Bolaji Osunsanya, CEO of Axxela Limited, a pioneer private sector developer of natural gas distribution in Nigeria and a designated natural gas shipper on the West African Gas Pipeline (WAGP).
In his capacity as CEO, Bolaji oversees the company’s gas infrastructure and virtual pipeline expansion programme, embedded power plant projects, as well as other substantive efforts across Africa. In this interview with BusinessDay’s Isaac Anyaogu, Osunsanya speaks about 150 million standard cubic feet per day (mmscfd) natural gas city gate commissioned in Ogun State in May, which will ensure the safe delivery of natural gas to various industrial and commercial users within the Sagamu gas distribution zone and the company’s plans.
What is behind the decision to build the plant in Ogun state?
For us, the decision to expand into Ogun state is first to empower Ogun State, and secondly, it will serve as an overflow of Lagos into an adjacent state, such that those who already think Lagos is packed from an industrial or manufacturing perspective have alternatives.
Additionally, the Escravos Lagos pipeline traverses most parts of Ogun State, so you’re also very near the gas infrastructure, however, the importance of what we did is that we’ve created a city gate there. And that heralds a new zone or the opening of a whole new territory that we can start to build on.
I think it was until there was a city gate in Lagos that’s when what people now understand as the Lagos distribution zone evolved. We are expecting that with the building of the city gate in Ibefun too, a new and thriving zone should evolve around Ogun state.
So essentially, we are going to see the same or similar kind of drive for industrialisation that we are seeing in Lagos.
I am optimistic that it might even be more aggressive this time because, in the last 20 years, we’ve shown how useful or important natural gas infrastructure can be for industrial development generally. I expect that the conversion will be a lot faster, and given the policy incentives to manufacture generally, the pace should be faster now.
Can you speak a little about the long-term and short-term impact you are envisioning for the project in Ogun State?
For us, the short-term will be growth for businesses that is channelled towards increasing industrialisation. So, we are opening up as many new territories as possible, both locally and in the region, to natural gas and its utilisation. Long-term will be to conquer more territories, Ogun state being one, but certainly to cover the whole Sub-Saharan region with natural gas infrastructure. While Sagamu adds to what we already have, the future is to cover more areas.
Are you looking at a situation where most of those companies get to rely on natural gas for their operations?
Yes. we are looking at them substituting whatever energy fuel they use today for natural gas, and they can use gas for their processes, power, oven, furnaces, etc. As a company, we are also developing other solutions that can use natural gas; gas to power, gas to heat, gas to cool, etc. There are so many things that we are trying to add on.
Apart from this, are there other projects your company is looking at?
This is just a small part of what the company is doing. In over 20 years of our existence in business, we’ve built our strategy to be a properly diversified energy provider. So beyond just building pipelines, we are also looking at virtual pipelines. We are trying to build LNG plants, floating regasification units, and FLNG plants, so there are a few things on the virtual pipeline side.
About 10 years ago, we started this virtual play with our CNG plant as one of the pioneers, and that has caught on, and we intend to be pioneers in the other possible pipeline efforts.
Secondly, in the infrastructure space generally, we have seen that it is not just about building pipelines, we sometimes need to integrate backward to ensure that all the bottlenecks that can threaten supplies are covered. That was the reason for the development of the pipeline in Akwa-Ibom 10 years ago, and it’s probably the same reason we will be extending our services in the gas value chain as we progress, so we are developing a few opportunities in that area. We are also looking at the region, as the strategy is a sub-Saharan strategy, and we have an entry into West Africa, particularly in Togo, Benin, and Ghana will be covered.
Are we expecting a big announcement soon?
There are a few projects we are working on, certainly, our small-scale LNG in Ajaokuta, which should be in execution mode very soon. We should be able to make a big announcement about it in the coming days. We want to start to execute before we make those announcements, but the development is far gone, and there are still a few pipeline expansions that we will also be announcing soon.
Beyond the southwest, do you have plans to reach out to the north?
That is the reason for our small-scale LNG project in Ajaokuta. It is focused more on the northern market, even though it will serve as a supplement for the southern market. Ajaokuta is in the middle of Nigeria, it is probably equidistant to most parts of Nigeria, so as a hub, it is where we will be doing most of our shipments.
We are optimistic that with the AKK Pipeline progressing, we will get to the northern states someday, but in the interim, we will be able to serve them with our virtual pipeline.
Can you speak a little about safety and sustainability, how do you ensure the integrity of your assets?
For us, safety is very important. We adhere to the best standards in terms of safety and ensure we go by the rules. Education and awareness are also critical for us. We are constantly doing surveillance and communicating with our stakeholders just to be sure that they are confident in the service that we provide. We are holders of a trifecta IMS certification, we have ISO standards in quality, environmental management, and occupational health and safety. We keep these three IMS standards.
…It will serve as an overflow of Lagos into an adjacent state, such that those who already think Lagos is packed from an industrial or manufacturing perspective have alternatives.
I guess we are one of, if not the only company in the Nigerian oil and gas sector that has all three of these standards, and that is important to us. We also have a stringent prequalification process for people who come near our facilities. We subject ourselves to the best surveillance and monitoring systems. We have O&M companies that examine our infrastructures regularly, and we have technologies that help us look at the condition of the pipelines, we also have monitoring teams that carry out daily evaluation and assessment.
On the sustainability side, since the product is natural gas, it is important to mention that we are at the forefront of reducing emissions so that the environment is safe for us today and in the future. With this in mind, we are substituting fuels that are dirtier (like diesel, LPFO, and coal), thereby reducing the emission footprint.
As a company, we carry the full mix of energies, and when it is appropriate, we will supplement with solar and some other renewables.
Some operators have called for liberalising gas pricing regime, what’s your take on this?
We are very pleased with the development in the recent past, we know that it should be heading where we want things to be, but just to reiterate that what we want is a situation where our sector remains sustainable.
We want a sector where we can move to a deregulated willing buyer-seller regime, a market where we do not worry about pricing relative to the cost of providing the service. If it is not cost-reflective, then it is just a matter of time before we experience a dislocation that we cannot explain, and we have seen it in many other sectors.
But the moment things became cost reflective, we also saw how well it went. For example, in the telecoms sector, things have progressed from the time of super profits because there is competition and market forces have worked.
That is also our aspiration for natural gas, we don’t want to go the way electricity and petroleum refined products went, it is important that we keep it sustainable over time so that activities can happen, production can be increased, utilisation can be maximised, and it can also thrive. The more we do that in a competitive setting, the better.
Coming from this industry with decades of experience, what policies would you recommend to push natural gas forward in Nigeria?
My suggestions will be centered on using the resource to add value. We should be looking at increasing the exploration beyond the 206 TCF and further developing the market. The policy should be growth-oriented, and expansionary, we should do more than export, but use more gas locally. This means additional LNG trains to complement what the Nigeria LNG is doing. There’s no reason why we shouldn’t be more aggressive in exploiting our natural gas resources.
We need to rethink how we build critical infrastructure; we have to be more creative. The government has a role to play in critical infrastructure, however, we can’t leave it all to the government, there must be some private-public partnership that creates infrastructure more aggressively. And in that regard, we need to use what we have to get what we need, all those we trade with should also have a reason to help us build infrastructure.
We must ensure that contracts are bankable and commercially sound, and regulations should be strengthening not discouraging people from building commercial contracts that can develop the market even further.