Seven Energy, a Nigerian oil and gas company is betting on the local gas market with a fresh debt of $495 million aimed at funding the cost of supplying gas to the domestic market. Part of the money will also be used to refinance existing loans and fund working capital.
Just last year, the company got $255 million from equity investors, which included Singapore’s state-run investment firm Temasek Holdings, to help build up its gas business.
The gas market in Nigeria is largely unexploited. The country has a proven reserve of 260 trillion cubic feet of natural gas but government-controlled price of gas has discouraged investments in the domestic gas market. By not fully harnessing its gas resources, Nigeria is estimated to be losing $18.2 million daily. Also, the quantity of gas flared in Nigeria is more than 40 percent of the gas flared annually across Africa. Gas flared could have been re-injected into the fields or converted into liquefied natural gas, domestic cooking gas, plastic production, among other uses, but most oil firms in Nigeria have chosen the easier route of burning the gas.
Although the current daily gas output in the country (4 billion cubic feet ) surpasses the daily domestic demand of more than 2 billion cubic feet, demand is expected to rise to over 7 billion cubic feet by 2020. Experts expect the economic prospects of gas to have surpassed that of oil by the end of this year.
There are 22 gas-powered power plants in Nigeria, most of which have found it hard to perform to their optimum capacities due to gas shortages which is often caused by inadequate infrastructure or vandalism. The plants are now ramping up generation and will be needing more gas as the country seeks an end to its blackouts.
Seven Energy is one of the major players in the fast-growing domestic gas industry. It processes and distributes gas in Nigeria through Accugas Limited, its wholly-owned subsidiary of Seven Energy, which has investments worth $1 billion in gas projects in the country’s southeast.
The new debt, provided by First Bank, Ecobank, FCMB, Union Bank, United Bank for Africa, FBN Bank UK and Union Bank UK, will help the company to improve its infrastructure as it plans purchase of gas fields and pipelines to ease domestic distribution.
Rival firms Oando and Seplat are also investing massively to increase their shares of the domestic gas market. While Seplat aims to hold a 20 percent share of the domestic gas market by 2018, Oando is targeting big energy users such as cement plants, which currently rely on diesel to switch to gas.
