FG, Seven Energy sign $112m gas supply agreement

The federal government and Seven Energy International Ltd have signed a $112 million Partial Risk Guarantee (PRG) agreement which is expected to enhance supply of natural gas, to the Calabar National Independent Power Plant (NIPP).

The gas under the agreement would be delivered by Seven Energy’s subsidiary, Accugas, to the 560MW Nigerian Integrated Power Project (NIPP), Calabar, Cross River State.

The Partial Risk Guarantee is a financial instrument that will secure the supply of up to 130 million cubic feet per day (MMcfpd) of natural gas to NIPP Calabar, thereby enabling the consistent generation of an additional 560 MW of electricity to the national grid, approximately 20 percent of current power generation in Nigeria.

The arrangement, which guarantees payments to Accugas for gas supply, is backed by the Federal Government of Nigeria and the World Bank.

It will be the first of its kind for gas supply in Nigeria and is a demonstration of the Federal Government’s commitment to increasing power supply in the country and stabilising the ‘gas to power’ value chain.

Commenting on the agreement, Vice President, Professor Yemi Osinbajo said “I must say that this is a very significant event for us and as we all know this is the first PRG for gas that we are signing.  We know that it will encourage investment in gas infrastructure and we are certainly looking forward to the multipliers that will come from it”.

The Vice President commended Seven Energy for completing the 69 km, Uquo to Creek Town pipeline which will provide a continuous flow of natural gas from the Uquo Field in Akwa Ibom state to NIPP Calabar in Cross River state and add up to 560 MW to the national grid.

The construction of the pipeline included completion of the longest Horizontal Directional Drilling (HDD) river crossing project in Africa, all done using local contractors.

“Given the current power situation, we expect that this gas that will go into the Calabar plant will provide another 500MW of power which is very significant given our current situation,” he said.

Phillip Ihenacho, Chief Executive Officer, Seven Energy, said that “The signing of the agreement is very significant because it is the first gas to power guarantee that the World Bank has provided for encouraging investment in the gas sector in Nigeria.

It assists in securing and leveraging the $700 million investment already committed into gas infrastructure in Nigeria.

“The World Bank has a programme of gas to power guarantees that could be used to encourage further investment in gas to power. The big challenge for people who are investing in the gas sector today is the worry about payment risk. If I build my infrastructure and I am supplying gas to my customer, will my customer pay me on time? This structure enables the investor to be confident that they will get paid on time because there is a guarantee from the World Bank and that unlocks a lot more investments in the gas and power sectors in Nigeria”.

Seven Energy forecasts gas deliveries to increase to 150 – 200 MMcfpd over the coming year and is capable of providing long-term supply of gas to additional off takers for power generation and for local industry.