Stakeholders in the global energy industry believe that natural gas is the fuel of the future. Unlike other fossil fuels, gas is environment-friendly and affordable. Nigeria is blessed with huge deposits of natural gas estimated at over 187 trillion cubic feet, yet it lacks adequate supply to fuel its thermal power plants. Gas is exported but the Federal Government has introduced the gas revolution policy to boost domestic supply. Seven Energy is leading other indigenous firms with over $1 billion investment in the gas sector, writes EMEKA UGWUANYI.
The pace of economic development in Nigeria continues to be constrained by lack of investment in the country’s power infrastructure. This is partly responsible for the unreliable electricity supply situation.
Nigeria has power generating stations that have combined installed capacity of about 24,000 megawatts (Mw) but struggles to attain 4,000Mw output. The reason for this, according to generation companies (Gencos), is a shortfall in gas supply.
To boost gas supply to power plants, industrial and commercial concerns, the Federal Government introduced the Gas Revolution programme aimed at encouraging oil firms, especially indigenous players, to step up gas supply for domestic use. The domestic supply drive has been boosted by the acquisition of Shell’s divested oil blocks by indigenous consortia and marginal fields’ owners. When the price of crude oil fell by over 50 per cent from an average of $100 per barrel mid-last year to less than $50 per barrel in the first quarter of of this year, the need to focus more attention on gas production became imperative.
Some indigenous companies, such as Seplat Petroleum Development Company Plc, Midwestern Oil & Gas Company Limited Waltersmith Petroman Oil Limited, Niger Delta Exploration & Production Plc (NDEP) and Frontier Oil Limited, developed or resuscitated their assets and are making progress in gas production.
However, what stands Seven Energy out is that while other companies produced associated gas from already developed assets divested by the multinational firms, the company financed and produced non-associated gas assets. Associated gas is gas found in the process of finding crude oil. It mixes with crude oil and is separated during the processing of crude oil. In the past, such gas is flared because there was no infrastructure to process, store and utilise it. But due to the global fight against environmental pollution, oil firms are compelled to find ways to utilise it but in non-associated gas, the asset or field’s reserve is wholly gas or sometimes with little oil as is the case of Frontier’s oil field.
Besides, Seven Energy has interests in some of these oil assets owned by local firms. For instance, it has indirect interests in oil mining leases (OMLs) 4, 38 and 41 through a Strategic Alliance Agreement (SAA) with the Nigerian Petroleum Development Company (NPDC), an arm of the Nigerian National Petroleum Corporation (NNPC), which holds 55 per cent interests in the oil blocks. It is also a major financier and technical partner to Frontier Oil Limited, with regard to the Uquo Marginal Field in the OML 13 area. The field was awarded as an oil field, but it eventually turned out to be a gas field.
It produces 200 million standard cubic feet per day (mmscf/d).
Seven Energy has championed the exploration and production of natural gas, and more critically, its commercialisation through the provision of processing and distribution infrastructure. It has invested over $1 billion in gas production in the Southeast region of the Niger Delta in the last five years. The infrastructure provision enabled end-users to access gas in the eastern axis. It also helped to meet the growing energy needs of the industrial sector and also provide stability in the emerging electricity market.
Its Chief Executive Officer , Phillip Ihenacho, told The Nation that delivering a cost-effective and reliable gas supply was critical to sustainable power supply to the national grid in order to meet the government’s reform objectives and facilitate industrial development. He said he was glad his company is contributing to the actualisation of these objectives. “I am delighted that our ability to deliver an indigenous gas solution from end to end is now being recognised by a broad range of industrial and power sector customers,” he said.
He said last year, former President Goodluck Jonathan commissioned the Uquo Gas Processing facility owned by the firm. The facility has begun gas supply to the 190 Mw Ibom Power Plant in Akwa Ibom State.
“Today, by deploying a combination of fixed-price gas sales and take-or-pay contracts, the facility supplies gas to five industrial customers, which includes three Independent Power Plants (IPPs) in Southsouth/Southeast Nigeria as well as industrial off-takers (such as ) Ibom Power since the start of 2014, Unicem late last year, Calabar NIPP, Alaoji Power and Notore Chemicals in early 2015.
“By this feat, Seven Energy is supplying power stations and industrial customers gas that accounts for 1,700 Mw of electricity, about one third of Nigeria’s total power output. This accomplishment has been recognised across Africa as the company recently clinched indigenous firm of the year award in the gas category conferred by the Petroleum Africa magazine,” he said.
