How Gasco Marine is growing gas supply in Nigeria

Nigeria is potentially the seventh largest producer of gas in the world, with proven reserves of at least 202 trillion cubic feet. The Nigerian government and in particular the Nigerian National Petroleum Corporation (NNPC) believe that a lot of investment opportunities are abounding in the natural gas sector.

In recent times, there has been increased attention to this vital sector and the government’s aspirations include- creating new industries out of the old oil industry; capturing economic value and generating as much revenue from gas as from oil, developing the domestic gas market and ending gas flaring within the shortest possible time .

The global oil price slump of 2016 was paradoxically an opportunity for the gas sector in Nigeria.  With only a small fraction of oil projects securing financing, there was increased interest from investors looking at the gas sector in terms of opportunities in power generation.

Besides the Nigerian government, increased investment in the natural gas sector from new plants to pipelines, have resulted in millions in additional public revenue. Some progress has also been recorded towards the realization of the government’s objectives; with only about 40percent of gas currently produced being flared, a drastic drop from the 70percent proportion flared previously.

The hitherto flared gas is being channelled into gas powered projects for rapid utilization and monetization with a view to maximizing value addition to the nation’s natural gas resource.

 However lingering policy gaps mean that unfortunately, investment has failed to match the vaunted potential of the sector, thereby holding back the growth of the gas industry which is critical to Nigeria’s overall industrial and infrastructural development.

Eleven years after a Gas Master plan was issued in 2008, the sector continues to perform below expectations and gas availability and supply remain key challenges, with potential investors faulting the pricing regime and inadequacies of the regulatory framework.

Private players are often not clear on – if and how domestic gas obligations will be enforced by the government, requiring them to sell to the power industry at lower pricing what they could have sold into industry at higher pricing.  There are also limited incentives for investors to build pipelines to improve distribution and the mandate of the Nigerian Gas & Marketing company to regulate the industry as well as be an active participant in the market by selling.

Considering the lingering uncertainties associated with a growing sector, the role that can be played by indigenous private sector becomes critical and despite the lack of a clear plan to promote efficiency in the gas process or drive investment in the sector through varied incentives, a number of visionary actors have taken the plunge. The demand for Compressed Natural Gas (CNG) is on the rise, and private sector suppliers (producers and distributors) are investing heavily in pipeline and plant infrastructure. But while there are returns to be made, the initial costs are significant enough that those returns are for the future, and not immediate.

Industrial off-takers (manufacturing companies) offer the most attractive price but the volumes required by such customers sometimes do not justify the magnitude of infrastructural investment required, in terms of pipeline infrastructure to reach them for example. To be more cost-effective, producers have to seek out the largest industrial manufacturers (such as cement producing plants) who can pay high prices while also take up a significant enough volume of gas as to make the investment worthwhile. But the distance from supplier to client, and the means of moving the gas required per day are some of the factors affecting the financial sustainability of the CNG supply model. Logistics costs (transportation of the gas) are borne by the supplier and they tend to be high in a country where bad road networks and a skewed foreign exchange policy means increased costs for upkeep of trucks.

With all of these issues affecting supply, one operator took the innovative step of going into distribution. Gasco Marine Limited, a fully indigenous company specialising in the distribution and commercialisation of natural gas in Nigeria is involved across the entire midstream and downstream gas value chain, covering compression and distribution of natural gas. When it’s parent company, Viathan considered how to optimize its processes, logistics handling stood out clearly resulting in a commitment to invest in logistics infrastructure. But this backward integration was only the beginning of the story.

Logistics costs can also be reduced if the customers are in close proximity to existing pipelines or a plant.  Noting that CNG demand is most highly concentrated in the South West of Nigeria, where there is a concentration of manufacturing for FCMG (Fast Moving Consumer Goods), Gasco Marine has also developed a N2bn compressed natural gas  (CNG) mother station in Abeokuta with a total installed capacity of about 216,000 scm/daily. The company also increased its footprints in the CNG delivery cycle by adding skids of 12 tube cascades to its virtual pipeline fleet, bringing the total number of skids in its fleet to fifteen with a total carrying capacity of 97,500scm.

Gasco Marine’s footprint with expanded capacity virtual pipeline and state of the art CNG mother station covers the industrial hubs in the south-west axis (Ogun State, Oyo State & Ilorin, Kwara State). This quantity of skids gives Gasco Marine Ltd an advantage that enables it meet the turnaround time required for skids to be changed and hence ensure efficiency, reliability and customer satisfaction. As domestic gas consumption in Nigeria steadily increases, Gasco Marine Ltd has placed itself as a key player in the downstream sector of the gas industry positioned for expansion across Nigeria. Companies like Gasco understand that to do ‘gas as a business’  you have to be in it for the long haul but in just five years, the company’s management  have demonstrated the kind of innovative thinking that is needed to disrupt gas supply and  succeed in a sector that is still in its infancy in Nigeria.