Seplat Petroleum Development Company Plc has been at the forefront of investing in projects that will enhance gas utilization and domestication in Nigeria. Speaking after the company’s annual general meeting last week, A.B.C. Orjiako, the company’s chairman described what makes Seplat standout and how its strides in gas production is impacting power supply in Nigeria.
How was Seplat able to recover from the oil slump that happened few years ago?
Frankly, our business is not based on the volatility of the oil market. Our business is focused on the effective and efficient delivery of projects and operations. Therefore, we pride ourselves to be a low-cost bio-operating company and therefore, in spite of the volatility and low oil price, our business continues to remain comfortable and that is really what we have demonstrated in the results you are seeing and we will continue to build on that.
Your investment in the gas sector is enormous. Will we see you in the midstream soon? Are you going to drill more gas wells to support your gas processing plant?
We are already in the gas midstream business. Last year, we spoke about two main things in terms of our gas business. We spoke about what we have been able to do in our gas growth, we added the capacity to process that gas and we are able to increase that processing capacity to 525 million scf a day and that was phenomenon. This year, you are also conversant that we are taking the first investment decision for our next gas business, which is the ANOH Gas Processing Company, and is more like an addition to our midstream business. That will add another 300 million scf in the first phase.
On the question of whether we will drill pure gas well, it is just a function of what we have to do to meet the capacities of what we have installed. Now, the existing gas reserves we have, have a combination of associated gas and non-associated gas. When we have the need, we will drill the wells as the need arises.
That is precisely what we will be doing, but we are making sure we are maintaining our leadership position in being the number one gas supplier to the domestic market. Thirty (30) per cent of gas to power the Nigerian market is a quite significant aspect of what we are doing.
How would you assess the security situation in the Niger Delta? Are you comfortable with the present situation and what do you think could be done to make things better?
Frankly, I must say that overall, the Niger Delta security situation has improved tremendously, but there is always room for improvement and the only thing we can do is that all hands must be on deck; the communities will play their role, and to get them to play their role, the operating companies must play their roles.
We will like to see a situation where the relationship continues to improve between the operating companies and the communities. Secondly, the government must also keep to their promises and once you put all of this together, you can only see improvement and more calm in the Niger Delta. Infrastructure development, employment creation, especially among the youth, are the key instruments to maintaining long term peace in the Nigeria Delta
On the Assa-North Ohaji-Southgas project, when are we expecting it to come on stream and what impact will it create to the nation’s economy?
Seplat and NGC have both contributed $100m each. We are expecting another $50m each from both parties by mid year and the final payment of $60m each by year end. There are 5 major contract packages to be awarded this year. Guidance is that we’ll have 1st gas by Q1/Q2 2021.
It will have a phenomenal impact and we are expecting that once this comes on track, it will enhance the demand in the western Niger Delta and more importantly, it will create demand in the eastern Niger Delta and we have already began to see that happen. We have seen a lot of people in the eastern states and even the south-south coming to make inquiries about buying this gas and this is a very welcome development.
Apart from power, there are also other aspects of the economy that this will impact – the agricultural sector, industries and overall; as well as the manufacturing sector will be impacted. Therefore, when we say that Seplat is a company that is well keyed into the economic development of Nigeria, we mean that we are extremely impactful with employment and empowerment key in our operations. So, apart from gas to power, the real trickle-down effect or the real multiplier effect in the economy will be a phenomenon and I am looking forward to the entire country to be extremely happy with what we are doing and for other companies to emulate.
As one of the major suppliers of gas to the Azura Power plant, which other companies are you looking to partner with when the ANOH gas project becomes operational?
The best way to describe Seplat, which tallies with a lot that has beenspoken about our differentiation, is that we have created a race in this competition that only us are running and frankly, by the time the others come, we will create other races. Our gas development is one of those types. We have demonstrated the ability to do willing-buyer/willing-seller supply of gas and in addition to meeting our domestic supply obligations.
There are not many companies that have met this and what I will like to say about Azura is that it is a willing-buyer/willing-seller arrangement and it is a take or pay arrangement. The people around there are happy that Azura has come on stream and it is actually one of the successful Independent Power Projects (IPPs) in the country and we are happy to be associated with it.
The truth of the matter is that the demand is high and it is growing so we are not indeed short of the market. Gas is one market where supply creates demand, but in this case, we have a situation where demand is already existing before the supply; so, we can only do one thing and which is continue to grow that business and if you look at the infrastructure gap in Nigeria for power alone, you can only say that the future is bright and we can only grow that business.
It is assumed that the commercial and financial framework for gas-to-power is weak. Is it still cheaper to flare gas despite the recently passed law on gas flaring?
LNG transfer price is below domestic market prices. Nonetheless a lot needs to change with the domestic market to make it more viable including adjusting exchange rate to market rate, achieving prompt payment of invoices transiting from the DSO framework to a liberalized market.
In respect to the gas flare, it is really a true statement that anybody who is still flaring gas today, is actually burning petrodollars because the penalty that has been revised will mean that you will pay as much penalty as you would have received revenue for investing in the gas.
So,that by itself is an investment for people to invest. From my own perspective, we are not only committed to the gas business just for revenue, because we pride ourselves as a company that keeps very high in our priority, environmental stewardship, and we see that the gas development will not only take away flare from the environment but will also bring cleaner energy in the environment and that is key.
The other aspect of this business will include LPG. In fact, somebody raised the issue in our AGM and one of the things we do with LPG is to take people away from burning bushes and firewood to take cleaner ways of cooking, so it has a very multifaceted advantage to the society and that is why we are doing it.
Are you saying the current arrangement under the new law will encourage investors to come into the sector?
Yes, that is the point. The core domestic gas price is adequate to attract investments in Nigeria and it is comparable to international gas price and people should be able to invest and that is why we are investing and we are making money. Can’t you see in our report that gas revenue is almost getting to 50 percent of oil revenue and it speaks for itself?
Are you venturing into petrochemicals in the future?
Obviously, our business is in the energy sector which is a broadband and we will definitely take one step at a time. Today, we are concentrating in our oil and gas business where we are consolidating our upstream business in production. We have now launched the midstream and will like to see how we progress with that. We consolidate before we take other options and we are very focused.