Mr. Austin Avuru is an eminent petroleum geologist, industry professional leader, investor and shrewd business manager. In this chat with Deputy Business Editor, Sopuruchi Onwuka, he provides the long term investment outlook of Seplat Petroleum Development Company and concludes that the ongoing pricing correction and pipeline development post hope for the Nigerian gas industry. Excerpt.
You have always emphasized gas as your key contribution to the domestic fuel market and major economic contribution. May have you current portfolio profile on gas and near term targets?
In 2010 when we took over these assets, the installed processing capacity was 120 million standard cubic feet (scf) per day but the actual processing capacity-the actual delivery- was about 60 million scf per day. We came in and inherited these facilities and set out to expand these facilities because we saw a future in gas well three years ago before people saw it.
Today we have revamped the existing 120-130 million scf per day and built a new 150 million scf per day. So today, really, our existing available processing capacity is over 300 million scf per day and we are actually delivery between 250 scf per day and 280 million scf per day into the domestic market.
Then there will be second phase of this our gas project where we are going to install another 225 million scf per day processing capacity additional to what we have. So that is why I said that at the end of 2017, we will have the capacity to process 500 million scf of gas per day. So, we are bullish about gas and I think, as a company, that domestic energy security is critical to this country’s future economic development; and it is achievable in the next five years.
How have been challenged with the infrastructure deficits and low commercial return from gas investments?
Those are the key challenges; and once you solve these challenges really, then the gas business is good to go.
On infrastructure deficits, fortunately for us we are situated in the middle of existing western infrastructure hub. That is Oben. It enables us to deliver to the domestic market without any additional investment in distribution infrastructure. So we are lucky to that extent.
On the overall national infrastructure, that will bring gas from east to the west and deliver gas to the north, that is under development by NNPC; and hopefully, when that is hooked up, it will ease the infrastructure problem.
Pricing is improving. When we started in 2010 we were selling at 20 cents per 1000 scf, and we went up to 70 cents, and then $1.50. Now the regulated price is $2.50 per 1000 scf; and independent customers are paying between $3.0 per 1000 scf and $3.50.
So we are moving closer and closer to market determined price which, if you are me is in the region of $3.50 per 1000 scf. So both problems are there and both problems are being addressed.
Some industry operators speculate that Nigeria’s gas reserves cannot take us up to 40 years, so what is the long term view of the gas business?
Be careful. If we achieve our national aspiration of 12 billion cubic feet (12 bcf) of gas per day by 2020, and if we don’t discover more gas, that production amounts to depletion rate of 4.0 trillion cubic feet (4.0 tcf) per year.
That means that unless you discover more gas once we hit out production ratio of 12 bcf per day then it would reduce our reserves is to production ratio to 40 years.
So production will go up to 12 bcf per day. And if we don’t make more discoveries, at the basis of our reserves today that will amount to a lifespan of about 40 years. It underscores the fact that we need to make more discoveries: we need to actually go out and look for more gas.
With your gas investments so and various monetization projects, may we have a glimpse of your current gas flare profile?
Our gas flaring today is probably about two percent of our total daily production. And quite frankly at the end of 2016, it will be totally eliminated.
What is your short business outlook under the current race among indigenous companies to grab market share locally and regionally?
In the next five years you will be seeing a national independent oil firm that you would be proud of as a Nigerian. Our business outlook targets uptick in the level of production for both liquids and gas, our professionalism, our international identity will all sum up to a new industry status for the company. So, in five years Seplat will be a company every Nigerian will be proud of.
“So today, really, our existing available processing capacity is over 300 million scf per day and we are actually delivery between 250 scf per day and 280 million scf per day into the domestic market. Then there will be second phase of this our gas project where we are going to install another 225 million scf per day processing capacity additional to what we have. So that is why I said that at the end of 2017, we will have the capacity to process 500 million scf of gas per day.”