History and Location
Ondo State of Nigeria (“Ondo or “the State”), one of the seven states created on 3rd February 1976 by the then Federal Military Government of Nigeria, was carved out of the old Western State. Ondo, which is generally referred to as the “Sunshine State” is the largest state in south-western Nigeria with a land area of 15,820 square kilometers. Ondo State has a population of over 3.4 million, out of a national estimate of approximately 186 million.
Ondo is reported to have the 6th largest economy in Nigeria, dominated by oil and agricultural products. The State is endowed with abundant natural resources, huge mineral deposits and rich forest reserves which create enormous potential for industrial and economic growth.
The State is an agrarian state with agriculture providing employment opportunities for over 70% of the population. The State has varied vegetation regimes, favourable soil types, adequate rainfall and ecological diversification which support the cultivation of a large variety of crops. Agricultural produce in the State includes tree crops such as cocoa, oil palm, rubber, cashew and kolanut; arable crops such as cassava, yam, maize, rice, sugarcane; fruit crops like pineapple, citrus, mango, pepper and tomato. The State‟s main revenue yielding crops are cocoa (accounting for over 40% of Nigeria‟s annual cocoa output) and palm oil. The State has tremendous potential for fishing owing to its location along the Atlantic Ocean and the presence of prominent rivers such as Owena, Ala, and Oni Rivers. The coastlines are known to be rich in stock fish, prawns and lobsters. Livestock farming is carried out on a small scale basis and consists mainly of the production of eggs and broiler chickens during festive seasons. Although Ondo State is also one of the main timber producing states in Nigeria, timber is mainly exported as timber logs for further processing outside the State as wood processing is only done on a minimal scale. Mineral Resources The State is one of the oil producing states in Nigeria, with an onshore and offshore crude oil production estimated to contribute up to 12% of Nigeria crude oil production and reserves. The State is considered as one of Nigeria investment haven in the 21st century because of its abundant reserve of crude oil, natural gas and solid minerals, such as bitumen, kaolin and granite. Ondo State has the world‟s second largest bitumen deposit. Source: https://www.fmdqotc.com/wp-content/uploads/2017/07/ODSG-Bond-Programme-Shelf_2.s
In this piece I explain why it makes economic sense for Ondo State to make the switch to a Natural Gas Based Economy.
Why Ondo State should make the Switch to Natural Gas
Vanguardngr.com reported that the Governor Rotimi Akeredolu of Ondo State has said that the gas project initiated by his government would boost the economy of the state.
Nigeria is making a huge bet on gas, it is this writer’s opinion that Ondo State would do well to make a switch to natural gas.
The age of Natural Gas is upon us! The world is changing very rapidly, with this change, comes new ways in which nations can do business and thrive. Ondo State will survive on being a gas based economy, as long as the returns and the byproducts of gas are strategically used as a catalyst to develop other critical industrial sectors. Gas has been shown to fuel industrialization, either as a cleaner fuel or as serving as raw material for various industries, thus leading to rapid development of industries that use gas and its byproducts as a feed stock.
Here are 5 reasons why the natural gas industry will boom.
1. Natural gas is the cleanest fossil fuel.
2. Natural gas deposits are more plentiful. The cost of floating LNG plants is dropping. The possibility of an LNG plant being provided as service is getting closer; the floating LNG plants will simply be shipped to places that have gas deposits they want to liquefy, after liquefaction the floating LNG plant will be shipped elsewhere to be used by another client with gas deposits. With contracts in hand, the gas business is just one of putting together infrastructure. As The Economist points out, “The gas business is really an infrastructure business: drill wells, build gas plants, install pipelines and accrue profits.”
3. The world’s use of natural gas is growing faster than its use of oil. Although the IEA’s projection about coal usage growing astronomically didn’t prove true. The IEA’s projection is that oil consumption grows half a percent a year. Natural gas consumption, by contrast, should rise more than 50% in the next 20 years. Total believes that that China will use much more natural gas as its economy grows and as it acquires the needed infrastructure for utilization of natural gas.
4. Demand for natural gas is bound to grow as the world will burn more natural gas in cars and buses of the future than it does today.
5. As some parts of the world make the switch to electric cars. The world will need to burn more natural gas to provide electricity to power the electric cars.
With its abundant gas resources, Ondo State, is positioned strategically for the age of natural gas which has begun.
Benefits of a Gas Based economy
1. Economic Impact
Perhaps the biggest advantage to the oil and gas industry in Nigeria is the economic impact it has on state funding. The Nigerian Government is said to have received the sum of $3.7 billion in taxes and royalties, from Anglo-Dutch Shell Group. Managing Director of Nigeria Liquefied Natural Gas, NLNG, Mr. Tony Attah, was reported to have said the company has so far paid $5.5 billion in taxes and $15 billion in dividends to the Federal Government since his appointment in July 2016. When the OK LNG project kicks off, it will add value to the community in which it is based.
