Oando Plc, a Nigerian energy company, is building a business to truck natural gas to industrial users whenever they are cut off from pipeline supply, an executive said.
“We’re basically creating a market for the future,” Bolaji Osunsanya, chief executive officer of Oando Gas & Power Ltd., said in a May 19 phone interview from Lagos, the commercial capital. “Markets that otherwise you won’t have been able to use pipelines to serve, today it is possible to truck compressed natural gas there.”
Oando is investing $36 million to build three gas-compression plants in the country’s southern industrial belt within a year to produce 20 million cubic feet of gas a day initially, and then increase capacity as demand rises, he said.
Though Nigeria, Africa’s biggest oil producer, also has the continent’s largest gas reserves of more than 184 trillion feet, it lacks the pipeline network to reach most potential users. Existing pipelines passing through the restive Niger River delta are frequently sabotaged, causing supply disruptions. Average daily output of gas in Nigeria is about 9 billion cubic feet, according to the state-owned Nigerian National Petroleum Corp., or NNPC.
With domestic gas demand projected by the NNPC to reach 5 billion cubic feet daily in the next two years, Oando is targeting “big energy users” such as cement and steel plants, who currently rely on diesel to generate at least 1.5 megawatts of power per factory, to switch to gas, Osunsanya said.
Natural gas traded $2.833 per million British thermal units on the New York Mercantile as of 11:11 a.m. in London, according to data compiled by Bloomberg.
Compressed to become more than 200 times smaller than its original volume, gas could be delivered to companies connected to pipelines during supply disruptions, he said. The plants are to be located in the southeastern industrial town of Aba, the oil hub of Port Harcourt and a third to be located in central Nigeria..
Oando concluded a $1.65 billion acquisition of ConocoPhillip’s Nigerian oil and gas assets in June. Its gas and power unit operates a 228-kilometer (142-mile) pipeline that supplies industrial users in Lagos, as well as Port Harcourt.
“The technology can be utilized on all modes of transportation,” Osunsanya said. “Today it’s trucks but there’s a future for rail and for barges so we can wheel compressed natural gas through the rivers upstream.”
Oando’s shares fell 1 percent to 18 naira each as of 11:13 a.m. in Lagos trading on Tuesday.