Nigeria

COVID-19: Savannah Energy’s Stamp On Gas Supply During Lockdown

When the stay-at-home directive of the federal government was announced in March 2020, one of the major concerns of residents in Lagos, Ogun and Abuja was the state of power supply. The prospect of over 20 million people in two of Nigeria’s most industrialised states and the Federal Capital Territory being confined to their homes without steady power supply was a source of concern.

Indeed, a day after the stay-at-home order was announced, the Transmission Company of Nigeria (TCN) in a statement signed by Ndidi Mbah, its General Manager, Public Affairs, confirmed that gas supply remains a major encumbrance to power supply in the country.

Nigeria’s power sector architecture is built around thermal plants which are fuelled by gas. But according to the TCN, several power plants including Geregu NIPP, Sapele NIPP, Delta II and IV, Egbin Power Plant and other independent gas-powered plants were, and continue to, suffer from inadequate gas supply.

Even though no reason was given for the insufficient supply of gas, the implication was clear; tit was responsible for a reduction in the amount of electricity transmitted to Nigeria’ eleven electricity distribution companies and millions of households across the country.

The two major challenges facing gas supply in Nigeria have been: poor enforcement of contracts in terms of payments to gas suppliers; and constrained production of associated gas related to crude oil production and potent vandalism.

Gas supply assurance requires putting in place measures to prevent sabotage and ensuring consistent payment for gas supply.  On 15, April 2020, the Federal government approved the payment of N200 billion to the power sector to boost the supply of gas to the electricity generation companies (GenCos). Whilst the payment is welcome, a sustainable solution that will prevent a payment backlog buildup is more desirable for the long term.

Energy analysts have said that one of the critical elements necessary to overcome the gas deficit in Nigeria is investment to boost gas production and supply capacity. In an era where oil supply projects face increasing threats, investment flow is sluggish but a number of companies operating in the country are going the extra mile to make gas available to power Nigeria’s electricity plants.

For instance, Savannah Energy, a British energy company has invested over US$1.2 billion in upstream non-associated gas production, midstream gas processing and transportation through its subsidiary, Accugas.

Also, Seplat Petroleum Development Company Plc, in collaboration with Shell, has set out to deliver the US$700 million Assa North /Ohaji South (ANOH) gas and condensate field project which is expected to significantly boost power supply in the country.

Savannah Energy’s investment has been significantly impactful with regard to power generation in Nigeria. From commencement of the lockdown Accugas, has ensured a steady and reliable supply of gas to its customer, Calabar NIPP, which enabled the generation of 470 MW of electricity to the grid.

The CEO of Savannah Energy, Andrew Knott, has committed to further investment in Nigeria. “We continue to expect to increase production levels further during the course of this year as we add new customers, such as First Independent Power Limited, who we announced earlier this year. Savannah is, and will continue to be, the partner of choice for customers seeking reliable gas-for-power in Nigeria”, he said.

Savannah has demonstrated its capacity to sustain gas production and ensure that customers’ demand is adequately met. From end of March, Accugas supplied a daily average of 114mmscfd and a daily peak of 123mmscfd to its customers.

According to Oge Peters, Savannah’s Head of Commercial “Savannah has been producing gas at an increasing rate throughout this crisis to our current customers and is currently speaking to other power stations about Accugas stepping in to meet their current gas volume deficiency. We’ve proven ourselves to be a very dependable source of gas supply through this crisis.”

Savannah Energy holds an 80 per cent interest in Accugas, with 20 per cent owned by private equity investor African Infrastructure Investment Managers (AIIM). Accugas has one of the most significant gas processing and transportation infrastructure in southern Nigeria.

According to the Minister of Power, Nigeria’s power sector has lost no less than N117.8 billion to gas shortages and other factors between January to March 10, 2020. Natural gas is the source of over 87.5 per cent of Nigeria’s power supply.  The sector lost as much as N2 billion daily in some days during the period under review, with the lowest loss pegged at N1.47 billion on February 4, 2020.

The Nigerian Electricity System Operator, commonly known as SO, put the nation’s installed generation capacity at 12,910.40MW, available capacity at 7,652.60MW, transmission wheeling capacity at 8,100MW, and the peak generation ever attained at 5,375MW. This is against an estimated peak demand forecast of 28,570.00MW.

Unfortunately, Nigeria is only able to generate around 4,000 MW on most days, which is grossly insufficient, leading to economic losses. These losses have a significant impact on the overall wellbeing and quality of life in the country. Therefore, it is imperative to encourage gas investors by way of providing a conducive environment for their operations and for further investment in the sector.

The enforcement of contracts and the protection of gas infrastructure are key to ensuring that gas suppliers are able to run their businesses profitably. Energy experts have advised that gas is critical to achieving stable power supply in Nigeria. At a time when Nigerians are desperate for stable power supply, anything worth doing to ensure steady gas supply for improved power generation is worth doing well.

Considering natural gas accounts for over 87.5 per cent of Nigeria’s power supply, a significant amount of investment is required in gas production, processing and transportation to bridge the gap between the current national generation levels of 4,000MW and the peak demand forecast of 28,570MW.

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