19 February 2014

The Voice of Adebayo Ibirogba, General Manager, Engineering and Technology, Nigerian National Petroleum Corporation

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The Voice talked to Mr Adebayo Ibirogba, General Manager, Engineering & Technology, at NNPC and WLPGA Vice President to ask, amongst other questions, his thoughts on the LP Gas market in Nigeria today.

[/custom_font]LPGA: Adebayo, thank you for taking the time to talk to us.  Please could you tell us a little about the key activities of the NNPC?

Adebayo Ibirogba: The Nigerian National Petroleum Corporation (NNPC) is an Integrated International Oil and Gas Company with strategic business units, covering the entire spectrum of oil industry operations: Oil and Gas Exploration and Production, Refining, Distribution & Retailing, Petrochemicals, Engineering, and Commercial Investments. More specifically in the gas business, NNPC is responsible for managing Nigeria’s enormous gas reserves. With proven gas reserves of 187TCF, Nigeria ranks 9th in the top 10 gas rich countries with another undiscovered potential of approximately 600TCF according to the US Geological Survey. Crude oil production is currently about 2.5Million bbls/day and natural gas is 8.2 BCF/day. Gas produced is predominantly associated gas (wet gas) with about 5% (molecular weight) of gas liquids (NGLs/LPG). This presents a huge opportunity for LP Gas recovery which is the area of interest for the WLPGA.WLPGA: Could you tell us a little about NNPC and its key activities in the LP Gas market?

Adebayo Ibirogba: In spite of the impressive its gas endowment credentials, LP Gas consumption in Nigeria is still relatively low compared to our principal peer country and the 10th top gas rich country in the world - Algeria. With a population under 40M, Algeria produces in excess of 9.3Million tons of LP Gas annually, consumes over two million tons and exports the difference. In comparison, Nigeria with 170 million people, is four times as populous as Algeria, has a larger proven gas reserve but only produces just over 3 million tons of LP Gas annually. Worse still, we only consume about 180,000 tons annually and export the difference. There is therefore a large mismatch between market size and LP Gas consumption statistics. NNPC is rising up to this challenge by promoting, the development of New-to-LP Gas customers and the conceptual design of an LP Gas conversion programme for Nigeria to enable our teeming population switch from the current use of solid fuels to the cleaner and healthier exceptional energy – LP Gas for their domestic energy needs. NNPC is in the best position to do this as it is the largest equity owner of the LP Gas produced in Nigeria and also currently the sole producer/importer of one of the major competing fuels to LP Gas which is Kerosene. In addition, NNPC owns over 60% of the current in-country LP Gas Storage Capacity totaling 60,000 tons. Over the next five years NNPC plans to roll out a new fully fledged LP Gas business and work with other key players to  grow the market to about 1.5 million tons per year, increase storage capability to at least 150,000 tons and increase the cylinders in circulation from the current level of just under 2 million cylinders to about 10 million.

WLPGA: Today you’re General Manager, Engineering & Technology, at NNPC, what career path brought you here?

Adebayo Ibirogba: I started my career in NNPC in 1983 as a Chemical Engineer working on the development of the multi-million dollar grassroots greenfield petrochemical complex which was named the NNPC Eleme Petrochemical Complex in Nigeria and in which the Indorama Group is now the majority equity owner and operator. I spent the greater part of three years working with Foster Wheeler Energy on this. Thereafter, I spent some time with SRI International in California working on the Master Plan for the Petrochemical Industry in Nigeria. In 1986, I moved into the International Trading Business and established a trading office in London as part of a broader Strategic Trading Alliance with the Chevron International Oil Company of USA. The trading portfolio was mainly crude oil and petroleum products with significant volumes of LP Gas business.  In 1992, I returned to Nigeria and joined the Commercial and Investment Team at the Corporate Headquarters in Lagos to extend and expand the Corporate Business Portfolio. One of such new business emerged in 2000 in the area of the domestic retail marketing of petroleum products. This became NNPC’s first effort at consumer marketing of any product and I eventually became both the pioneer Manager and pioneer General Manager of the new business in 2004 and 2006 respectively. In 2007, I took up the challenge of Gas Development in the Corporate Planning Group with much emphasis on the development of the domestic LP Gas Market. In 2009, I was appointed the Group General Manager of Greenfield Refineries to establish a blueprint for the construction of new Crude Oil Refineries and other Hydrocarbon Conversion Plants. A lot of the work here was undertaken with Wood Mackenzie and Foster Wheeler both of the United Kingdom as Consultants. Finally in 2012, I was appointed to my present position as the Group General Manager, Engineering. In this role, I serve as the Corporate Engineer, executing big ticket Engineering Projects on behalf of NNPC’s various Business Units so that the Business Executives can concentrate on their core businesses while I bear the burden of some of the infrastructure they require to run their businesses profitably.

