Seplat Petroleum Development Co., a Nigerian oil producer that raised about $500 million in an initial share sale this month, expects the African nation to almost stop burning natural gas at oil fields within five years as the domestic fuel market becomes more profitable.
Seplat, which flares or burns off about 26 million cubic feet of gas a year, expects to stop the practice in September by expanding its fuel processing facilities, said Chief Executive Officer Austin Avuru. The company is investing about $100 million to more than double its annual gas handling capacity to about 280 million cubic feet by 2015.
“Deregulation of the domestic gas business has created an opportunity set for a robust and viable domestic gas business in Nigeria,” Avuru said today in an interview in London. “We are combating the challenge, the challenge of gas flaring.”
Nigeria, the holder of Africa’s largest gas reserves, loses at least $3 billion in revenue a year by burning off associated gas, which is pumped together with crude oil, according to the Petroleum Ministry. The West African nation has been working on a plan to increase domestic gas prices to spur supplies to power generators.
Seplat sells its gas for about $3 per 1,000 cubic feet to power plants. The price for the fuel has risen from about 20 cents only a couple of years ago, Avuru said.
“We are moving from the government stopping flaring by regulation into the industry stopping flaring because it’s a commercial value,” the CEO said.
Seplat fell 0.6 percent to 229.5 pence in London, the first decline since share trading began on April 8.