Shell, partners sign 300 million cubic feet gas investment deal

The Nigerian National Petroleum Corporation (NNPC) says it has reached a final investment decision with partners, Shell, Total, NOAC for the Assa- North-Ohaji South Gas development Project in Imo State which will boost local gas supply for power generation and industrialisation.

The project is expected to produce 300 million standard cubic feet of gas per day and will be treated at SPDC JV’s Gas Processing Facility and distributed through the Obiafu-Obrikom-Oben pipeline network. The gas field where the plant is located is projected to deliver around 3.4 billion standard cubic feet of gas per day (bscfd) by 2020 and is one of the seven critical gas development projects (7CGDP) in the country.

“The NNPC Project Management Board would work hard to ensure progress having provided the necessary approvals and enablers,” adding on successful completion, the project would translate into huge social-economic benefit to Nigerians,” Baru, who was represented by NNPC Chief Operating Officer Upstream, Rabiu Bello, said.

In December when Shell announced that it was taking FID on the project, Osagie Osunbor, Country Chair of Shell Companies in Nigeria & Managing Director, The Shell Petroleum Development Company of Nigeria Limited (SPDC) said the project would be a major game-changer in Nigeria’s quest for energy sufficiency and economic growth.

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“This is good news for the SPDC JV and Nigeria as we look to grow the domestic market and optimise our onshore footprints,” Osunbor said,

The country chair added, “The project is key to driving the Federal Government of Nigeria’s ambition of marching away from a mono-economy through diverse industrial growth. It is premier amongst the Seven Critical Gas Projects initiative led by the Ministry of Petroleum and the Nigerian National Petroleum Corporation (NNPC). Their integrated focus, support and drive were instrumental to this investment decision.”

NNPC and its partners say the Assa North project would be a significant contribution to GDP growth in Imo State and across Nigeria as the gas produced will be utilised in-country across diverse industries, while providing economic opportunities for local communities.

Analysts express concern over the viability of the project due to huge debts to gas producers by legacy power plants.

Seun Smith, an analyst after commending the project, said “Although a part of me is wondering how the gas will be paid for given current challenges in the wholesale electricity market?”

The Nigerian Bulk Electricity Trading (NBET) Plc, who acts as a clearing house in the power said the average energy sent out by the GenCos in January was 3584.55MWh. International Customers and other net Importers consumed 232.21MWh (7.07%) but it could only pay GenCos N6.08 billion for the January invoices of N48.23 billion which represents 12.62% payment.

This is because DisCos collect poorly and even remit less. Between October and December last year, Nigeria’s eleven electricity distribution companies (DisCos) collected from consumers only 65 percent of the value of electricity sold but remitted back to other operators only 33percent of what they collected, according to a report by the Nigerian Electricity Regulatory Commission (NERC), the sector regular.

Recently, the Federal Government said it will stop releasing bailout funds to the power sector and charged Gencos to use the eligible customer regulation provided to help them sell power the DisCos are unwilling to take because they lack the ability to improve collections.