October 2024, Vol. 251, No. 10
Features
Shell Expands Gas Distribution Network in Nigeria
By Shem Oirere, P&GJ Africa Correspondent
(P&GJ) – Shell plc’s Nigerian business, Shell Nigeria Gas (SNG), has struck a deal with a regional government in the country to develop a new gas distribution network to boost consumption by commercial and industrial entities for increased business performance.
The agreement between SNG — a fully owned Shell company incorporated 26 years ago, with mandate for the company’s downstream gas distribution business to Nigeria’s commercial and industrial customers — and Oyo State, a regional government in southwestern Nigeria, is for a gas supply and distribution infrastructure along 0.62 miles (1-km) of pipelines route to deliver up to 60 MMscf/d across the state with the first gas expected in the fourth quarter of 2025 according to a statement by Shell Nigeria.
When completed and online, the new gas distribution system would be the fourth for SNG, which currently owns three main gas transmission and distribution infrastructures across Nigeria, spanning 86 miles (138 km). These include Agbara-Ota, the Aba Cluster and Port Harcourt in Ogun and Abia and the River States.
SNG’s short to medium term goal is to expand the company’s assets in the West African nation, including the development of two gas trains with a total network distribution capacity of more than 102 MMscfd, a pressure reduction metering station and a 93-mile (150 km) gas transmission and distribution network, to meet the energy requirements of at least 140 industrial and commercial customers in the three states.
SNG’s Agbara-Ota gas distribution system serves at least 120 customers in Ogun State including the Ogun-Guangdong Free Trade Zone, which houses the largest ceramic and float glass manufacturers in Nigeria, the Ota metropolis and Agbara industrial estate, also ranked one of the largest industrial clusters in the West Africa country according to Shell.
The company says the Aba distributed gas cluster links the industrial zones of Ogbor Hill, Osisioma and Ariaria, as well as key industrial customers such as Ariaria Market Energy Solutions Limited, the Independent Power Project (IPP) consortium.
Since its incorporation in 1998, SNG says it has increased its gas distribution capacity by more than 150% with its network “capable of distributing 150 MMscf/d of dry processed gas to more than 300 industrial customers.”
“The gas distribution project will be a game-changer in the industrialization drive of the Oyo State Government and help boost internally generated revenue and result in more job opportunities,” said Managing Director SNG Ralph Gbobo, in a statement during the signing of the agreement in May.
“For SNG the project is a milestone in our effort to continue growing the energy supply to businesses in Nigeria, in line with Nigeria’s ambition to drive progress on the back of natural gas availability across Nigeria under the Decade of Gas initiative,” he said.
Expanding the gas distribution network in Oyo State — the sixth most populous in the Nigeria, with an estimated population of 8 million people — is the Oyo State-Shell Nigeria Gas Project, which was mooted in 2023, with the regional government saying construction will be developed through a Build-Own-Operate-Transfer (BOOT) model.
The Oyo State government, which is one year into the implementation of its Roadmap to Sustainable Development 2023-2027, says it has provided the land for the development of the gas distribution pipeline project by SNG Ltd.
An earlier brief by the Oyo State government said the project entails SNG constructing a pressure reduction and metering station (PRMS), to deliver “an output of 60 million standard cubic feet of gas per day to industrial, manufacturing and commercial entities.”
The government said the project by SNG is a milestone for Oyo State as the first time in its history that it has attracted a multinational gas project.
“It will also serve new emerging industrial corridors, industrial parks/zones and independent power projects, while providing stable power generation for industrial and residential use in Oyo State,” the government said in a media release.
Both SNG and the Oyo State government did not respond to a request for additional information, such as project deadlines, design and EPC contracting.
However, in March, Oyo State Gov. Oluwaseyi Makinde said the gas distribution project “fits into our plan to drive innovation and industrialization in Oyo State, and we’re ready to partner with more companies and other organizations to enhance the delivery of relevant projects.”
Oyo State’s Roadmap to Sustainable Development 2023–2027 program is expected to be a phase in Nigeria’s long-term strategy of growing the value of its economy to at least US$4 trillion by 2035, with increased investment in the development of infrastructure that supports the country’s industrialization.
Currently, more than 78% of Nigeria’s electricity generation — estimated at 32,000 GWh — is from pipeline-distributed gas, according to the Paris-based International Energy Agency (IEA), with the share of gas-generated electricity growing by 208% between 2000 and 2021.
Nigeria, which held an estimated 206.5 Tcf of proved natural gas reserves as of the first quarter of 2023, still faces the challenge of insufficient oil and gas pipeline infrastructure to supply energy not only to commercial and industrial consumers but also power other downstream oil and gas projects.
It is expected that new gas distribution pipelines, such as SNG’s, will be routed along existing and planned industrial cities throughout Nigeria, as the federal government looks for about 300 MMcfd of additional supply — an amount equivalent to a 20% increase in domestic supply.
The gas distribution pipeline expansion in Nigeria would obviously benefit from the completion of NNPC’s 79-miles (127-km) Obiafu-Obrikom-Oben Gas Pipeline (OB-3 main line) and associated spur lines, as well as the Ajaokuta- Abuja segment of the 382-miles (615-km) Ajaokuta–Kaduna–Kano Natural Gas Pipeline project.
Nigeria’s existing pipeline network is about 3,180 miles (5,120-km) in length and owned by the country’s national oil company Nigeria’s National Petroleum Company Ltd.
SNG’s planned expansion through the planned distribution pipeline network project in Oyo State pushes Nigeria a notch higher in the country’s drive to achieve the goals of its Decade of Gas Policy launched in 2021, which include increased domestic consumption of gas for industrial growth, to address reduction in the amount of gas flared and reduce energy shortages.
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