Seven Energy targets N200b investment in gas infrastructure next year
THE total investment of Seven Energy in
the gas infrastructure in the country is
expected to hit N200 billion ($1bilion) in
2016.
The Chief Executive Officer of Seven
Energy, Philip Ihenacho, who disclosed
this in Abuja, explained that the
indigenous integrated natural gas
development, production and
distribution firm has so far invested
about $800 million on gas infrastructure
that extend from Port Harcourt, Calabar
to Aba in its bid to extend gas
groundwork in the country.
He further hinted that once the next
phase is completed, Seven Energy would
achieved a pipeline network of over 250
km and a processing plant that can
process in excess of 200 million standard
cubic feet a day of gas.
While decrying the dearth of capital for
the building of infrastructure in Nigeria,
Ihenacho said the company based its
investments on long term off-take
agreement with major manufacturing
companies.
He added: “This is a substantial
investment and by next year (2016), we
would have invested over one billion
dollars. It is not easy to raise capital for
infrastructure and the success of our
business is essential for Nigeria to
continue to attract further investment in
the sector. Success will bring further
capital.”
He hinted that Seven Energy has
agreement with Ibom Power, Lafarge
cement and Calabar NIPP with upwards
of 10 – 20 years duration.
The Seven Energy boss stressed the
importance of unlocking money for the
private sector through the
instrumentality of international
organisations like the World Bank and
African Development Bank to enhance
credit and provide guarantee to create
credit worthy long-term contracts.
For Ihenacho, with 179 trillion cubic feet
of gas which is the largest gas deposit in
the continent, Nigeria has failed to
optimize gas usage.
His words: “Nigeria’s large gas reserves
is a good problem to have. In terms of
gas, Nigeria sits with an incredible 179
trillion cubic feet of gas (2013), the
largest proved gas reserves in Africa.
Unfortunately, when it comes to
utilisation and production Nigeria is
lagging behind with only 14% being
supplied to the domestic market,
approximately 38% exported as LNG,
24% is flared, and the remainder is re-
injected, used as fuel, or processed into
liquefied petroleum gas or gas liquids.
There is a disconnect between the size of
Nigeria’s reserves and the translation of
these reserves into production.
Seven Energy is working towards
capturing this opportunity by building
gas infrastructure and promoting gas-
based industry in Nigeria.”
He hinted that convincing investors to
participate in gas infrastructure has
been an arduous task, saying, “the initial
challenge that we encountered is the
necessity for long-term infrastructure.
This requires long-term investment and
convincing investors that the investment
in Nigeria’s gas infrastructure will pay
off. The second challenge we faced was
to develop several reliable off-takers or
customers of our gas and what they are
willing to take and pay. The investment
in infrastructure and the gas off-takers
go hand in hand, because investors need
to invest in a commercially viable
operation.”
He said educating and enlightening local
communities and employment of locals
by oil and gas firms would in the long
term stem the tide of pipeline
vandalization.
He added: “We focus a lot of attention
on education around the dangers of
tampering with a gas pipeline. The gas
pipelines that are vandalised quite often
are vandalised out of error. We have
been successful in protecting our
infrastructure but not through around-
the-clock security but through the
support of our right-of-way communities
and community education programmes.”
To boost investment in gas
infrastructure, Ihenecho said
government must, as a matter of
urgency, make the Production Sharing
Contracts (PSCs) terms for gas very clear.
He explained further: “Favourable fiscal
terms are important to encourage
investors and detail and incentives are
required here. Secondly, to make the gas
industry successful, the power sector
needs to be bankable and commercial.
The government needs to make sure that
the power sector is a financially viable
and that the power generating
companies have sufficient revenue to
pay for gas supply.
That is fundamental. Government should
also encourage the sale of assets and the
redistribution of held assets that are not
being developed, to companies that are
willing to invest. For example, in the
Gulf of Mexico there’s licensing round
once every six months or at least
annually. The development of an open
and transparent bidding and licensing
process that happens on a regular basis
would make a big differenc
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