‘The Case for Utorogu Industrial Park’ - Africa’s premier report on the oil, gas and energy landscape.

‘The Case for Utorogu Industrial Park’

The Utorogu gas field in the western Niger Delta is the site of the second largest gas gathering and processing facility for the supply of natural gas to the Nigerian domestic market.

The field is one of the several producers in the Oil Mining Lease (OML) 34, which is jointly operated by NDWestern Ltd, a homegrown, private Nigerian independent and the Nigerian Petroleum Development Company (NPDC), a state-owned firm which is a subsidiary of the NNPC Ltd.

In February 2022, OML 34 averaged 355Million standard cubic feet per day, retaining its position as the largest gas producing asset in the country, run by an entirely Nigerian Joint Venture.

The partners have commenced the process of developing Utorogu into an industrial park. At the heart of the proposed hub are natural gas delivery, crude oil refining and power supply to co-located factories. There are plans for an export route, featuring a rail line for transporting the manufactured products to the Warri wharf and out to sea.

 As part of our series of interviews with Chief Executives of producing companies, regulators and ranking agencies, Eberechukwu Oji, managing director and chief executive officer of ND Western, tells Africa Oil+Gas Report’s Akpelu Paul Kelechi, that NDWestern is filling the gap left by Shell’s exit from Warri and the Niger Delta, and establishing significant projects to industrialize the area. Excerpts from the conversation:

AOGR: The Nigerian government has declared this decade as a decade of gas. Where do you think you want ND Western to be in 2037?

Eberechukwu Oji: If you look at the trajectory of the company, ND Western will grow to be a global integrated Energy Company by 2037 playing not just in Nigeria but well across Africa and most definitely playing globally.

As the Chief Executive of a key Nigerian Independent, what keeps you most awake at night, of all the risks that challenge your company’s growth plans?

On the now and immediate, we have the security challenges in the Niger Delta, pipeline vandalism, crude oil theft, illegal refinery, as you know. These are pressing issues and they affect our production quite significantly. It’s a battle against criminals to ensure that the oil we produce actually gets to the terminal. I think that’s the most significant threat and most significant challenge on the security front that affects our production and that could impact our growth.

Utorogu Gas Plant: We have been successful in our operation in stemming crude theft over a 12km pipeline and we’ve done that with a combination of technology. We have drone flights that basically patrol that line to give us on the spot and real-time pictures of what is going on.

Investors keep hearing all this news and it makes them a little bit hesitant to put money into projects in the Niger Delta. So that affects our funding not just on the immediate but on the long term. In the medium term, we have to understand the implementation of the PIA because some of these regulations are good on paper but implementation is always a challenge. The industry needs to be engaged as government begins to implement the PIA so that we are sure that we bank the benefits of the PIA.

In the long term, I worry about regulatory activism around the energy transition and climate change. It’s important that we pay attention to the levels of carbon emission and limiting emission as has been increasingly recognized. However, many people today don’t have energy of any sort. People are dying from the use of charcoal and firewood and the lives of those people do matter. So it’s important that we balance climate change and its impact in the future with the realities of today, especially in Africa, where there are huge numbers of people who are energy denied.

Is there a global solution to the vandalism and crude theft in the entire nooks and crannies of the Niger Delta?

We have been successful in our operation in stemming crude theft over a 12km pipeline and we’ve done that with a combination of technology. We have drone flights that basically patrol that line to give us on the spot and real-time pictures of what is going on. We have what we call Ground Trotting, which means we have people patrolling the line over the 12km and they’re able to report any unusual activity. And then we have the cover of the government security agents who then can respond when something is noticed. And I said we’ve been successful over a very short length of pipeline which is 12km, but in this 12 km of pipeline, we were able to remove 300 crude theft points: 300 over 12 km of pipe.

So, if you then use that as a corollary and then look at the hundreds if not thousands of kilometres of pipeline across the country, it gives you a sense of how much theft is going on. And the effort that we should take to keep those lines free from illegal crude tapings is just enormous. So there needs to be more than just the mechanical interventions to ensure that the crude theft doesn’t happen. More needs be done with the socio-economic status of the Niger Delta which fuels the desire or intention to go into this line of criminal activity and we can have some conversation around what should be done about that.

Crude oil prices have experienced a see -saw, from the plunge in the first two quarters of 2020 to the sky-high prices of today.

