Olufola Wusu

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It was reported in the news that, the Nigerian National Petroleum Corporation (NNPC) has said it would partner with a Danish firm, Unibio A/S Limited in a joint venture operation to produce animal feeds with the government of Denmark will guarantee a 10 per cent equity financing of a Joint Venture Company involving the NNPC and a Danish firm, Unibio A/S Limited.
The NNPC in a recent statement stated that the proposed joint venture company would be engaged in the production of animal feeds from Nigeria’s abundant natural gas resources.
From this action, it would seem that the NNPC is keen on taking the lead in monetising Nigeria’s gas resources by turning some of it into animal feed.
This piece attempts to highlight some key issues in the value chain of natural gas to animal feed.
Natural Gas as Animal Feed?
Natural gas is being used to manufacture animal feed. The animal feed pellets are made using methane-eating bacteria; methanotrophs, that are found in soil and lakes. These bacteria are fed methane gas, which makes them grow and multiply into a protein-rich biomass that can be dried and turned into animal feed. With most fermentation the carbon source is sugar, here the source is methane.

Henrik Busch-Larsen, chief executive of Unibio, a Danish company also working on a methane-based animal feed, was quoted as having said that: “It is a difficult reaction to control. You need to get as much methane gas as possible into the liquid that the bacteria are in.” The aim is for the bacteria to reproduce efficiently enough to make the process worthwhile. This technology seems to have reached the point where it can be commercialized.

Unibio the company mulling a joint venture operation with NNPC aims to sell its product to fish, poultry and pig producers. Henrik Busch-Larsen says, the protein has been approved for fish and animal use by the EU, and farmers have so far been enthusiastic about the product.

The Business case for turning Natural Gas to Animal Feed
Global demands for food is expected to increase close to 100% by 2050 driven by an increase in the global population to 9 billion, from the current 7.6 Billion and a growth in affluence primarily in China, India, Eastern Europe and Latin America.
The Sun Newspapers reports that the global animal feed mar­ket can be segmented into five divisions based on livestock: poultry, swine, ruminant, aquaculture and others, and the cost of their feeding is on the high side especially the pet animals, which are also known as companion animals.

The major ingredients in animal feed are maize and soybeans. Other raw materials that can be used to produce animal feed include ground­nut, sorghum, and cassava and the major ingredients include cereals, fats and oils, which provide the protein and energy required for animals to maintain good health.

Natural gas is used for the manufacture of fertilizer and animal feed. Thus natural gas plays a critical role in Agriculture. World Health Organisation (WHO) estimates, Nigeria needs about 1.5 billion litres of milk annually. While the US department of agriculture puts Nigeria’s “insufficient” milk import bill at $225 million per year, while estimating that Nigeria’s dairy market is potentially worth $3 billion. Aliko Dangote, president of Dangote Group, plans to own 50,000 cows by 2019, and produce 500 million litres of milk per year. Those 50,000 cows will require a lot of feed which can be made from natural gas, instead of importing feed.
Albertamilk.com states that a lactating cow will consume between 18 and 25 kg of dietary dry matter each day, depending on how much milk she is currently producing! If one cow consume 25 kg of feed a day, that will be 750kg of feed in a month, the 50,000 cows may consume up to 37,500,000kg of feed in a month! For those who know the average price of a bag of animal feed, you can do the math…

Benefits of Gas to Animal Feed
There will be a further reduction in gas flaring; while companies have one more reason not to flare gas. There are huge possibilities in view of the demands for this kind of feeds as it will boost food production in Nigeria tremendously. The benefits are not only in local production and consumption of the feeds but also in terms of revenue generation in foreign currencies through export to various countries.

Price of animal feed often fluctuates
The raw material for manufacturing animal feed is imported and susceptible to currency fluctuations. Thus, locally manufactured natural gas to animal feed may offer a more stable alternative. A methane-based feed will be in the middle of that price range, so while it will not be cheap the price should be stable.

