Royal Dutch Shell said on Wednesday it had started production from a major new oil and gas facility in Nigeria which it hopes will boost exports as well as provide a badly-needed boost to domestic electricity generation.

The Gbaran-Ubie oil and gas project will be able to produce 1 billion standard cubic feet of gas (scf/d) per day – about a quarter of Nigeria’s current output – and up to 70,000 barrels per day (bpd) of oil when fully operational next year, Shell said.

Mutiu Sunmonu, Managing Director, Shell Petroleum Development Company of Nigeria (SPDC) said “This project will deliver substantial benefits for the country as it’ll provide liquefied natural gas and oil for export and gas for electricity generation in Nigeria.”

The project’s gas processing plant is already producing 200 million scf/d from the first two wells of a planned 33.
Shell did not give an investment total for Gbaran-Ubie but Nigeria’s state oil company, NNPC, which holds 55 per cent of SPDC, in 2009 signed a $1.69bn funding agree-ment with the Anglo-Dutch firm to cover its share of the investment.

Shell holds 30 percent of SPDC while the other shareholders include a subsidiary of France’s Total, and Italian energy firm Agip. Despite being Africa’s largest oil and gas producer, Nigeria is saddled with chronic power shortages because of the poor condition of its domestic refineries and because weak regulation has put many investors off trying to solve the problem.

The government has introduced a new gas pricing regime to try to encourage its foreign energy firms including Shell to divert more of their gas towards the domestic power sector and help meet the country’s growing energy demands.