Gas! Nigeria’s new oil


Nigeria, with her 5.1 trillion cubic metres of gas reserve, is ranked 9th in the world and first in Africa. The country is considered more of a gas nation than an oil producing nation, because of the extensive gas reserve. Unfortunately, much of the gas is flared as associated gas encountered during the normal course of oil production. The country is one of the top gas flaring nations, in fact Nigeria is second only to Russia in this respect.


Gas plants

In an attempt to harness the Country’s tremendous gas resources, several billions of dollars had been invested in Liquefied Natural Gas (LNG) facilities. The first LNG train was commissioned in 1999 and after that, five others had been commissioned. With the completion of the sixth train, Nigeria’s LNG Plant has an overall capacity of some 22 million tonnes per annum. In 2014, NLNG will pay a tax of about $1 billion to the government. The completion of the Escravos gas to liquid plant also provides another dimension to the country’s gas utilisation. The $10 billion project scheduled to start production this year will convert natural gas to about  30,000 barrels of liquid fuel, mainly diesel.


Local players

While Nigeria’s gas plants continuously supply gas to the rest of the world, earning the country foreign exchange, the domestic gas market suffered. The need to domesticate and monetise Nigeria’s gas became a major policy trust for the government. Hence in 2010, Nigeria launched a gas master plan, which is beginning to facilitate the necessary changes in the sector. Today, there are several completed and ongoing pipeline constructions by the Nigeria Gas Company. These pipelines not only supply targeted industries, but also supply the power stations scattered all over the country. Since the privatisation of the power companies, the owners of the new companies have also entered gas purchase agreements with private gas companies. In addition to the Nigerian Gas Company, private entities like Oando and Seven Energy now also own gas pipeline network.  Oando for instance, operate pipeline in the western corridor, supplying gas to industrial clusters in the Lagos area. Seven energy recently purchased the eastern network of gas pipeline from Oando’s subsidiary, East Horizon Gas Company (EHGC) in a $250 million deal. The pipeline traverses Akwa Ibom and Cross River states and it will supply gas to Calabar Electricity Generation Company Limited and Ibom power plant. Temersek, a subsidiary of Singapore Sovereign wealth fund recently invested $150 million dollars in Seven energy.



The new investors

There are several other new players coming into Nigeria’s gas space. Seplat, a company formed in 2009 has just entered a gas purchase agreement with Azura power plant. When the Azura plant is completed, Seplat will supply gas from its $300 million gas processing plant to the power station. The company is also aggressive in buying International Oil Companies onshore assets in Nigeria, and looks set to increase its gas reserve. Similarly, Dangote limited is also looking towards becoming a major gas player, as it gets set to acquire Shell’s OML 18 in the Niger Delta. This onshore asset is primarily a gas asset, with a recently expanded gas processing facility. Dangote’s intended acquisition of the asset is strategic and it is expected that when the company’s proposed multibillion dollars fertilizer and petrochemical company is completed at the Lekki free trade zone, Lagos state, the gas feedstock will come from the facility in the Niger Delta. Another new player in the gas space is Transcorp, which recently signed a production sharing agreement with the NNPC for OPL 281 in the Niger Delta. Transcorp is expected to operate the field and develop a gas processing facility as well. The gas from the field is expected to supply Transcorp’s recently acquired $300 million Ugheli power plant, which will be generating 1000MW of electricity for the national grid


The future

Beyond the industrial concerns and power plants, Nigeria needs to encourage the utilisation of gas for domestic use. There should be a drive for homes to use Liquefied Petroleum Gas (LPG) instead of kerosene. Although Companies like Oando are already driving the process, much more needs to be done. There is however no doubt that Nigeria’s next fortune makers will be gas Barons and not oil Barons.

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