As Stalled 80-km Sagamu-Ibadan Pipeline Project Threatens Gas Supply to Businesses in South-west

With the disruption of work on the 80-kilometre gas pipeline being constructed from Sagamu in Ogun State to Ibadan in Oyo State, by NIPCO Gas Limited in joint venture with NNPC Gas Marketing Limited, foreign and local investors in Nigeria’s oil and gas industry are seeking the Presidency’s urgent intervention for a speedy resolution of the dispute according to the provisions of the Petroleum Industry Act (PIA), Ejiofor Alike writes.

The efforts by the administration of His Excellency, President Bola Tinubu to revive economic activities in the South-west by encouraging manufacturers and other businesses to use gas to generate their own electricity have faced serious setback following the disruption of work on the construction of the 80-kilometre gas pipeline from Sagamu in Ogun State to Ibadan in Oyo State.

As part of the implementation of the Petroleum Industry Act (PIA) and in line with President Tinubu’s policy of utilising Nigeria’s abundant gas resources towards revamping the nation’s industrial growth and kickstarting its economic prosperity, NIPCO Gas Limited was in September, 2024, awarded four Gas Distribution Licences (GDL) for 25 years by the Nigerian government.

These licences cover the Ibadan Axis (Ogere-Ibadan-Oluyole-Olorisaoko-Asejire-Ajoda); Lekki Free Trade Zone, and Kara-Sagamu-Abeokuta-Ibadan Axis (Sagamu Interchange-Ibafo-Isheri-Otedola Bridge, in addition to Benin City, where NIPCO Gas Limited started Nigeria’s Compressed Natural Gas (CNG) programme in about two decades ago, using gas to power vehicles.

In line with the PIA, the exclusivity period of 25 years granted under these four licenses by the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) was to attract investment in gas infrastructure development, prevent infrastructure duplication, and maximise efficiency and national resource optimisation.

NGML operates the largest network of gas pipelines of over 500 kilometres in Nigeria.

 On its part, NIPCO Gas Limited is Nigeria’s largest indigenous licensed gas distribution company, with a very robust network of gas distribution infrastructure that caters to customer’s energy needs across 22 states and the Federal Capital Territory (FCT).

Currently, the NNPC Limited, through its gas arm, NGML, is aggressively implementing audacious plans to supply an additional 1.8 billion cubic feet of gas per day (bcf/d) in 2026 to meet rising demand in the domestic market.

The national oil company’s subsidiaries, NNPC Upstream Investment Management Services (NUIMS) and Nigerian Exploration and Production Limited (NEPL), are expected to produce additional volumes of 1.496bcf/d and 223.6 million standard cubic feet per day (mmscfd), respectively this year.

According to the NNPC Gas Master Plan 2026, this effort is expected to contribute to Nigeria’s target of supplying 10bcf/d by 2027 and 12bcf/d by 2030. It will also catalyse over $60 billion in new investments across the oil and gas value chain by 2030.

In line with President Tinubu’s agenda to ensure the utilisation of Nigeria’s abundant gas resources for the country’s economic growth, NGML and NIPCO Gas Limited have continued to lead the federal government’s efforts in promoting the use of domestic gas to support industries and businesses nationwide. NIPCO’s robust network of gas distribution infrastructure in 22 states and the FCT, has also continued to boost Nigeria’s economic and industrial growth. NIPCO Gas Limited’s joint venture with NGML has strengthened industrial gas supply, particularly in the Lekki and Lagos-Ibadan corridors. The company has successfully commissioned several CNG stations across Abuja, Lagos, Edo, Delta, Ogun, Oyo, Kogi, and Akwa Ibom states. The company’s strategic partnerships with NNPC Limited and the Presidential CNG Initiative (PCNGI) are driving the adoption of CNG as a cleaner, more affordable, and sustainable energy alternative

The company also entered into an agreement with Delta State and recently commissioned a CNG station and CNG conversion workshop in Asaba. With NIPCO’s robust network of gas distribution infrastructure that caters for the power supply needs of industries in the South-west, the region has retained its position as the country’s industrial base and home of manufacturers.

However, NGML and NIPCO Gas Limited’s efforts to drive the use of gas as a more affordable, and sustainable energy alternative in the South-west are being frustrated by the stoppage of work on the 80km Sagamu-Ibadan pipeline project, which was scheduled for completion in June 2026.

