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Nigeria tackles infrastructure challenges

CLARA NWACHUKWU & OSCARLINE ONWUEMENYI

When President Goodluck Ebele Jonathan launched Nigeria’s Gas Revolution in March this year, many may have thought it would be another one of those “white elephant dreams”. But one year on, the Federal Government has shown its resolve to ensure that the revolution, aided by the Gas Master Plan becomes a reality through the provision of infrastructure.

Taking the infrastructure developments in phases, government aims to fast track the monetisation of the nation’s gas resources, instituting a gas based industrialisation as well as increasing the generation capacity of the power sector, to ensure sustainable electricity delivery for domestic and industrial uses.

Very few nations can boast of the resources the country has, both natural and human. The country’s resource endowments leave it with no excuse for the relatively high rate of unemployment and under-industrialisation.

The need to diversify revenue sources away from just oil makes it imperative for government to fast track the development of latent resources for the growth of the economy.

Although Nigeria’s commercial oil is over 50 years, the discovery of huge gas resources, estimated at about 187 trillion cubic feet proven gas reserves, coupled with about 600 trillion cubic feet undiscovered potential, make industry watchers describe Nigeria more of a gas province than oil.

This discovery and the need to match words with action spurred government to embark on infrastructure development – through the planned construction of gas pipelines that will supply gas to the thermal power plants in the Niger Delta and western Nigeria; the approvals for Free Trade Zones, FTZs; and the planned construction of various fertilisers, petrochemicals and methanol plants in specific locations in the Niger Delta.

These are being implemented mostly through private pubic partnerships, PPP, with a view to “Repositioning Nigeria as the regional hub for gas based industrialisation, through which the country will add value to its natural gas and create a broad platform for aggressive industrialisation,” according to the Minister of Petroleum, Mrs. Diezani Alison-Madueke.

Implementation of agenda

Reiterating the commitment to see the gas revolution to fruition, the Group Executive Director, Gas Development, at the Nigerian National Oil Corporation, NNPC, Dr. David Ige, told Sweetcrude that once government was done with the provision of backbone infrastructure, investments will start springing up across the country. In this regard, he disclosed that a number of contracts have either been approved or undergoing tender in each phase of the development.

President Goodluck Jonathan

Infrastructure development in the area of power include the Itoki-Olorunshogo Pipeline to supply gas to the Olorunshogo Power Plant and the environs; Alaoji Pipeline for the Alaoji Power Plant both to be completed in six months; doubling the capacity of the Lagos-Escravos Pipeline from one billion standard cubic feet, SCF, per day to two billion scf/d, to be completed by end 2012; the Rumuoji-Obigbo-Imo River Pipeline, and a host of many others.

According to Ige, these pipelines are meant “to bridge the gap between excess gas availability in East, shortage in the West, and significantly boost gas availability to the power sector.”

In the area of industrialization, he said that approval has been given for the construction of the Koko free Trade Zone, which will be supported with a 40-kilometer pipeline that will feed the fertilizer, petrochemical and methanol plants to be located there.

He said the objective is to make Koko, “a gas based industrial city, the biggest of its kind south of Sub-Saharan Africa.”

He added that government also plans to set up another industrial hub in Akwa Ibom and Calabar with the location of fertilizer and methanol plants, and in the Rivers axis, “issued the gas purchase order for two fertilizer plants, and methanol plant around the Onne Free Trade Zone area.”

Ige explained that these developments are targeted at “creating an enabling environment that will reduce the risks that the people face, and we phased the activities in a manner that reduces the risks of the projects and shores investors’ confidence.”

Investment opportunities

With all of these infrastructures coming on stream, Ige argued that investment opportunities abound in the areas of:

·Pipelines for gas gathering and distribution

·Central processing facilities to optimize gas resources

·Liquefied Petroleum Gas, LPG for domestic and export

·Civil and ports infrastructures at the FTZs

Industry reforms

Since the return of democratic rule in the country, Nigeria has embarked on a number of fundamental reforms of its energy industry, thus, setting the stage for exponential growth in the economy.

