International investment agency backs a $200m Nigeria Gas Deal
The Multilateral Investment Guarantee Agency (Miga) has announced its first engagement in Nigeria’s gas sector.
Miga is providing a guarantee of US$200mn against the risk of expropriation to Accugas Ltd, a subsidiary of independent Nigerian oil and gas company Seven Energy, which is investing in mid-stream infrastructure.
Its backing forms part of a “new generation of jointly developed World Bank Group solutions” says a statement issued by Miga. To date, the World Bank’s IFC has invested US$75mn (its largest equity financing in the oil and gas sector in Africa) and the IFC African, Latin American and Caribbean Fund has invested US$30mn in Seven Energy.
“Miga’s involvement is an important part of the financial security package that enables us to invest for the long term in Nigeria’s gas sector – a decision that we expect will be good not only for our business, but also for Nigerian citizens, companies, and the economy as a whole,” says Phillip Ihenacho, Seven Energy CEO.
Seven Energy’s processing facility and pipelines now deliver gas to three power stations and two manufacturing plants in Nigeria – a country that suffers from a severe energy shortage due to the lack of infrastructure to bring gas to the domestic market.
“The issue of power is one where we have placed the cart before the horse, Dolapo Oni, head of energy research at Ecobank told GTR at a roundtable in Lagos last month. “Unfortunately, we dove headlong into trying to get power on the ground without even looking at gas. Now, we are thinking: ‘We need to fix gas.’”
Most international oil and gas companies in Nigeria are focused on offshore oil, while gas is often considered a by-product and re-injected, liquefied for export, or flared. Yet, despite the country’s enormous natural gas reserves, only one third of power is supplied from the national grid. Those connected to the grid face multiple daily power cuts and 55% of the population has no energy access.
In response, the Nigerian government created the Gas Master Plan in 2009 to increase the gas supply and jumpstart investments in gas infrastructure through market-based pricing, strengthened regulation, increased contract enforceability and better-aligned incentives.