Shell targets Nigeria’s industrial clusters for its gas expansion plan

The Managing Director Shell Nigeria Gas, Ed Ubong, has unveiled plans by the company to expand its investment in gas development which targets Nigeria’s industrial clusters.

The Anglo-Dutch oil major is seeking to develop Nigeria’s domestic energy market around natural gas, because it is potentially huge, harder to steal, better for the environment and can underpin a robust industrial sector that could potentially employ thousands.

Nigeria’s gas production is rising but boosting domestic demand is challenging, and Ubong believes Shell has done the groundwork to set up a gas-based system, and that the organisation’s influence and large balance sheet can transform Nigeria’s population of almost 200 million people into a new market.

“Imagine if you held maybe $100 million in the U.S, would it convince you to set up a factory in Nigeria? The first thought companies have is: Do I have power? Ubong said.

Gas demand in Nigeria has remained low, and hard to calculate Ubong wasn’t actually able to say said what it was partly because there isn’t a robust distribution system.

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The country consumed 20 billion cubic metres about 706.3 billion cubic feet of gas in 2016, according to government data. That’s just a quarter of the 81 billion cubic metres the U.K. consumed that year, and with just a third of Nigeria’s population, according to data from BP Plc.

Nigeria’s gas reserves are thought to be the largest in Africa at 5.2 trillion cubic metres, according to BP data. Domestic gas production has been steadily increasing over the past decade, reaching 47.2 billion cubic metres last year. That’s up from 35 billion cubic metres in 2007.

Shell also intends to expand the infrastructure needed to reach more gas customers by first focusing on what it calls “industrial clusters.” In these areas, it hopes to persuade foreign companies to build a concentration of factories that employ hundreds of people.

Ubong said, foreign companies are calling me, “That’s how I know the demand is there.”

But to get to the level of development Shell hopes for, the company may have to endure further difficulties. Two decades ago, when it built a gas pipeline network in the western part of the country near Lagos, Shell suffered years of losses before attracting enough sales to turn a profit. The network now serves about 90 industrial customers, it says.

It would also require a change of focus in the nation’s production sector. Though Nigeria is estimated to have more gas than Iraq, what’s been produced historically has mostly been a by product of oil. It’s sometimes burned off, or flared, because it’s more economical to do that than capture and sell it.