Some of these reforms and policies include efforts to halt militancy in the Niger Delta through the Amnesty Programme, the signing of the Nigerian Content Act in April, the launch of the Gas Master Plan, instituting an incentive-driven gas pricing for manufacturers, approval for the construction of four refineries across the country by Chinese investors, signaling an end to the wasteful era of exporting crude to other countries and importing the refined petroleum products as well the development of a road map for the development of the power sector.

During this period, a lot of works have been done to reform the legal apparatus of the petroleum industry with the formulation of the Petroleum Industry Bill, PIB, which seeks to overhaul the management of oil and gas resources in the country.

President Jonathan described the Gas Revolution as the Rebirth of Nigeria’s Industrialisation, and vital for the diversification of the economy and for national development.

“This aspiration to re-industrialise Nigeria is aggressive and can only be achieved through a revolution. The focus is to catalyse a major industrialisation of the country by seeding in a few anchor investments that have the highest potential to have far reaching secondary multiplier effect on the economy,” he said during the launch.

Jonathan reassured the investors notably, Xenel of Saudi Arabia, Nagarjuna of India and Chevron Nigeria Limited, CNL, of government’s readiness to provide the necessarily support, including the quick passage of the PIB, which serves as an anchor for sustainable and profitable investment in the Nigerian oil and gas industry.

The President hoped that by 2014, Nigeria would have been positioned firmly as the undisputed regional hub for gas based industries. “We would by then, be producing enough fertilizer to create a self sufficient country and a net exporter of fertilizer and food to the world. We would be the leading regional centre for petrochemical production and manufacture of petrochemical related products both for local and export use,” he added.

Indigenous triumph

A leading Nigerian indigenous oil company, the Oando Group, recently made history with the successful completion of a 128-kilometre gas pipeline system from Akwa Ibom to Cross River State, built by one of its subsidiaries, Oando Gas and Power.

Alison-Madueke, immediately announced that the inauguration of the project marked the successful take-off of the gas revolution programme of the Federal Government.

Speaking during the inauguration, Oando’s Group Chief Executive Officer, Mr. Wale Tinubu, said the pipeline was built under a joint venture arrangement with the Nigerian Gas Company, NGC, a subsidiary of the NNPC. He disclosed that the 18-inch pipeline would accelerate industrialisation in the South-south region by providing cheaper, safer, cleaner and environmentally friendly fuel to industries in the region.

Tinubu said his company pioneered the private sector pipeline and distribution of natural gas to industrial and commercial consumers in Nigeria.

Alison-Madueke said the completion of the project marked the successful take-off of the gas revolution programme of the Federal Government, which targets a $25 billion worth of investment, and would generate about $10 billion over the next three years.

According to her, over 500,000 direct and indirect jobs are expected to be created from the Oando gas project and other similar projects contained in the gas revolution agenda.

Speaking with Sweetcrude on the sidelines of the launch, the minister disclosed that ongoing pipeline projects are estimated to cost about $2 billion.

According to her, the President has “a strong vision and passion to re-industrialise Nigeria using the vast natural resources that the country is so richly endowed with. Mr. President is determined to ensure that the efficient and effective utilisation of our natural gas resources will impact positively on the lives of every Nigerian.”

She added that the Federal government’s gas agenda, both domestic and export, clearly paves the way for Nigeria to be a regional leader with all the attendant benefits.

“That agenda will necessitate an unprecedented growth in our gas supply, from the current one billion cubic feet per day to over 10 billion cubic feet per day by 2020. Realising this growth calls for a radical review of how the nationwide gas potential is harnessed,” she said.

She further noted that in order to grow the gas industry at the envisioned pace, there must be flexibility in our gas resource development and supply base. “This calls for the strategic development of various inland basins, in addition to the Niger Delta and offshore basins.

“Over the next five years, we will be prioritising about $1 billion for further seismic data gathering, aeromagnetic surveys, exploration and appraisal drilling. By enhancing the prospectivity of these basins, we hope to build significant supply bases across the various geopolitical zones that complement the existing gas supply centres in the Niger Delta,” she added.

Economic revival

Part of the agenda is to make the petrochemical project alone the largest industrial complex in Africa, producing over 150 containers worth of products. These products will enable the growth of numerous downstream plastic manufacturing industries. With these, secondary industries such as the high end printed circuit boards, car dashboards etc. can be established here in Nigeria.

