How is NNPC improving gas utiization?
There are two components to delivering additional gas to domestic market. The first is developing the gas itself and the second is building the transmission lines that transport it from the suppliers to the buyers. We are working on both. The ongoing expansion of the existing Escravos-Lagos pipeline system, which was started in 2011 is making good progress. It is the backbone of pipeline infrastructure in Nigeria because most of the power plants in the country are located on this line. Escravos-Lagos is currently 60 percent finished and we expect the completion of the project by the end of 2014, upon which daily capacity will be doubled from 28mcm (989mcf) to 57mcm (2 bcf). The second pipeline we are working on, the Obiafu-Obrikom-Oben line runs for 120kilometres and crosses the River Niger. The engineering for this project is pretty much complete and the first set of pipes arrived at the end of November 2013.
What is the expected timeline for the completion of the Obiafu-Obrikom-Oben pipeline?
Construction will be ongoing in 2014, and we aim to complete the project in 2016. This pipeline will connect the Obiafu/Obrikom field and gas recycling plant in Rivers State to the Oben field in Edo State. We are trying to improve the flexibility and reliability of supply by making sure that we can transport gas from multiple sources. At the moment, the lack of infrastructure and disrepair of existing infrastructure limits business. By making this connection, we will be able to improve transportation and expand the market. Upon completion, the pipeline will service U.S multinational ExxonMobil’s Nigerian offshore operations.
We have also commenced work on the Trans-Nigerian Gas pipeline project with a view to bringing natural gas to Nigeria’s Eastern and northern regions by 2018. The total investment outlay is about $5billion for an estimated 1,200 kilometres of pipeline. A public private partnership is currently being developed for this project with construction to commence 2014.
Can you outline the anticipated demand and consumption of Nigeria’s gas resources?
We anticipate that about 57mcm (2bcf) of gas per day will be supplied to the domestic market in 2014 with around 13percent of this going to industries. Another 6percent will be transported away from Nigeria to surrounding countries through the West Africa Gas Pipeline and the rest will go to the power generation sector.
Daily gas volumes of 100mcm (3.5bcf) can support close to 16GW of electricity in Nigeria with hydropower and other renewable sources still available to generate power for the country. This 16GW excludes additional electricity that will already be utilized in fertilizer and petrochemical plants. Within the 10percent of Nigeria’s gas supply that goes towards fertilizer plants is a dedicated volume for electricity, since all the fertilizer plants have their own power plants. There is still a large amount of non-grid electricity inclusive in the volume allocated for transport through the West African Gas Pipeline. When we reach a gas production rate of 142mcm (5bcf) per day, we would have put in place 20GW of gas fired power both on and off the national grid.
How do you evaluate the privatization of Nigeria’s power generation sector and its effect on the national gas supply?
The privatization of the power generation sector which on the government’s $2-$5billion sale of the Power Holding Company of Nigeria’s assets to private buyers in 2013 had been a welcome recent development in Nigeria. The power generation sector is the dominant consumer of gas, so the structural efficiency of both markets is closely linked. In the past, the pace of gas market growth was hindered by electricity companies failure to pay in full for the gas they used. Private sector players are more disciplined, more efficient and pay bills on time.
We plan to reduce the cost of energy in order to bring business costs down and improve profitability. If people in Nigeria are making profit now, just imagine how much more they will make if the cost of energy is reduced by 40-50percent. We are creating an industry here that guarantees the availability of energy across the country. It allows investors to locate their investments better, either close to large sections of the market or close to the source of raw materials. If we can perfect an investment model for public private partnerships, we will develop an investment framework and then there will be no shortage of investors.