The Multilateral Investment Guarantee Agency (MIGA), the World Bank’s political risk and credit enhancement arm, is providing a guarantee of $200 million against the risk of expropriation to Accugas, a subsidiary of Lagos- and London-based oil and gas group 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,” commented Phillip Ihenacho, Seven Energy’s chief executive, upon announcing what marks the agency’s first engagement in the space.
An integrated oil and gas development, production and gas distribution company, Seven Energy is active both in the upstream and midstream segments of the energy value chain. Its midstream infrastructure, focused on south east Niger Delta, includes the 200 million standard cubic feet per day (MMcfpd ) Uquo Gas Processing Facility and a gas pipeline network of 260 kilometres with a distribution capacity of 600 MMcfpd, which have begun delivering gas to three power stations and two manufacturing plants in Nigeria.
These assets are also “expected to have a significant development impact in a country suffering from a severe energy shortage due to the lack of infrastructure to bring gas to the domestic market,” MIGA said in a statement.
Although Nigeria is a major oil producer and despite having enormous natural gas reserves, the country imports about 62 percent of its consumed petroleum products, according to statistics provided by Seven Energy. The company reckons these largely come in the form of diesel, which is expensive and environmentally more harmful than natural gas.
Furthermore, most international oil and gas companies in Nigeria focus on offshore oil, either liquefying gas for export or flaring it. The Nigerian government has made the development of gas supply a priority through a number of initiatives, including the Gas Master Plan, which calls for the construction of new cost-competitive gas infrastructure, including pipelines and gas processing facilities.
The International Finance Corporation (IFC) – another World Bank Group member – last year also invested in Seven Energy by committing $75 million in equity and acquiring $50 million of the oil and gas company’s debt. The organisation’s African, Latin American and Caribbean Fund made a further equity investment of $30 million in the business in October 2014.