The spiral effect of such a huge plant is the redevelopment and expansion of the port facilities near the plant locations. This will create a hub of economic and commercial activity around the hither-to quiet port towns.

The fertilizer plants and their customized blending plants will result in a radical transformation of the nation’s agricultural productivity from subsistence farming to full scale industrial farming. The concept of customized blending plants as introduced by this project will ensure that the fertilizer is formulated to suit the type of soil in the zone resulting in enhanced productivity.

Also, increased productivity will lead to the establishment of many agro processing industries to cope with the production growth that will emerge.

Beyond the specific projects being launched in the initiative, it is expected that the various gas pipeline projects will revive the many textile industries and numerous other industries in the North, which have hitherto shut down as a result of high energy costs. Natural gas will replace fuel oil as fuel for industrial boilers.

Wealth creation

Industry experts estimate that over 100,000 engineering design and construction related jobs would be created from 2012 and beyond to deliver all these plants. Engineers will be required to participate in the design of the petrochemical, fertilizer, central processing facilities and numerous pipeline projects.

Local fabrication yards will need to gear up capacity to provide relevant construction support. Skilled workers such as welders, fitters etc. will also be required. The civil construction effort required both onshore and at the ports will impact on demand for cement.

Government said the strategy adopted for the fertilizer project, for instance, means it would expect a significant increase in employment from the agricultural sector. In total this initiative will result in over 500,000 direct and indirect jobs from construction, logistics, hotel and hospitality service, fabrication, banking and above all agriculture.

As government delivers the LPG agenda, there will be a boost in the disposable income of households as cheaper fuel becomes available. In particular, women in small scale catering business will benefit significantly from the relative cheapness of LPG.

Nigerian Content law

This initiative provides a test bed to actualise the intent of the Nigerian Content Act which was signed into law by President Goodluck Jonathan last year. Before the reforms, previous governments paid lip service to the development of local content, which led to the loss of over 85 percent of in-country jobs to other countries.

However, it is expected that the full application of the Law will stimulate these jobs and opportunities, and a significant portion of the jobs created will be for Nigerians. The nation’s service sector should benefit significantly from these opportunities.

According to the President, “When we are done we would have created a Nigeria that we all would be proud of. Our youths can clearly see the roadmap to engagement and self worth as they get gainfully employed. This is not just a plan, this is now in action.”

The PIB nightmare

However, observers fear that this economic revolution may be jeopardised by the delay in the passage of the PIB. Indeed, hopes of a quick passage for the bill, which has been delayed for upwards of three years at the National Assembly, may have been dashed by the inglorious politicking in the legislature, and matters may get worse as the new legislature, in the habit of the last, continue to thumb its nose at the PIB.

The impasse in the federal legislature has not been helped by the obtuse racketeering by various stakeholders including the NNPC, the international oil companies, IOCs, and even the organised labour organisations.

Experts believe that the long delay in the passage of the bill has blocked billions of dollars worth of investments in Nigeria’s oil and gas industry. For instance, the Royal Dutch Shell said it put aside $40 billion worth of potential investment in deepwater oil projects on hold as it awaits the outcome of the bill. Other oil majors like Chevron, Exxon Mobil, Texaco, ENI and Total, all consolidated their positions by frowning at some provisions in the PIB.

A former Regional Executive Vice President of Shell Exploration and Production, Africa, Ms. Ann Pickard, had lamented the “failure to recognise that we all benefit from taking a fair share of a growing industry rather than an excessive share of a declining one; an unwillingness by some to stand up and take decisions.”

President Jonathan, obviously bothered by the protracted delay in the passage of the PIB, was effusive with thanks to Saudi Arabia, India, Italy and the USA, noting that, “Your decision to invest in Nigeria is a testament of the confidence you have both in our vision and our resources.

“I assure you that as you have taken the bold step to invest, even when many things hinge on passage of the PIB; government will support you every step of the way to ensure that this is delivered successfully. Your commitment will serve as a challenge to other investors elsewhere, letting them know that Nigeria is indeed open for business.”

 


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