For Nigeria’s indigenous players, a time to lead

Nigeria

Eberechukwu Oji, CEO of ND Western Limited, talks to The Energy Year about the Utorogu Industrial Park, the company’s relationship with host communities and the rise of modular gas processing plants in Nigeria. ND Western is an independent Nigerian oil and gas exploration and production company.

This interview is featured in The Energy Year Nigeria 2023

Can you give us an overview of ND Western’s milestones?
ND Western was founded in 2011 as a SPV with the purpose of acquiring the jointly held 45% participating interest of Shell, TotalEnergies and Eni in the OML 34 asset. Nigeria Petroleum Development Company Limited (NPDC) holds the remaining 55% interest in the asset.
We are a consortium of several companies comprising Niger Delta Petroleum Resources (NDPR), which is one of Nigeria’s foremost indigenous marginal field operators; Petrolin Trading, which is an international E&P player; FIRST Exploration & Production, which is by far the most significant local shallow-water operator in Nigeria; and Waltersmith, which is a critical local onshore operator as well as the owner of the 5,000-bpd Ibigwe modular refinery.
The 2011 divestment has been transformational for local oil and gas companies in Nigeria. Previously, indigenous players were predominantly buying marginal fields, but we purchased an entire asset, and we demonstrated that local companies are indeed capable of stepping up and leading the market. We are operating with over 10 years of proven exceptional performance. We operate with international quality standards and an excellent ESG agenda. ND Western represents the best of what indigenous companies taking over from IOCs can do.

How does the company manage its assets?
In 2016, an Asset Management Team (AMT) was launched together with NPDC to operate the OML 34 asset in Warri, Delta State. An AMT is a form of an unincorporated SPV that enables private investors to co- or jointly operate assets with NPDC. NPDC is the official asset operator of the OML 34 JV asset. With the AMT, we are able to add capabilities and skills from the private sector into the operations of the asset by leading the AMT and providing technical skilled personnel for the operations.
The outcomes have been outstanding because we have managed to unleash the asset’s full potential in oil production: it used to produce 8,000 bopd at the time the asset was acquired, while now it produces 27,000 bopd. In terms of gas production, it used to produce below 200 mcf [5.66 mcm] per day, and now we are at 360 mcf [10.2 mcm] per day with peak production at 385 mcf [10.9 mcm] per day.

What is ND Western’s current production footprint?
We provide most of our produced gas to the Escravos-Lagos Pipeline System (ELPS) and we also provide 30% of our gas to the power plants in the country. Along with Chevron, we are the leading supplier of gas to the West African Gas Pipeline system. We commissioned and brought into production the Utorogu NAG2 gas processing plant, which has a total capacity of 150 mcf [4.25 mcm] per day. By the end of 2022, we should be producing 400 mcf [11.3 mcm] per day, and in the next two years, we plan to raise the plant’s capacity to 600 mcf [17 mcm] per day. We will also bring three more fields – Warri River, Rapele and Osioka – into production within the next 24 months.
On the oil side, we have the potential for 120,000 bopd of processing capacity, and within the next three years, our oil production capacity is expected to grow to 60,000 bopd. We have also commissioned a Lease Automatic Custody Transfer (LACT) unit, which has a capacity of 65,000 bopd. We are resuming a drilling campaign that was truncated by the Covid pandemic. Currently, we are exploring a third of our acreage area that does not have proper seismic data from the previous ownership.
As for our downstream activities, we are commencing the development of a 10,000-bpd modular refinery, and the FID is expected by the end of 2022. We are also in discussions with the Nigerian National Petroleum Corporation (NNPC) for another 10,000-bpd condensate refinery within the Utorogu corridor because our asset is one of the largest producers of condensate in the country.

What is your main current project?
We are currently developing an industrial park in the Utorogu area, and the feasibility studies for this project are ongoing. Utorogu is extremely rich in gas with about 3 tcf [85 bcm] of gas reserves, and our strategy is to exploit it for the country’s domestic consumption. Local and international companies will be able to locate their factories and manufacturing plants within the park. The park is located 25 kilometres from the Utorogu gas processing plant, which is one of the most reliable plants in the country. Plus, this proximity to the source leads to higher pressure and reliability of the gas flow.
Moreover, companies will save on gas transportation costs, and they will have to pay only reticulation expenses. It is a safe area, and the presence of several long-lasting international companies already operating within the park proves it. We intend to develop an eco-park where we will promote eco-friendly solar panels, and every activity within the park will be deployed sustainably. We have gas-based industries to produce methanol who can site their facility within the Utorogu Industrial Park.
We have received many inquiries, and three companies have been shortlisted to select the sites where they want to establish their plants.

Which types of infrastructure will be linked to the Utorogu Industrial Park?
The most beautiful factor for the park will be the development of railway lines that will connect the area to the main ports and airports, thereby facilitating the exchange of goods and services. There are ongoing plans to transform the Warri port into a deepwater port, which will enable bigger ships to take advantage of it. Meanwhile, we will provide ship-to-ship transfer to facilitate the exchange of petroleum products in and out of our park.
Accessibility by air is also possible with the Federal Airport Authority of Nigeria open to the possibility of turning the Warri airport into a proper cargo airport, and the conversations are ongoing. Our park will be fully connected to the main infrastructures of the region, making it efficient and unique.

