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Current domestic gas price is adequate to attract investment – Dr Orjiako

Dr. Bryant Orjiako is the Chairman of Seplat Petroleum Development Company
Dr. Bryant Orjiako is the Chairman of Seplat Petroleum Development Company

Dr. Bryant Orjiako is the Chairman of Seplat Petroleum Development Company. In this interview, he speaks on developments in the oil and gas sector, huge investments the company has made in the gas sector, especially on the Assa-North and Ohaji-South (ANOH) gas and condensate development project and its impact when it comes on stream in the first quarter of 2021.

With the result that you have declared today, would you say Seplat has fully recovered from the oil slum that you experienced some years ago?

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Frankly, our business is not based on volatility of the oil business; it is focused on efficiency and effective delivery of projects and operations, and therefore, we pride ourselves to be a low-cost operating company. Therefore, despite the volatility, despite the low oil price, our business continues to remain. That really is demonstrated in the result that you have seen, and it will continue to be like that.

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Do you agree that the commercial and financial framework for gas in the power sector is weak?

That is not quite correct. It chooses to be the case that the domestic gas price is less than 50cents per thousand standard cubic feet. This is very important for many people to know. If you have that kind of pricing at the time the international gas price was $10 and $13 and when oil price was around those figures and the domestic price was less than 50cents, really investment is like water flowing downstream, it is not going to upstream. Therefore, it became very difficult for people to invest in the gas business; that is one.

The second thing that happened, by 2012, government took a bold step and came up with the gas revolution plan and that gas revolution plan has various components: One; price; government immediately moved gas prices in the domestic market from less than 50cents a thousand cubic feet to $1.50, as well as addressed the processing fees and tariffs. Therefore, at the back of this programme, we immediately launched our gas expansion and commercialisation programme. By the time we started investing, we already had the market at the right price that is also increasing. So, it is not quite correct to say that the gas price in the domestic market is low when the price in the domestic market was less than 50cents, transfer price to Nigerian Liquefied Natural Gas (NLNG) was $2.

Obviously, there was no incentive to invest in crude gas in the domestic market at that time. All of that has changed now. The Nigerian domestic gas price is in $3 range and above transfer price to NLNG is still at $2. So, there is lot more incentives to put gas in the domestic market. More so, the domestic demand is increasing, so it is a no brainer; that is the reason.

In respect of gas flare, it is really a true statement that anybody who is still flaring gas today is actually burning money. 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 into the environment that is key, and other aspects of this business will include Liquified Petroleum Gas (LPG). One of the things we do with LPG is to take people away from burning bushes and firewood to a cleaner way. And that is why we are investing and we are making money as in our report, gas revenue is almost getting to 50 per cent of all revenues for itself.

Your investment in the gas sector is enormous. Are you going to drill gas wells to support your gas processing plant?

We are already in the gas mainstream business. Last year, we spoke about two main things in terms of our gas. We spoke about what we have been able to do in our gas growth, we added the capacity to process that gas from when we took up. We are able to increase that capacity to 520 million standard cubic feet. This year, we will also be conversant with the fact that we have taken the first investment decision for our next gas business, which is the Assa-North and Ohaji-South (ANOH) gas and condensate development. The project is more like an addition to our mainstream business and this project will add 300 million standard cubic feet in the first stage. On whether or not we will drill pure gas wells, it is just a function of what we have to do to meet the capacity of what we have in reserves. Now, in our gas reserves,  we have a combination of associated gas and non-associated gas when the needs arise, we will drill the wells and that is precisely what we will be doing and keeping on track in making sure that we maintain our leadership position in being the number one gas supplier to the Nigerian  market. 30 percent of gas in Nigeria is quite a significant aspect of what we are doing in Nigeria.

How would you access the security situation now in the Niger Delta?

Frankly, I must say that overall, the Niger Delta security has improved tremendously, but there is always room for improvement, and the only thing that everyone must 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 role too. We will like to see a situation where the relationship continues to improve between the operating companies and the communities; that is number one.

Number two; it is for the government to also keep to their promises, once you put all of these together, we can only but see improvement and more calm in the Niger Delta. Infrastructure development, employment creation, especially among the youths, is the key instrument to maintain long term peace in the Niger Delta.

When are we expecting the ANOH project to come on stream?

From Seplat’s point of view, we have contributed more than $100m, the government through the Nigerian National Petroleum Corporation (NNPC), contributed their $100m and we are expecting that we will be contributing about $50m in the newer time. We are expecting that this project is already on track and we have taken the First Investment Decision; we are going now into the contracting processes. Our guidance is that, we will have the first gas by first quarter of 2021, and we are expecting that we will be able to deliver on that.

Now, with respect to the impact on the economy, 300 million standard cubic feet of gas, if you convert that it translates to about 3000mw of power that is 50 per cent of capacity of Nigeria. The project will have a phenomenon impact on Nigeria’s economy. We are expecting that once this comes on track, it is going to enhance the demand in western Niger Delta and more importantly, will create demand in the Eastern Niger Delta and we are already beginning to see that happen. We have seen quite a number of people around Imo State, Eastern and even the South South states coming to make enquires about buying this gas and this is a very welcomed development.

You are a major supplier of gas to the Azura Power Plant; are you expecting to sign more deals with other power plants?

The best way to describe Seplat, and I have spoken a lot about our differentiation, we have created a race in this competition that only we are running, and frankly, by the time the others come, we will create other races, and I guess, development is one of those demonstrated ability to the willing buyer, willing seller, supply of gas in addition to meeting our domestic supply obligation. There aren’t many companies that met this, and what I will like to say about Azura is a willing buyer, willing seller arrangement, and it is a take and pay arrangement and that contract is moving economically and we are happy about it.

Again, the power project is actually one of the most successful IPP projects in the country. The truth of the matter is that the demand on our side is high and it’s 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 was already existing before supply, so we can only do one thing; continue to grow that business.

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