has come from the Nigeria National Petroleum Corporation (NNPC) which says that within the next four months, all the national integrated power plants located on the eastern Niger Delta would get full compliments of gas supply required for power generation because the necessary gas pipelines have been laid to their locations.
Confirming this at the ongoing West Africa Gas Conference in Abuja, David Ige, group executive director, gas and power, NNPC said the investments had to be made because the focus has been first to reduce gas flaring and rechannel the gas for economic uses.
Ige said the quantity of gas supply coming now is not commensurate with the investment so far made because the focus now is to reduce flaring.
According to him, supply of gas in the eastern Niger Delta area has begun on a low scale and would scale up increamentally. He further said that currently NIPPs and privatised Power Holding Company of Nigeria (PHCN) have a gas supply shortage of 760 million scf.
“Clearly there is a shortfall of about 760 million scf today .The split is between the NIPPs which require about 360 million scf and 400million scf for the privatised PHCN plants in the eastern axis, while the plants in the western axis require almost 500million scf per day,” he said.
Nigeria has the world’s ninth-largest proven gas reserves at 188 trillion cubic feet and potential gas reserves of 600 trillion cubic feet (TCF), however much of it has been flared until now.
A number of domestic Nigerian firms such as SEPLAT, Oando, Seven Energy and Dangote Industries Limited are investing in the hugely untapped gas sector, as divestments by International Oil Companies (IOCs), spur opportunities.
SEPLAT petroleum Development Corporation an indigenous oil and gas firm which acquired assets (OML 4, 38 and 41) from Shell onshore divestments in Nigeria says it aims to take advantage of improving market conditions to monetise its existing gas reserves.
“SEPLAT signed two gas supply agreements, under which it agreed to supply the Geregu and Sapele power plants with approximately 130 MMscfd at a price of $1.40/Mscf, which is scheduled to increase to $2.00/Mscf during 2014,” the company said in a statement announcing its intention to float its shares on the Nigerian Stock Exchange (NSE) and London Stock Exchange (LSE).
“To date, the company has initialed two gas sales agreements with commercial off-takers, Azura Power and Southfield Petroleum, at a minimum unit price of $3.00/Mscf and the Company is in advanced discussions with a number of other potential commercial off-takers.”
The company’s total gas production was 16.3 bcf for the year ended 31 December 2013, equivalent to an average daily production of 45 MMscfd.
Explaining the current status of gas supply to some of the power plants, Ige said the gas to be supplied to Omoku Power Plant is ready, and is only waiting for the plant to be completed. Also, he said, the Gbarein Power Plant has gas ready, just as Calabar Power Plant has its gas pipeline connected and is waiting for supply from Seven Energy.
Alaoji Power Plant, according to him, is to be supplied by Total Exploration and Production, but is awaiting the completion of the channel in the next two weeks, while Egbama Power Plant is going to be supplied gas from ExxonMobil, through a sub-marine facility.
While the entire gas requirement of the Eastern NIPPs would be met within the next four months, this is however not so with the NIPP plants located in the western axis because a couple of projects currently going on there are yet to be completed.
Ige however said the gas needs of the axis would be reduced from 300millio scf to 240 million scf, by the end of the year.
“Within the first six months of next year ,we would have met the gas demand of all the NIPPs in the western axis. And before the end of the third quarter, those of all the privatised PHCN installations would have been met”, he assured.
The increasing gas demand from thermal plants and industrial users and improving pricing dynamics has led to companies showing greater interest in the sector.
DIL, controlled by Africa’s richest man Aliko Dangote recently submitted the highest bid for Shell’s stake in Oil Mining Lease (OML) 18, according Forbes onlin e quoting a recent report by Africa Intelligence. The Alakiri Creek plant on the OML 18 field processes 80 million standard cubic feet per day, but has the potential to rise to 120 mmsf/d.
Oando, another indigenous oil firm which purchased Conoco Phillips assets with significant gas reserves, has 100 km of gas pipelines laid in Lagos and another 128 km in Eastern Nigeria.