WLPGA: You also hold an important role within the WLPGA as a Vice-President, how important is this role and the association to you? And do you enjoy your role within WLPGA?

Adebayo Ibirogba: Yes, I was elected into the Board of Directors of the World LP Gas Association in 2010 and subsequently appointed a Vice President of the Board in 2012. Being the first African to hold these offices confers on me the obligation to highlight the immense opportunities available to the Association on the African Continent as an LP Gas rich region of the world.  It is noteworthy that 95% of the three billion people without clean cooking facilities worldwide, are in sub-Saharan Africa and Asia. They meet their energy needs from solid fuels - wood, charcoal, cow dung etc., and thereby causing immeasurable hardship to the environment. Over the 30 year period between 1980 and 2010, the percentage of African Households using solid fuels fell by only 10% from 87% to 77% and Africa is still burdened with the highest percentage of solid fuels users amongst all the continents. South East Asia comes a distant second with 61%. In spite of this relative percentage reduction in users of solid fuels across the continents, actual numbers have increased significantly as a result of world population growth from about four billion in 1980 to just over seven billion today. The three billion people who are currently burning solid fuels represent about 40% of the world – more than ever before in human history. With an estimated 170 Million people, Nigeria is the most populous African Nation. Estimated GDP per Capita is US$2,660 and she produces over three million tons of LP Gas annually. Of this, it currently consumes only 180 KT with an estimated two million cylinders in circulation.  The huge disparities between product availability and potential consumers in Nigeria, presents a significant opportunity for focus and possible meaningful impact on the current WLPGA initiative to convert one billion people from solid fuels to LP Gas by 2030 (The Cooking For Life campaign Roadmap to a Billion).

WLPGA: And what about the principal opportunities for NNPC at the moment?

Adebayo Ibirogba: Nigeria is a Gas Province with plenty of crude oil. NNPC’s vision is to look beyond crude oil and generate as much economic benefit from crude oil as it currently does from the export of 2.5 million bbls/day of crude oil. In terms of the gas opportunities, NNPC plans to grow the domestic natural gas market from the current 4 BCF/day (about 50% of total production) to about 10 BCF/day by 2020. This will be equivalent to about 1.7 million BOE/day resulting in significant investment potentials for WLPGA members and other investors. In addition to the opportunities outlined for LP Gas development above, the main areas of opportunity will include: Gas to Power: Nigeria aspires to generate 40GW of Power by 2020. This will require about 7BCF/day of dry gas, a seven fold increase in the current domestic supply levels. Gas Processing & Conversion Plants: Nigeria desires to be the regional hub for gas processing facilities, and gas conversion plants such as petrochemicals, fertilizer, methanol. LNG: There is currently a 22 million TPA LNG Facility operating in Nigeria (NLNG Ltd) but there is room for additional plants and two projects totaling another 23 million TPA are on the drawing board. Gas Transmission: In order to deliver gas to various points of consumption, gas transmission infrastructure will be required over the next decade including about 4,000km of oil and gas pipelines. National Content regulations also require that a healthy portion of these pipes be manufactured locally and this presents an opportunity local pipe mills, pipe coating and other related services.

WLPGA: What do you see as the key challenges in the Nigerian market today?

Adebayo Ibirogba: For LP Gas, the main barrier and challenge to the growth of consumption in Nigeria is the high switching cost from cheaper domestic fuel alternatives to LP Gas. The main competing domestic fuels are firewood and kerosene which are utilised by over 90% of the population. Kerosene is highly subsidized and therefore cheaper than LP Gas. Currently, 1kg of LP Gas costs about US$1.75, while 1.5litres of kerosene (which has the equivalent energy content of 1kg of LP Gas) costs only $0.50. Other competing fuels like firewood and charcoal are also cheaper than LP Gas. A Kerosene stove can be purchased for about $7.50;  a firewood tripod and coal stove both cost less than US$4.00; while the cost of a single burner LP Gas cooker+ 3kg cylinder is about US$50.00.  To grow LP Gas consumption therefore, there would be need to attract customers who are mainly rural and sub-urban dwellers, and who make up about 80% of Nigerian population. The disposable income of these potential “New-to-Gas” customers is very limited and they may not be able to purchase LP Gas appliances outright. There would therefore be need for a one time stimulus package to support appliance acquisition. This will surmount the most formidable of the entry/growth barriers and place LP Gas at par with other competing fuels, leaving price and product attractiveness as the only marketing variables to contend with. This is why Nigeria is a potential high impact country and the almost perfect candidate for the WLPGA initiative to convert one billion people from solid fuels to LP Gas by 2030 (The Cooking For Life Roadmap to a Billion).