What are the key challenges you are facing?
Industrial parks involve a significant number of stakeholders that participate in the local economy. As developers, we need to conduct a social impact assessment to align our goals with the local community’s interests. Economically, a sizeable number of businesses will move there while fostering economic development and the employment rate in the area.
Regarding urban development, associated infrastructures such as roads and railways will improve. We are also training host communities because we want them to be involved as key stakeholders in the project, and it will be quite a challenge.

How committed is ND Western to the development of host communities?
We have an excellent relationship with our host communities. In 10 years, we have not had one community-related shutdown. Our sister company, Niger Delta Petroleum Resources, pioneered a host community relationship programme where a certain percentage of our profit is designated for helping the local community. We manage to impact the communities directly, and by doing so, we build trust. There is a well-funded GMoU [Global Memorandum of Understanding] structure which enables us to have a direct impact in our host community.
In 2021, we commissioned the Professor M.O. Oyawoye E-Library for the University of Ibadan, and it is a state-of-the-art facility designed for the Department of Geology. Our strategy is to invest in building the capacity of our youth by creating technical expertise. When the IOCs leave, they will create a technical/capacity gap. We are filling this gap by investing in internationally recognised education where African students will have the possibility to access an international level of expertise and skills.
We are also reviving the former Shell Intensive Training Program (SITP) in Warri for training young engineers and geologists. They will go through a year-long intensive training across the different areas of the industry before we unleash them into the market. We hope to launch the programme by September 2022.

How would you assess Nigeria’s energy transition?
Being a major energy producer, Nigeria should drive the narrative for the energy transition in Africa. Our population will grow massively in the future, and the energy demand will grow accordingly. To satisfy this demand, it is a prerogative for us to exploit our untapped reserves of gas. By doing so, we will take care of our people while preserving our environment, and this is an example of an efficient energy transition structure.
Nonetheless, gas represents the most sustainable and efficient way to meet our energy demand but Nigeria currently lacks gas-related infrastructure due to a lack of investment. One of the main reasons is that international players and financial institutions are divesting from fossil fuels without differentiating oil from gas, creating a clear asymmetry for us. We are burning wood, coal now, which has a more significant impact on the environment than gas. Nigeria should continue to advocate that a just energy transition means that immediate investment is still needed to develop gas infrastructure in the near future.

What should be the main prerogatives to ensure financial support for local companies?
We need to establish an energy bank to fund energy-related projects, and we need a well-funded sovereign wealth fund to ensure that these energy projects will develop our economy. Most importantly, we need local players to develop more bankable projects with a more significant social impact.
Projects should create jobs, support the energy transition agenda, and have an excellent ESG score. If all these aspects are respected, then the prospective energy bank will be able to fund projects.

Can the AKK pipeline effectively foster gas penetration in Nigeria?
First, we need to build gas infrastructures across the country, and in this regard, the AKK pipeline is brilliant because it will reach the northern part of the country. Consequently, we will need to build associated facilities to foster gas penetration around and from the pipeline. It is tragic that the Niger Delta and the South East states don’t have gas networks; it is imperative to build them there. The policy prerogatives should attract private investors through public-private partnership arrangements to make sure that gas pipelines will be built urgently all around the country.

How would you evaluate the rise of modular gas processing plants in Nigeria?
The utility of modular gas processing plants is highly based on their geographical positioning. In the east, we have a lot of associated gas which is wetter and needs modular processing to make it dry and viable for commercial purposes. In the west, the gas is much drier, and the benefits of modular processing mechanisms are limited.
However, there are stranded gas pockets in the country, and there are producers who do not have access to a major gas pipeline. For these cases, we need modular gas processing that quickly turns the gas into LPG, LNG and CNG, which will be distributed through virtual pipelines.

How is ND Western positioned in the Nigerian midstream sector?
In May 2022, ND Western officially entered the Nigerian midstream sector by signing a gas infrastructure development agreement. This project will be developed in the Lagos Free Trade Zone through a consortium called Optimera Energy FZE, which comprises ND Western Limited, Falcon Corporation and First Hydrocarbon Nigeria. It’s a USD 25-million investment aimed at facilitating gas distribution from the Niger Delta region to the industrial facilities in the free trade zone. The initial capacity is expected to be more than 5 mcf [141,600 cubic metres] per day.
If you’re looking for a place to invest, it’s in the Lagos Free Trade Zone. Optimera Energy guarantees that there will be a continuous gas supply if you locate your company there.

What are the expected impacts of this agreement on the Nigerian energy industry?
The first step is to provide gas to companies currently located in the zone and possible future activities that will be relocated there. Once we have a gas surplus, we will indeed look at the export market.
Europe is looking at alternative gas suppliers, and our project represents a straightforward addition to the Nigerian export capability. Economically, it will significantly impact our USD power purchasing capability by incrementally positioning Nigeria as a top gas exporter. Furthermore, this development is committed to promoting gas-based industrialisation.

How have the federal government and regulatory bodies supported this agreement?
This project has been carried out in deep collaboration with the State, the federal government and the regulatory agencies. Since the beginning, they have shown us support by facilitating the licensees’ requirements that we had to meet. Since the Decade of Gas announcement, if a project is aligned with the energy transition narrative and is bankable, the government and regulatory bodies have shown support and a fostering attitude.

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