Local and foreign investors who are monitoring the unfortunate development described it as a defining test of President Tinubu’s gas reforms. The 80 kilometre gas pipeline from Sagamu to Ibadan being constructed by NIPCO Gas Limited, was backed by over $100 million in investment.

Under the law, the project was based on the Gas Distribution Licence (GDL) issued to NIPCO Gas Limited under the PIA 2021, by the Nigerian Midstream and Downstream Petroleum Regulatory Agency (NMDPRA) on behalf of the Nigerian government.

The licence granted NIPCO the exclusive rights to distribute gas within Ibadan for 25years based on the PIA. However, for about three months, the project has been halted through stop-work notices pasted on the line pipes by the Oyo State Ministry of Lands, Housing and Urban Development.

Since then, all efforts made by NIPCO Gas Limited to resolve the dispute, including writing an application for approval to construct the pipeline to the state Ministry of Energy as directed by the state government, were rebuffed by the agents of the state government.

The silence by the state government has fueled the speculations that NGML and NIPCO Gas Limited were being frustrated because one of Governor Makinde’s companies operating in the Niger Delta region allegedly has business relationship with an international oil company (IOC) that is interested in the Ibadan gas pipeline project.

Though the identity of the IOC could not be confirmed, it was gathered that the representatives of NGML and NIPCO Gas had held several meetings with officials of the Oyo State Government and Shell Nigeria Gas, where the position of PIA regarding GDL exclusivity was presented to all the parties.

Curiously, the NMDPRA, which issued the licence to NIPCO Gas, has also remained silent as this regulatory dispute escalates, strengthening the speculations that powerful political forces are interfering in regulatory matters in violation of the PIA 2021.

By the provision of the PIA, the license awarded to NIPCO Gas overrides the 20 years gas distribution agreement which the Oyo State Governor, Seyi Makinde and Shell Nigeria Gas signed in London in May 2024.

Before the license was awarded to NIPCO Gas, NMDPRA also confirmed that it did not issue key permits for any other company to execute gas pipeline projects in Ibadan. The two permits required for such a project are Permit to Survey (PTS) and Oil Pipeline Licence. NMDPRA was said to have communicated this development to Shell Gas. A source privy to one of the meetings called by Oyo State Government, revealed that NIPCO Gas Limited was told to divide the gas distribution license with the state government to accommodate Shell Gas but NIPCO Gas Limited raised an objection, citing the 25 years exclusivity clause in the PIA. Multiple sources claimed that by the provision of the PIA, Shell Nigeria Gas or any other company cannot lawfully execute pipeline projects in a gas distribution zone already licensed to another operator as such entry constitutes a breach of the PIA. According to one of the sources, the exclusivity was meant to protect investors and investments, and give them assurances and guarantees that the future of their investments is safe and secure.

In the current global energy transition, gas is expected to play a central role in powering industries, stabilising electricity supply, and reducing reliance on expensive diesel. President Tinubu’s administration is a global champion in the campaign for use of gas as a transition fuel in Nigeria and Africa. Though his administration has rolled out ambitious and audacious reforms to actualize this objective, gas availability remains inconsistent, constraining power generation and limiting industrial output.

The 80km Sagamu – Ibadan pipeline project is one of the administration’s deliberate efforts to close the energy gap. To halt such a project in flagrant violation of the PIA 2021, is to halt the development of the South-west and frustrate the efforts by the Nigerian government to use the country’s abundant gas resources to power industries and other businesses.

However, the Oyo State Government, NGML, NIPCO Gas, and Shell Nigeria Gas have remained silent on the issue. But some oil and gas industry operators, who spoke on condition of anonymity, described the stop-work order issued by the Oyo State government as a continuation of the political cold war between the state government led by the Peoples Democratic Party (PDP) and the Federal Government controlled by the All Progressives Congress (APC). While describing the stoppage of the project as anti-people and anti-South-west, the stakeholders warned of the dangers of mixing politics with business.

“No company is above the law. The law should be allowed to take its course. Investors should be given the assurance that their investments are safe and secure. His Excellency, President Bola Tinubu should intervene personally and urgently because the dispute has placed his efforts to restore the confidence of investors in Nigeria’s oil and gas sector in jeopardy,” one of the stakeholders said.