Steel-pipe manufacturing in Nigeria is set to expand on the back of a law that reserves supplies to the energy industry for local companies, the implementing agency said.

The 2010 Nigerian Content Act requires international energy companies working in the nation’s oil and gas industry to end imports of pipes and buy instead from local companies to meet annual demand of 800,000 metric tons a year. Royal Dutch Shell Plc (RDSA), Chevron Corp. (CVX), Exxon Mobil Corp. (XOM), Total SA (FP) and Eni SpA (ENI) run joint ventures with state-owned Nigerian National Petroleum Corp. that pump most of the country’s oil.

“We’d like to see four to five pipe mills in the country” with demand for steel pipes increasing as the country builds new gas-pipe networks and replaces old ones, Ernest Nwapa, executive secretary of the Nigerian Content Development and Monitoring Board, or NCDMB, said in an Oct. 5 interview in the commercial capital, Lagos. “Investors in pipe mills must be seeing these opportunities.”

Nigeria is Africa’s biggest economy and oil producer and has the continent’s largest gas reserves. Under a plan to use natural gas to meet its electricity needs, the government is expanding the country’s pipeline network to reach far-flung power stations. Since the law came into force four years ago, the NCDMB has been working out terms of engagement with prospective investors in mills.

‘The Lifeblood’

Among the early investors in domestic steel-pipe production is Lagos-based Technova Africa Group Ltd., which is building a $200 million mill and coating facility to be completed in September next year in southern Edo state, according to Chief Executive Officer Norbert Oleah.

“The lifeblood of the oil industry is pipes,” Oleah said in a Sept. 23 interview. “As important as the oil well is, that’s how important the pipe is.”

Technova is in talks with international banks and hedge funds to raise additional capital either through debt or equity, and expects to reach a financing agreement before the end of the year, according to Oleah. He envisages a $1.2 billion investment over 10 years, including a fabrication yard, a jetty and a 10-megawatt power plant.

Technova has formed a technical partnership with Indian steel-pipe maker PSL Ltd. (PSL) and is negotiating with the world’s largest steelmaker ArcelorMittal (MT) for the supply of raw materials, according to Oleah.

Output Capacity

Nigeria’s steel-pipe output capacity will reach 300,000 tons a year when Technova’s 200,000-ton capacity facility starts production and adds to the 100,000 tons currently produced by the country’s only existing mill run by Abuja-based SCC Ltd. The existing gaps are met through imports. The NCDMB is discussing plans with investors to set up a 250,000 ton per year pipe mill in southern Bayelsa state to further boost self-sufficiency, according to Nwapa.

“There are about 50 suppliers bringing pipes from all over the world into Nigeria and they’ve been doing it in the most unfair manner,” he said “For 50 years they’ve just been dumping their pipes here.”

The leading suppliers of steel pipes to Nigeria include Luxembourg’s Tenaris SA (TS), Moscow-based TMK OAO (TMKS) and China’s Tianjin Pipe Corp. Nigeria now wants them to “set up some manufacturing facilities here” by forming partnerships with Nigerian companies, Nwapa said.

Fledgling Industry

“The local pipe industry is still fledgling, it’s something we’re trying to generate growth in,” he said. “If we continue to import everything like we are doing, we can’t get a place for people to work.”

When the government started discussing getting more indigenous companies into oil and gas, they were looking at areas such as pipemilling, where local operators could quickly come in with a limited amount of capital, Dolapo Oni, Lagos-based head of energy research at Ecobank Research, said by phone on Sept. 30.

“The sector didn’t take up as fast as they thought it would because of issues of quality,” Oni said. “One model that has emerged is to get the oil companies to essentially dictate the specifications they want and also control the production.”

The NCDMB is creating a fund, which currently stands at more than $300 million, to kickstart investments, Nwapa said. The fund collects 1 percent of all contracts awarded in the exploration and production sector of the oil and gas industry. Most of the money will go toward guaranteeing bank loans in the industry that banks are still reluctant to lend to, Nwapa said. The remainder is for infrastructure developments that will lure more investments.

“We want to bring manufacturing to the grassroots,” said Nwapa, whose board is working to develop oil and gas parks that will provide services to operators in three oil-producing states, requiring a basic investment of about $10 million each. “We believe the parks will stimulate interest among the operators and big services companies and they will begin to take stakes in those places.”

To contact the reporter on this story: Yinka Ibukun in Lagos at yibukun@bloomberg.net

http://www.bloomberg.com/news/2014-10-13/nigeria-law-may-usher-in-billion-dollar-steel-business-1-.html

Great stuff. This country is really moving.

Can I say it now GEJ till 2019

Very good one. Inspires more confidence and believe in our dear country.

Unfortunately, the OP can't help trying to take the shine away from this piece with his TAN propangada-like "GEJ forever" mentality. Can't you simply be a Nigerian before been a GEJite?

#feeling hopeful#irritated#mixed feelings

pmc01:
Very good one. Inspires more confidence and believe in our dear country.

Unfortunately, the OP can't help trying to take the shine away from this piece with his TAN propangada-like "GEJ forever" mentality. Can't you simply be a Nigerian before been a GEJite?

#feeling hopeful#irritated#mixed feelings

Not possible, give GEJ his needed credit.