Chief Executive Officer of Seven Energy, Mr. Phillip Ihenacho, spoke to Ejiofor Alike on the new Uquo gas processing facility funded by his company, which was recently inaugurated by President Goodluck Jonathan
Could you please give us a brief background of the Uquo Gas Processing Facility funded by your company?
The Uquo Gas Processing Facility is one of the biggest projects of its nature undertaken by independent indigenous partners in sub-saharan Africa. The Uquo Marginal Field where the processing facility receives gas is located in Esit Eket and Eket Local Government Areas of Akwa Ibom State.
The field was one of the 24 marginal fields that were awarded by the Federal Government in 2003, as part of the federal government’s marginal field programme, aimed at increasing production, reserves, employment and indigenous participation in oil and gas business.
The field development is an unincorporated joint venture between Frontier Oil and Seven Energy. Frontier Oil is the operator of the field, while Seven Energy provides technical services and 100 per cent of the funding.
The Uquo Marginal Field that produces this gas is supposed to be an oil field. How did it turn into a gas field?
Crude oil and gas usually come together. So, this field is a very large gas field with some quantity of oil. Typically, what happens is that people tend to focus on oil and ignore the gas. But what we decided to do was to focus on the gas and not ignoring the oil. So, this processing plant is also oil processing plant. We process 2,000 barrels per day of crude oil but that is small compared to the gas infrastructure that we built. So, it is a primarily in a gas field and we have developed it primarily as gas field.
Other operators would have simply walked away when they discovered that the supposedly oil field contains relatively small oil but a very large volume of gas. Why did you go into the development of the gas field instead of going away to look for oil fields elsewhere?
We see it as a long term opportunity. It is not as easy as oil but in the long term, it is something that will generate good returns on investment and it is also what Nigeria really needs. We have been blessed with capital that is long term investment capital. We are looking at next 10 to 20 years and not one or two years. There is huge demand for gas in Nigeria – there is huge need for gas in the country and the country as a whole will not develop unless we are able to harness the gas resources we have here and use it for industrialisation and power generation.
When did you complete the processing facility?
In December 2012, first gas was produced for testing and commissioning purposes. Initial gas production is dedicated to supply the Ibom Power Station via a 62 kilometres 18-inch pipeline from Uquo to Ikot Abasi. The gas produced from Uquo Field is sold to Accugas, which is a subsidiary of Seven Energy Group. The initial customers are Ibom Power Station and Calabar Power Station. First gas from Uquo Gas Procesing facility is also scheduled for delivery to the Calabar Power Station this year via a 37 kilometre-24-inch pipeline from Uquo to Oron. Accugas has been completing the construction and Frontier Oil the commissioning of Train 2.
How will it impact positively in power supply in the country?
The critical thing this project has which is different from any other project is that it is fully an integrated project. So, as well as developing the gas wells and the gas fields as well as the processing the gas –refining the gas, we also have more than 200 kilometres of gas pipelines that are actually transporting the gas to the doorstep of consumers, including the Ibom Power Station, which is about 70 kilometres away from here. That power plant, for the past six weeks has been generating at continuously 100 per cent uptime for the first time ever.
What is the nameplate capacity of this facility in terms of the volume of gas to be produced?
This plant today, just with the two trains that have been installed here can do over 200 million standard cubic feet per day (Scf/d) of gas. And 200million scf/d can power almost 1,000 megawatts of power.
Apart from the Ibom Power Plant, which other power stations will receive gas from this facility?
So, as well as Ibom Power, we are doing a pipeline that is almost completed now to the National Integrated Power Project (NIPP) power station in Calabar, which is another 540 megawatts. So, with these two trains, we will be able to power both Ibom Power and Calabar NIPP for the next 20 years.
The initial customers are Ibom Power Station and Calabar Power Station. First gas from Uquo Gas Procesing facility is also scheduled for delivery to the Calabar Power Station this year via a 37 kilometre-24-inch pipeline from Uquo to Oron. Accugas has been completing the construction and Frontier Oil the commissioning of Train 2. These will provide the additional capacity to supply 131 million cubic feet per day of gas to the Calabar NIPP power station. When these deliveries are taking place, Frontier Oil and Accugas will be supplying gas to provide 750 megawatts of electricity generation capacity at the Ibom Power Station and the Calabar NIPP power station, equivalent of some 10 per cent of Nigeria’s generating capacity.
What is the financial commitment of Seven Energy to this project, so far?
The investment we have made as Seven Energy today is approximately N90 billion. That is over $600 million that goes into the gas processing plant and the pipeline infrastructure that you don’t see – that is on the ground.
Who are your other partners in this gas project?
We are working with Frontier Oil Limited on this project, which operates the facility, while Seven Energy funded the project. Frontier Oil Limited was awarded the Uquo Marginal Field in Oil Mining Lease (OML) in 2003.
This is the first time this kind of project will be built by a purely indigenous entity, as others in the country before this one were built by the super majors. Is this the new way to go?
At the end of the day, there is a business here. There is a huge demand for energy in Nigeria, which has been overlooked by many people. What is happening recently with the power reforms and with the liberalisation in the power sector that allows commercially-sustainable investments in the power sector – that has a knock-on effect on the gas sector. The gas sector needs a strong power sector because the power sector will be a large customer of the gas sector.
Do you really have plans to expand the gas facility in the future?
There is plan for expansion. If you look around the gas plant, you will see that we have drawn lines that are empty. The reason for that is that we intend to expand. As we have more customers and as we are able to access more gas, we will expand.
Apart from Uquo Gas Processing facility, in which other assets does Seven Energy has stakes in Nigeria?
Seven Energy operations are currently centered on two focus areas of the Niger Delta and a recently acquired stake in the undeveloped asset in the Anambra Basin. In the south east Niger Delta, Seven Energy has interests in the Uquo Field, which lies within OML 13 license area and the Stubb Creek Field, which lies within OML 14.
In the north east Niger Delta, Seven Energy has entered into a Strategic Alliance Agreement with the Nigerian Petroleum Development Company (NPDC) in respect of OMLs 4, 38 and 41. It also has an interest in the Matsogo field, within OML 56. In the Anambra Basin, Seven Energy has an interest in OPL 905.