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.
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