He after leading the supply of gas to the domestic power market, its foray to industrial sector is quite instructive. He said the case of Notore Chemicals demonstrates its commitment to the development of the industrial sector. The commercial delivery of gas to Notore, a leading fertiliser and agro-allied company in Onne, Rivers State is being executed through Accugas, a 100 per cent subsidiary of Seven Energy. Gas is being supplied at a rate of 25 mmcf/d as part of the feedstock to the fertiliser plant. By this supply arrangement, Seven Energy has enabled the fertiliser plant to improve its operational efficiency and enhance the plant’s output. Natural gas is the core input into the production of fertiliser. “Through the supply of our processed gas, we are providing a new source of feedstock to meet the company’s increasing requirements, whilst directly enabling the production of fertiliser that Nigeria’s agriculture sector desperately needs to grow,” Ihenacho said.
The Managing Director, Accugas, Stephen Tierney, said it is a manifestation of the firm’s commitment to the industrial development of the nation that it was supplying gas to the fertiliser firm.
He said: “This milestone represents another significant step for Accugas in our effort to increase domestic supply and utilisation of gas for the good of the Nigerian people and its economy. By providing a clean, dependable, quality source of gas supply to the Notore plant, and doing so via an integrated end-to-end solution, we are demonstrating our clear commitment and execution performance toward enhancing domestic gas consumption for broader industrialisation.”
Last year, Seven Energy completed the acquisition and integration of the East Horizon Gas Company into its core group and also reached an agreement with Niger Delta Power Holding Company to construct, and take ownership of a further section of pipeline between Oron and Creek Town, thus expanding its geographic reach over this industrialised area of Nigeria.
In addition, Seven Energy reached agreement with Nigerian Gas Company (NGC) to transport gas from Ikot Abasi through its pipelines to customers in the Port Harcourt region. By this, the company has the capacity to transport gas to customers covering from Port Harcourt to Calabar.
Last year too, Seven Energy completed two wells, Uquo 7 and 8, which are producing gas at a combined rate of about 85 mmscf/d with estimated potential of some 140 mmscf/d. This year, the company drilled an exploration well, Uquo NE-1, which encountered gas and oil reservoirs, achieving results ahead of expectations.
With limited competition, Seven Energy’s quest for expanding its gas processing and transportation infrastructure positions them to reach a larger distribution area and demand for their own and third party gas. Having demonstrated ability to deliver gas to high specifications with consistent reliability, the company is attracting new customers.
Beyond its forays in gas, the company, through its subsidiary company Universal Energy Resources Limited, recently announced the commencement of crude oil production from the Stubb Creek Field, in Akwa Ibom State, following approval to embark on delivery of oil through ExxonMobil’s Qua Iboe Terminal. Its interest in the Stubb Creek field is held through a 62.5 per cent interest in the operator, Universal Energy Resources Limited.
Stubb Creek’s development was conceived and led by the Seven Energy’s team, resulting in production start-up in February this year at an initial gross rate of 2,000 barrels of oil per day (bpd) with plans to increase the processing capacity to 8,000 bpd. The company also constructed a 23-km oil pipeline from the field to the Qua Iboe Terminal to enable evacuation and export of the crude produced.
The Stubb Creek Field lies in OML 14 located in Akwa Ibom State. It was classified as a marginal field in 2002, and subsequently transferred to Universal Energy, a subsidiary of Seven Energy, in 2004. The field has been developed in a joint venture with Sinopec International Petroleum Exploration & Production Company (Nigeria) Limited.
“Production at Stubb Creek is also important because it marks the attainment of first oil at one of the marginal fields allocated to indigenous companies. This realises the original intention of the marginal field round to enable domestic companies to bring smaller, unutilised fields on stream, enhancing domestic ownership, national production, and also revenue,” Iheanacho said.
To secure its operations and activities in the Niger Delta, it engaged specialist security consultants to examine and manage transport routes and any other identified hazards to mitigate potential risks and security issues. It also engaged host community representatives and affected persons along the right of way (RoW) of the Uquo to Oron gas pipeline to ensure compliance with community expectations and international best practices. The firm has interest in OPL 905 in Anambra Basin with gas processing facility and pipeline network of 260 km, which has distribution capacity of 600 mmscf/d.
