Nigeria: Seplat seeks to raise gas production to match surging demand

By David Whitehouse
Posted on Wednesday, 22 June 2022 06:00

A gas station attendant pumps fuel into a customer's car at the NNPC Mega petrol station in Abuja
A gas station attendant pumps fuel into a customer's car at the NNPC Mega petrol station in Abuja, Nigeria March 19, 2020. REUTERS/Afolabi Sotunde

Nigerian oil and gas producer Seplat has seen a jump in gas demand as higher diesel prices prompt a search for alternatives, director of new energy Yetunde Taiwo tells The Africa Report.

Seplat, which is listed in Nigeria and in the UK, produces about 30% of Nigeria’s gas. The outlook is “very promising” and there is “more demand than we can supply,” Taiwo says at the Africa CEO Forum in Abidjan. The company is trying to increase gas production to keep pace, she says. “There is huge potential.”

The Russia-Ukraine war has driven a surge in diesel prices as global inventories have hit historic lows. According to Per Magnus Nysveen, head of analysis at Rystad Energy, there is no easy way out for national governments. Reducing diesel taxes would simply worsen existing tight supply, he writes in a research note. “If supply does not improve, governments will be forced to enact emergency plans to limit sales to consumers in order to ensure essential sectors are kept going.”

Nigeria’s Natural Oil and Gas Suppliers Association (NOGASA) said in mid June that the price of diesel could hit 1,500 naira per litre in the next two weeks. Diesel prices, Taiwo argues, are likely to keep rising and become “almost unaffordable. It’s not going to get better.”

While petrol prices in Nigeria are subsidised, diesel prices are unregulated, leaving gas as the main alternative to spiralling costs. Nigeria’s 2021 Petroleum Industry Act (PIA) provides fiscal incentives for midstream and downstream gas projects. The exit of some international majors from the Niger Delta means more opportunities to invest in low-cost brownfield gas assets, and the use of gas is likely to keep increasing, especially in the industrial and transport sectors, according to Hawilti research group in Lagos.

Taiwo is confident that completion of the Ajaokuta-Kaduna-Kano (AKK) gas pipeline will support the transition.

  • The company is looking at areas along the AKK corridor where industrial hubs may be created.
  • State oil firm NNPC has said that the pipeline, which is expected to reduce gas flaring in Nigeria, will be ready early in 2023.
  • The pipeline will pass through Abuja, which is a gas demand centre, Taiwo says. “We will be ready when the pipeline is ready.”
  • She points to plans to convert 5m Nigerian cars to gas engines as a further factor will support demand.

Renewable energy

Seplat is also starting to explore diversification into renewable energy. A presentation from the company in October 2021 says that Nigeria’s solar home systems and mini grids has the potential to grow to become a market worth over $10bn in annual revenue.

The company has carried out a feasibility study on a solar project which may be implemented in 12 to 18 months, Taiwo says. Gas and renewables may account for between 10% and 15% of group revenue within five years, she adds.

Seplat will focus on areas with high residential demand for solar, as well as industrial customers for gas. It has expressed interest in supplying the Lagos free-trade zone (FTZ). The FTZ project involves the development of about 740 hectares of land over the next 15 years, including the development of the country’s first deep water port at Lekki.

“There’s a niche market there. It’s almost a captive area,” though more study is still needed, Taiwo says.

Bottom line

Seplat is confident that gas is a big part of the answer to Nigeria’s energy crisis.

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