Making Natural Gas the Future Energy for Nigeria
The AGPC $260 million deal sealed with the Nigerian Gas Company, recently, may have succeeded in setting the platform that will make natural gas, the future of energy in Nigeria, reports Chris Paul
February, the month of love, is that part of the year, when lovers prepare for the 14th day of the month to celebrate their relationship on Valentine’s Day. But it would seem the Nigerian oil and gas industry could not wait for that day as two major players in the community began a romance that will bequeath Nigerians with lots of gas for their commercial and domestic use; in the deal that will berth a 300 million standard cubic feet daily (MMscfd) capacity gas plant.
Seplat and the Nigerian Gas Company (NGC) began the month with the fruit of their love affair, ANOH Gas Processing Company (AGPC), successfully raising $260m in debt to fund the completion of its 300MMscfd capacity ANOH plant; located on OML 53 in Imo State.
An Incorporated Joint Venture (IJV) and owned equally between the two partners, AGPC is a wholly owned subsidiary of Nigerian National Petroleum Corporation (NNPC).
A leading Nigerian independent energy company, Seplat Petroleum Development Company Plc and NGC had previously provided a combined $420million in equity funding, which made it possible for the project to be fully funded.
Held on February 1, in a signing ceremony, the $260m funding was provided by a consortium of seven banks: Stanbic IBTC Bank Plc (advisor), United Bank for Africa Plc, Zenith Bank Plc, FirstRand Bank Limited (London Branch) / RMB Nigeria Ltd, The Mauritius Commercial Bank Ltd, Union Bank of Nigeria Plc and FCMB Capital Markets Ltd.
According to the official statement from the organisation, the transaction allows for an additional $60million accordion at the time of completion to fund an equity rebalancing payment, if considered appropriate. Funding commitments of more than $450million were received by the company, which is a significant oversubscription and a strong sign of confidence in the project.
Chairman of AGPC, Mr. Yusuf Usman, said “This Financing Agreement; for the development of the ANOH Gas Processing Plant will significantly contribute to the realisation of the federal government’s initiatives towards increasing natural gas utilisation in the domestic market.”
With the equity of US$420 million already injected by the sponsors of the Project (NNPC and Seplat), Usman said both shareholders reinforce their commitment to expanding gas infrastructure in Nigeria as well as progressing towards making natural gas the future energy for Nigeria.”
Also, AGPC Managing Director, Mr. Okechukwu Mba, said: “Successfully closing the $260million debt facility means that the ANOH project is now fully funded. Once operational, AGPC will be a significant supplier of gas to Nigeria’s power sector, supporting local employment and the cleaner generation of power for millions of Nigerian homes and businesses.”
Following a cost optimisation programme and inclusive of financing costs and taxes, the AGPC construction cost is expected to be no more than US$650million; which is significantly lower than the original projected cost of US$700million.
One of Nigeria’s most strategic gas projects, ANOH will help Nigeria to accelerate its transition away from small-scale diesel generators to cleaner, less expensive fuels such as natural gas for power generation. Seplat is a leading provider of natural gas to Nigeria’s power sector, supplying around 30per cent of gas used for electricity generation.
Chief Executive Officer of Seplat, Mr. Roger Brown, who took over as Seplat CEO, from Mr. Austin Avuru, on August 1, 2020, said the completion of the funding of ANOH was an important milestone for AGPC. “The ANOH development is one of the government’s Seven Critical Gas Development Projects and our involvement provides a clear path towards strengthening Seplat’s position as Nigeria’s leading indigenous diversified energy producer. It will help us drive, alongside our government partners, Nigeria’s transition to cleaner, less expensive power generation. We are extremely proud to partner with the Nigerian Gas Company in this strategically important project, which will create jobs and prosperity in the Nigerian economy,” he said.
“Seplat will continue to diversify its business and invest in gas to help Nigeria develop its own natural resources, which in turn will drive more sustainable social and economic growth for a young, rapidly growing population.”
Nigeria has abundant reserves of associated and non-associated gas estimated to be more than 187 trillion (standard) cubic feet. Though Nigeria is ranked 7th in terms of proven natural gas reserves in the world, geological experts hold the view that more gas can still be found; potentially up to 600Tcf1.
This is realisable, if oil and gas companies deliberately explore for gas as against finding gas while in search for oil. To facilitate gas gathering, processing and utilisation will require favorable developmental-oriented market conditions and policy framework for the gas sector.
Some of the challenges plaguing the sector, include a lack of a clearly stated, long-term “vision” for the sector and realistic policy goals to promote and facilitate gas use; a lack of a clear gas sector development strategy and implementation plan, covering both policy directions and integrated investment priorities.
The importance of natural gas to Nigeria’s economic and social development cannot be over-emphasised. Gas exploration and utilisation are necessary to curtail environmental challenges associated with gas flares and the use of other traditional fossil fuels. It is also relevant for the expansion of the revenue base of the economy in the light of dwindling oil prices.
For Nigeria to properly harness her gas potentials, the Seplat CEO believe some key issues that need to be addressed, include: a lack of adequate legal, fiscal, regulatory, and contractual frameworks and institutions that are required to accommodate new investment proposals from international investors while protecting Nigeria’s interests.
Similarly, a lack of capacity to evaluate, correlate, and prioritise proposals received from the private sector, together with growing reservations about the structure of current fiscal incentives, require some attention, too.
Another issue that need to be addressed is the inadequate or non-existent infrastructure for the commercialisation of gas in the Nigerian domestic market.
It was the desire to effect a change for the good of the gas market that led to Seplat’s involvement in gas to drive Nigeria’s social and economic growth
Thus, investing in Nigeria’s Gas to Power Plans, became a critical imperative for Seplat’s involvement in gas development.
This birthed the need to channel further investments into Nigeria’s gas sector, in order to increase the utilisation of gas to fuel the country’s agriculture, power, and chemical industries.
This is the gap that ANOH seeks to fill. AGPC planned to a significant supplier of gas to Nigeria’s power sector, supporting local employment and the cleaner generation of power for Nigerian homes and businesses. It conservatively estimates that the gas from AGPC will be enough to generate electricity for more than five million people.
ANOH is adjudged to one of Nigeria’s most strategic gas projects as it is expected to help the country to accelerate its transition away from small-scale diesel generators to cleaner, less expensive fuels such as natural gas for power generation.
Seplat is already the largest provider of natural gas to Nigeria’s power sector, supplying around 30 per cent of gas used for electricity generation.
More investments are being expected to come to the gas sector and ANOH gas is one of the government’s Seven Critical Gas Development Projects that will change the gas stratosphere in Nigeria.
Seplat’s involvement provides a clear path towards strengthening its position as Nigeria’s leading indigenous diversified energy producer. It will continue to diversify its business and make more investments in gas to help Nigeria develop its own natural resources, which in turn will drive more sustainable social and economic growth for a young, and rapidly growing population.
This resolve was why Roger Brown was appointed to continue the growth trajectory of the company started by his predecessor, Austin Avuru, and there will be more strategic partnerships in the gas sphere that will transform the country’s energy ecosystem.