Nobody can accurately predict oil price and its direction. One major incident and it goes north, because crude oil is sold in futures. That’s what people don’t realize. There is some forecasting that go behind crude oil prices and there are geopolitical incidents that drive the forecasting. As you know, the West and Russia are in tension over Ukraine, with anticipation that war could break out and there will be severe supply disruptions. Second, there was pent-up demand during the lockdown in terms of the supply chain and companies are trying to catch up and are putting pressure on the supply chain. There is also an unusual cold winter that we’ve seen in parts of the world. Cold winter means more energy use, to keep homes warm.

So, a combination of those factors are currently in the mix and driving prices northward. Some of those could be resolved quite quickly; for instance, if the Security Council’s efforts to diffuse tension with Ukraine, works, then you will see an unwinding [in] the market.

As a company, we have a very clear growth strategy that is not based on crude oil price forecast. If the prices are good we take advantages of it. When it slumps, we try to make sure that our unit cost of production is low. But in this business, we’ve been around for some time, prices are up today and they’re down tomorrow.

Are there specific, key pillars to ND Western’s growth in the next 10 years?

Our growth projection is built around [the 4Ps]. If you take the people for instance, we now have in place the ND Western networks. We have the ND Western Future Leaders Network and that is essentially recognizing that 10 years from now, we need new highly experienced, well-trained managers who will run this business and continue its growth trajectory and all these things we are projecting 20-30 years away. People will make it happen and you must train them today.

We have the Women Network and that is recognizing that STEM studies for women need to be promoted. They bring a certain diversity of views into the workplace and it’s important for us that we harness the capability that our women bring. So, those are two critical networks that we have in ND Western. We’re working to re-introduce the former Shell Intensive Training Program. Now, we just call it Intensive Training Program. Essentially, this is a learning Hub in Ejeba that was originally built by Shell which is now owned by OML 34 JV of ND Western and NPDC. We want to bring it back. We will invest in the young industry professionals of today so that they will be competitive in the future with all the advances in technology that are coming their way.

So, it’s going to be a massive intervention to develop specialist skills that is needed to fuel our growth ambition. We call it Growing Our Own Timber to make sure that we train our people to the level that we need them to be able to perform to deliver our growth aspiration.

And there are other things that we’re doing in that capability space. Currently our plant capacity in terms of gas is 600MMscf/d. Oil is about 120,000 barrels a day. So that’s significant capacity increase in the plants. We must keep the plants full which means that we must grow our production to take up all our available capacity and then that buys us time to grow and build and build more capacity.

In terms of production, yes, I just mentioned we’ve got 120,000BOPD capacity but of course, all of it is not oil, some of that will be water coming with production. But when it is full, even at 50% BS&W, so that’s already 60,000 barrels a day of production capacity from our current 20 to 30,000 barrels a day and we produce around 360MMScf/d [of gas] now and our short-term ambition is to take it to 400MMscf/d and in the longer term, take it to 600MMscf/d and then we begin to grow from there.

For processes, we make work process, effective, efficient, sustainable, etc. So those are the key pillars of growth for our company.

What were your thoughts on creating an Industrial Park?

There are many imperatives behind the industrial park. Number one, our industry utilizes a lot of capital resources, but employment is low. So, the oil industry [can’t] provide all the employment that is needed in the Niger Delta. The restiveness in the Niger Delta is not going to be solved by the oil companies alone. So, we need manufacturing, we need to industrialize the Niger Delta and as ND Western, we have a unique opportunity to promote to other industrial investors that they can come within our vicinity, and we can challenge the assumption that Niger Delta is unsafe because we are there, and we have been there for many years. If we can operate there anybody else can operate.

Transcorp is also there and have been operating for many years; the Delta Glass company is also there, and they have been operating for many years. Delta Steel Company is also there. This whole assumption that the Niger Delta is unsafe is not true. Folks need to come down, visit the place, make an assessment for themselves and then they can see the viability of locating new plants and manufacturing concerns around the Utorogu Industrial Park.

Since 2021 when we began to promote the industrial park, we have received very strong interest from many potential, anchor tenants in the Utorogu Industrial Park. It totally makes sense if you locate your plants in our industrial park and we have our gas plant supply gas directly to you, you have already saved yourself transport costs because the gas will be piped directly to your plant. Apart from the power that we will provide eventually for industrial park, Transcorp can also provide you power. The security architecture that we have will extend to cover the entire industrial park. So [there are] a lot of benefits in co-locating.

