June 22, 2009

Shell to supply 45m cubic feet of gas to Aba power plant

By Oscarline Onwuemenyi
ABUJA-AS part of efforts  to ensure adequate gas  supply to the188MW Aba Independent Power Plant, towards the effective take-off early next year, Geometric Power Limited, the promoter of the project has signed an agreement with Shell Petroleum Development Corporation, SPDC and its JV partners, Nigerian National Petroleum Corporation, NNPC, Agip Nigeria and Total Nigeria Ltd.

*The Total operated Apko FPSO project with proven reserves well in excess of 620 million barrels was inaugurated at the weekend.

*The Total operated Apko FPSO project with proven reserves well in excess of 620 million barrels was inaugurated at the weekend.

With the agreement signed  in Abuja last week, Shell is expected to supply between 40 and 45 million cubic feet of gas per day from Owesa, which is just by Imo River but in Aba, Abia State.

Describing the agreement as a ‘win-win’ partnership, the Chairman of Geometric Power Limited, Professor Bath Nnaji, disclosed that the over $400 million Aba IPP, reputably Nigeria’s first indigenous Independent Power project located in Aba, was over 80% complete and well primed to serve the industrial, commercial and residential customers in Aba metropolis.

He explained that the agreement was a credible gas off-taker, that would ensure a steady demand of gas commodity over a 20-year horizon at a commercial tariff, thereby serving as an incentive to develop more gas fields for domestic consumption.

“It also helps to cover the cost of gas production at a reasonable rate of return, and serves as a platform for effective long-term business forecasting.

“While through this agreement SPDC and its JV partners help Geometric Power to maintain its business model, we equally play significant role in sustaining Shell’s JV gas production operation at its gas processing facility,” he stated.
Nnaji further disclosed that the company, in partnership with Alpine Investment Ltd, plans to replicate the project in other major cities in the country including Kano and Kaduna for the development of infrastructure in the Northern part of the country

According to him, the significance of the agreement was that it is the first gas transaction on gas power with private sector in Nigeria that is very sensitive and will set the pace for how Nigeria and Nigerian companies can buy gas on a commercial arrangement.

He said, “The critical part of this agreement is that we are not going to be buying gas at very cheap rate that will not meet the cost of production of the producer and that is really what we expect in the country so that we will work towards the development of the country.

“It is significant for Nigeria that is why getting it signed particularly for the country is important so that we can continue to progress.”

Nnaji further noted that, “The gas supply agreement is central to GPL’s Aba IPP business model as it serves to secure a fuel source for gas-fired plant such as ours, we will be able to keep our promise of providing Aba and its environments uninterrupted power supply, reliable and efficient electricity.

“More importantly, it enables us to make long-term business projections towards meeting President Umaru Yar’Adua’s seven-point agenda.

Speaking at the ceremony, the Managing Director of SPDC, Mr. Mutiu Sumonu, noted that, “This is the very first time we are selling gas at business price to the third  party. I am not going to give you the exact amount we are going to charge for the gas but it is very close to commercial rate which is the aspiration of Shell as a company in order to be able to get on our domestic gas but I am not ready to disclose it to you now.”

According to him, the planned capacity (188 MW) of the Aba Power Plant will require some 43MMscf/d of gas which the SPDC JV will supply.

“This ultimate Daily Contract Quantity, DCQ will be reached over an initial build-up period of two years, following commissioning period, and the gas volume will be sourced for from SPDC JV’s Eastern Gas Network,” he explained.
Special Assistant to the President on Petroleum Matters, Dr. Emmanuel Egbogah, who was represented by Mr. Kester Mgbodille, said, “What we are witnessing today is a clear demonstration of the Federal Government’s intention to address the problem of power and energy in the country for the development and growth of our economy.”

The development, according to him, is a clear indication that the government is determined to encourage the private sector participation in the development of the economy not only addressing the power but also in other sectors of the economy.

He noted that the signing of the MoU was the final phase of the step to provide uninterruptible power to the city of Aba and environs stressing that when completed, it will no doubt improve the quality of lives in other areas.

While expressing hope that other IPPs will ride on the back of this success story, Egbogah said the government would continue to support the initiative involving the private sector so that industrialisation and economic development can spread rapidly to all part of the country