Aiteo: Building Virtual Gas Infrastructure Beyond Pipeline
Aiteo Eastern Exploration and Production Company Limited is one of the fast growing oil exploration companies in Nigeria’s petroleum industry. The company acquired 45% of Total, Shell and Agip OML 29 and at fast pace, it has put its name in Nigeria upstream landscape. As at the time Aiteo took over OML 29 asset which is a very critical infrastructure for Nigeria in the Nembe creek trunk line, it was designed to carry about 600,000 barrels of crude per day. When the company took over the crude oil asset being controlled by Shell, the asset was under 25 000 barrels of oil per day and the pipeline had less than 60% availability. In less than a year, the company took the production up to the peak of over 90% barrels per day and increased in availability of pipeline to over 80% including its gas production from meagre 10 to 15 million scf per day to 65 million scf per day. With this feat, Aiteo is confident to create its own space in the Nigeria’s oil and gas environment.
Victor Okonkwo, Senior Vice President Gas & Commercial on Aiteo’s new initiative in gas development made it known that the country with over 190 trillion scf of gas on the ground and close to 180 million population is bogged down with less than 25% electricity availability. Okonkwo maintained that traditional market for gas has metamorphosed to export while the market seeks for American and Asian countries. Some parts of the world have discovered gas and looking for market as well. This means the window of opportunities may close if countries like Nigeria do not find ways to restructure and extract its resources for diversification of its economy. The country may lose out because in Europe, efforts are being made to phase out diesel fired engines. Terminal dates are in place to effect the change. This means gas has enormous potentials as an alternative in case of eventuality owing to recent trends.
Concerning Nigeria gas dynamics, Okonkwo opined that in building gas infrastructure, the gas location and market should be put into consideration. How does the gas which goes to the market become viable for commercial price so that every stakeholder along the chain will make decent profit? This is the dilemma gas operators are facing. Offshore deposits hold a lot of gas, to get the gas onshore Nigeria, cost a lot of money which is probably out of the reach of the industry and the power plants that will use the gas. There has to be a combination of global market dynamics, fiscal conditions, and government interventions to work on the offshore gas and deliver them to the market profitably.
The Aiteo Vice President reiterated that the onshore gas in Nigeria is predominantly held in the hands of the International Oil Companies (IOCs) and over the years, in recent times, the IOCs have divested their assets. At present, independents and indigenous operators are controlling substantial amount of gas onshore. But the challenge is that most of these independents acquired assets via divestment exercise which were financed by banks. The banks have been exposed to the oil and gas industry which has put pressure in all the indigenous companies that were funded to acquire these assets. The tendency therefore is to focus on oil production. Okonkwo advocated that the government on its part should figure out a way to intervene and create room for the independents that have acquired assets with substantial gas deposits to be able to develop gas and convey them to the market.
Besides, infrastructure is required to take gas to the market. The traditional method of infrastructural building to transport gas will enhance its productivity which is one of the emphasis of operators. This may be capital intensive. Therefore, he admonished operators to look at other options and virtual pipeline technology is the intervention that the industry needs to bring gas to utilization which engenders industrialization. According to the Aiteo Executive, virtual pipeline is the technology that enables the gas to either go through pressure or liquefaction so that it could be put into a different transportation system that is not a pipeline and delivered to the market. When gas is pressurized and contemporized, it becomes Compressed Natural Gas (CNG), CNG enables trucks, rails, badges to deliver gas to the market. If the gas is liquefied, it becomes LNG, which is known as Liquefied Natural Gas. It could be put in a vessel or truck and be delivered to the market for end users. Apparently, it will check pipeline vandalism.
The mini-LNG is cost effective. There could be floating, storage and re-gasification units which an independent is pioneering in Nigeria. This gives quick access to the market and it is modular in nature. There is no point building a 400 megawatts power plant where there will be no transmission and distribution system to spread it across. Okonkwo made a stunning remark that some of the power plants in Nigeria are generating less than 30% installed capacity which involves hugh funding. Financial institutions are at disadvantage because these projects are not generating any value for operators and the country. The virtual pipeline involves stakeholders in the chain to engage in the venture, capacities can be built as and when due provided there is capital to enhance the project. What encourages the virtual pipeline is that the National Gas Policy, which has been enacted sees virtual pipeline as a key instrument leading to market growth in gas utilization. The policy recognizes and requires external financing of projects. The key drivers for virtual pipeline development is private sector led and some companies in Nigeria have created satellite centres that generates electricity and supply a dedicated set of customers. The virtual pipelines are modular in nature, scalable and will augment owing to the size of the country. The intention is not to displace the traditional method of building grid connected electricity or gas to power project because of the high cost of fund and time to deliver to end users. It also involves regulatory and fiscal issues.
Virtual pipeline technology will intervene by providing and conveying LNG to underserved areas and industries which will aid the country’s industrialization and enhance economy diversification efforts.
Okonkwo submitted that beyond pipelines, virtual pipeline technology involving CNG and mini-LNG hold the key to accelerating the country’s gas to power infrastructure development. Modular development nature can also solve the perennial energy crises in an incremental manner and “this will shorten the suffering of commercial clusters that are in hubs of our industrial development.” Moreover, “The large scale pipeline and mega power plant development will continue to provide the national backbone solution but until then big scale businesses need to survive and operators in gas business need to make money as well.”