We are also working on an export route. There is a rail line and a short portion could extend it to Warri wharf. Manufacturers in the park who need it for export could take their products straight to the port for export. Before that infrastructure is built, [they could use] a short road trip to Warri wharf and then export. The Warri airport, can be extended into a proper cargo airport to export products from the Industrial Park.

We are building a mini refinery in that park to stake our claim to the park and our belief, that it would work.

What is the capacity of the mini refinery? Will ND Western be able to supply all the gas that would be needed in that cluster?

The government has implemented the gas network code, which means that ultimately, it won’t be only ND-Western gas that is used in industrial park. Our refinery is a 10,000 barrel a day mini refinery and there is a discussion on another 10,000 barrel a day condensate refinery with NNPC.

ND-Western is the upstream supplier of gas into the West African Gas Pipeline, through NGas. If the Ghanaians complain of perpetually low gas supply into the line (less than 70MMscf/d) does this bother you at all?

There was a technical issue, a very well-known technical issue with a force majeure on the line for some time but that force majeure has been lifted towards the end of last year. So, the technical issue is resolved. [There] is a commercial issue around the terms of the ongoing supply agreement; we like to supply more if the Ghanaians want to take more gas.

Is carbon capture something that is in the horizon of ND Western, and are you looking at virtual pipeline?

Some of these concepts are nice to talk about but there’s no limitation from our side to assess or utilize technology. To make a virtual pipeline work, there are several things, one is that you must have Compressed Natural Gas so then you can do virtual pipelines for short distances, or you can have Liquefied Natural Gas so that you can do virtual pipeline for long distances. We have some key players in the market who are proving the concept on both CNG and domestic LNG. We’ll watch these companies to see if the demand is real.

To your point about carbon capture, Nigeria should not be talking about carbon capture. I think Nigeria should be talking about commercializing all our gas. Carbon capture is about producing excessive amount of CO2 and you want to capture it and strip it. Our biggest carbon comes from the flares, so this is gas that can be used but we are burning it to produce CO2. There is a good initiative around gas flare commercialization that is ongoing. I think we need to accelerate [it to] utilize all the gas we produce.

If you were to advice the government on implementing Petroleum Industry Act, what would be top on the list?

We should engage the industry. The government did very well in their engagement strategy before the PIA was passed. They need to sustain that engagement. In the Nigerian parlance, they say, you must tell someone before you shave his head. So, if the PIA is meant to grow the industry, industry players must be squarely integrated, properly engaged in the implementation.

In the wake of the departure of Shell from Warri, how does ND Western feel it should bring back what is perceived as Warri’s lost glory?

We are in Warri today and the glory is not lost completely. ND Western owns the Ejeba estate formerly owned by Shell. Today that estate is over 90% occupied, from around 15%. The same for Ogunu. We have basically refurbished the bungalows, repopulated, maxed out their use. There is the former SITP now called the Intensive Training Programme which we’re bringing up and we are just commissioning Delta Plus, the IPPG/ NPDC/ND Western Test Laboratories.

ND Western is already helping to restore the glory of Warri as a city and the Niger Delta. Our Utorogu Industrial Park and our refinery, and the port, the airport [will create new jobs].

What else do you want the government to put in place to escalate investments into this industry?

You must take care of your current investors. They are your biggest advocate for future investors. ND Western like many other companies are currently investing or we have invested in Nigeria. We need to be taken care of so that we do extremely well and that becomes the biggest PR or marketing campaign for the country to say if investors like NDWestern have done so well, then others can come.

If someone asked you: “what is your bestselling plan as ND Western to host communities,” what would you say?

We firmly believe in the government’s plan to set up a Community Trust. Our shareholder partner NDPR pioneered Host Community Trust investment which has now become law in the PIA. We now need to implement it rigorously and make it work, ensure that community trusts are set up, are well-funded, have the right caliber of people in their boards to administer these funds, [then have a] conversation with the community around what direction should things go in terms of developing the community.

We have a very robust Community engagement strategy, committee management strategy; we have a very well-funded GMoU, very functional GMoU, which deploys quite a lot of resources into the community, and we have excellent relationship with the community. We are yet to have any Community related shutdown of our facility and that is incredible in the Niger Delta.

 

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