Environmental Benefits
Production of the protein using Natural Gas, some water and land, makes it more sustainable than feeds such as fishmeal or soybeans. Production of the protein uses up methane a GHG.
In Nigeria we are importing most if not all the raw materials needed to manufacture animal feed, and when the foreign exchange market fluctuates, animal feed becomes more expensive, making it difficult for our farmers to earn a good living without further impacting on our environment.
The need for sustainable and innovative production of animal feed and protein for the world’s rapidly growing population is a good reason for gas to animal feed to thrive.

Basic process of converting natural gas to animal feed
1. Natural gas, fed into a fermenter, is the key component used to convert Methylococcus capsulatus into highly concentrated protein pellets
2. The fermenter is designed to provide the bacteria with optimal growth conditions, including the addition of methane
3. The bacteria are harvested continuously using a downstream process that removes liquid to increase bacterial biomass. The water is recycled
4. The final stages of the process turn the biomass into easy-to-digest granules that are 73% protein

Punch Newspapers reports that the dredging activity going on around Iyana Iworo has driven the fish further out to sea. This leaves even less fish nearby to be processed into animal feed.

Oil and Gas IP made Gas to Animal Feed possible
The idea of turning gas into animal feed was first explored in the 1980s by Norway’s state-owned oil company, Statoil, which in the early 2000s built a plant capable of producing 10,000 tonnes of feed a year. However, at the time, gas prices were high and the product had not been approved in the EU. The plant was closed, and the technology was sold to Calysta.

Patent Protection “fathered” the Gas to Animal Feed Industry
It goes without saying that companies in the Gas to Animal Feed industry, would probably not have been formed and would not continue to exist today without protection of their Intellectual Property!

Commodity Sellers vs. Proprietary Industry…
If the technology for turning natural gas into animal feed was not protected by patents, it would have been priced as a “commodity”. If this technology had been priced as a “commodity”, it would not have had enough value to fund its development and it may not have been developed and made available to the industry.

Value of IP to the Oil and Gas Industry
A report issued by PricewaterhouseCoopers in 1999 found that the global IP licensing market totalled more than US$100 billion, giving an idea of how economically important IP assets are today. Right now the total worldwide IP licensing market is estimated to be $250 billion annually.

ExxonMobil is reported to have collected more than US $129 million in 2011 from licensing its IP to third parties, and this number is increasing every year.

IBM alone generates nearly $2 billion a year from out-licensing its IP.The asset value of patents worldwide is estimated at $1 trillion.

U.S. IP licensing revenues were estimated at $120 billion in 2003 and are expected to have reached$500 billion by 2010.University licensing royalties in the U.S. total nearly $1 billion annually.

In 2013, the Shell Oil Company received 189 patents from the U.S. Patent and Trademark Office. Research withpatent portfolio analysis tools shows that Shell was assigned 207 U.S. patents in 2014 held by Royal Shell. Shell spent $1.2 billion on R&D.

The Chinese government paradigm
The Chinese Government is fostering home-grown innovation and IP commercialisation through tax incentives. From 2006 through 2010, Chinese oil and gas companies cumulatively boosted R&D spending by 29 percent annually and upstream patenting activity by 66 percent annually. In downstream, the Chinese energy conglomerate Sinopec is amassing a large patent portfolio, at home and abroad.

Nigeria’s Window of Innovation
For the Gas Industry to thrive we need Governmental support for our local industry, government has given some support in the National Gas Policy. However technological growth and development does not happen by chance, in this writer’s opinion our local companies have a duty to take full advantage of governmental support by actively innovating and commercialising their resulting innovation and Intellectual Property.
Nigerian companies may need to pay a little more attention to research, development and the resulting innovation that increases profitability which should be protected and commercialised by IP possibly Patents, Trademarks, Copyright and Trade Secrets etc.

Conclusion
Nigeria is placing a huge on agriculture, at the same time Nigeria is also placing a bet on agriculture, gas to animal feed may very well be the fertilizer that will ensure that both endeavours blossom adequately.

It goes without saying that technological development does not happen by chance, it can be encouraged by good policies like the National Gas Policy serving as a spring board for the inventiveness of our local companies to flourish.

Olufola Wusu Esq. © 2017

Olufola Wusu is a Commercial/Oil and Gas and I.P. Lawyer with Megathos Law Practice based in Lagos.