2. Employment & Job Creation
The oil and natural gas industry’s contribution to Nigeria’s overall economy can’t be overstated. In addition to the hundreds of thousands of Nigerians who have a job in oil and natural gas, gas exploration and processing may very well lead to a revival of manufacturing in Nigeria.
Gas and tourism
The gas industry is also capable of contributing to tourism, the world is now a global village, Dubai attracts so many visitors that the purchasing power in Dubai is huge!Mobility of capital is something Ondo State should explore.
3. Gas plays a key Role in Other Industries
Natural gas will help Ondo State to develop clean alternative energy sources in various ways, such as the following:
• Natural gas is used to make fertilizer for ethanol.
• Natural gas is used to make methane for hydrogen.
• Hydrogen is used to eliminate soot for cleaner diesel fuel.
• Electric companies use natural gas to generate clean power.
• Natural gas is a raw material that goes into lightweight cars, wind power blades, solar panels and energy-efficient materials.
4. Essential Power Source
Most experts agree that Solar and wind energy help save the environment, but Green World Investor believes that it is difficult for these energy sources to produce power 24 hours a day, seven days a week.
However, Natural gas can produce power for your home all day long, year-round and is highly reliable due to the mature technology that has been developed during the many, many years of production.
5. Decreased Reliability on Import of fuel
Nigeria currently spends a lot of money importing refined petroleum products ranging from petrol to diesel. Nigeria will save a lot of foreign exchange and create much needed jobs by utilizing the abundant natural gas we have for transportation, agriculture, power and manufacturing.
Ondo State/NNPC bio fuels
Yesterday, the NNPC group and Governor Rotimi Akeredolu signed a memorandum of understanding on a Biofuels Project at Okelusi Ondo State.
The good news is that Ondo state government is to begin large scale production of sugarcane at Ikaro village in Ose local government of the state, this sugarcane may very well be used to produce ethanol.
Increased Profitability and A Cleaner Environment?
Petroleum Products Consumption Statistics Q1 – Q3 2016 National Bureau of Statistics November 2016 covering January to September 2016 reveals that Ondo State consumed 289,622,849 litres of PMS and 72,063,100.00 litres of AGO also known as diesel. By making a switch to natural gas, the businesses and vehicles would be making a 30% cost savings and achieving a 20% reduction in emissions. Natural Gas has one hydrogen molecule and 4 carbon molecules, unlike diesel that has 8 carbon molecules; Natural Gas emits half as much carbon dioxide as coal when burnt to generate electricity, and at least 75 per cent less nitrogen oxide and other health-harming particles.
Why Olokola LNG is still a viable project
Natural Gas has many important uses! These include Power generation, Domestic use, Transportation, Fertilizers, animal feed and Hydrogen. Natural gas is also used in the manufacture of fabrics, glass, steel, plastics, paint, and other products.
The National Gas Policy has made provision for domestic use of LNG.
The Federal Executive Council on the 28th of June 2017 approved the new National Gas Policy (“NGP”). The NGP is designed to catalyze growth of the gas industry in Nigeria.
For example, Greenville LNG’s investment in small scale LNG is poised to deliver liquefied natural gas (LNG) by LNG powered trucks which have the capacity to travel about 1,000 km on LNG before refueling, to states not connected by pipeline, supplying power plants and industry with cheaper, cleaner fuel.
An in-depth review of the NGP reveals the NGP provides a bit of balance and makes provision for LNG for domestic downstream applications:
Possible Domestic uses of LNG
LNG for Mining
LNG for Transport
LNG as a fuel for heavy duty vehicles
LNG for Buses and Taxis
LNG as fuel for Ferries and Ships
LNG for Shipping
LNG for Rail
LNG for Agriculture
LNG for Power
LNG as a gas source where no pipeline gas is available
LNG as a backup supply for natural gas pipeline network
LNG as a fuel for heavy duty vehicles like Trains, Tractors, Trucks and Buses is innovative and practical; this may be made possible by small scale LNG plants and LNG engines.
LNG and Mining in Ondo State
The increase in mining activity in Nigeria and the scale of energy use clearly points at Mining as a suitable market to make clears gains of up to 30% cost savings from the use of liquefied natural gas (LNG) the cleanest fossil fuel.
Natural Gas as Animal Feed in Ondo State
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.
Natural gas is used for the manufacture of fertilizer and animal feed.. 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…
Developing a gas industry in Ondo State will no doubt help facilitate the economic progress of Ondo State by helping its people live, work and play with greater ease.
Olufola Wusu Esq. © 2017
Olufola Wusu is a Commercial/Gas and I.P. Lawyer with Megathos Law Practice based in Lagos.