Gas & Power Projects and Services
Our business in this segment, was built on the back of an earlier generator capacity rental to field projects, undertaken in remote locations without the existence of electricity infrastructure. However, the business has now been transformed to involve the provision of an integrated and specialist solution based service that caters for private businesses or governments in need of captive or on-grid electricity generation, on a medium-to-long term PPA (Power Purchase Agreement) structure, accompanied by a guaranteed fuel supply arrangement. Our solutions are offered as a full turnkey project, coupled with ongoing operations and maintenance support, under a basic structure where our off-taker’s only responsibility is more often than not, provide a suitable land space, within the proximity of a possible fuel source and an interconnection point, where the Electricity Output evacuated from our station will be fed into, while we provide the necessary equipment and technical manpower required to generate and inject the agreed MWs.
In achieving this objective, we firm up various contractual understandings with major equipment manufacturers and their technical EPC contractors to develop a competent power plant O & M (Operation and Maintenance) team that is dedicated to support and sustain each project we embark on and no matter the off-taker’s situation, our company is readily available to provide a basket of customized and feasible solutions that deliver results.
We have access to a combination of technologies, services and expertise to use in addressing every client’s power needs in a more effective and efficient manner, than most providers of the same service.
A typical description of our captive generation projects, feature the generation of onsite commercial power and supply to a bulk end user of electricity on a Build Operate & Own (BOO) project structure, over a minimum period of 5 - 7 years operations or rental period. The project cost is hugely dependent on the consumption and load demand from the client, while funding for the project is typically carried out 100% by Energy Culture, through a mix of debt and equity, with repayment specifically tied to a schedule of payments (monthly bills) for the electricity consumed by the client, as evidenced by a metering device that accurately records the quantity delivered and received.
All required commitments from the client to off-take the energy produced and delivered to the point of interest are adequately provided, in an available form and substance, acceptable to Energy Culture. These commitments include an irrevocable Power Purchase Agreement (PPA), setting out the concerned obligations and liabilities of both parties and a host of other instruments, necessary to provide sufficient comfort and guide to rule the transaction. Revenue is typically generated through monthly electricity bill payments from the client, according to the terms and conditions of the aforementioned PPA. And if required, the proceeds are irrevocably domiciled to lenders or other parties nominated by Energy Culture.
The electricity supplied is utilized in powering various products and services, while its production and off-take are consummated based on a minimum take or pay arrangement. Thus, there is a pre-agreed minimum quantity that the client is compelled to pay for, whether consumed or not, provided it is delivered to the nominated interconnection point as prescribed.
Preliminary assessments are typically conducted by Energy Culture and other associated technical support personnel at the feasibility stages of each project, to confirm the exact requirements of the client and the liability of subscribing to the investment. Flexibility is also provided to cater for future growth and expansion of the client’s business when conducting an assessment.
In contributing to the drive towards developing a sustainable, clean and cost effective solution for making electricity available in Nigeria, Energy Culture has decided to expand the captive power generation business by scaling up its operations to accommodate the development of large, resourceful and very efficient base-load, electricity utility supply structure that is tailored to support the requirements of the national grid.
The decision to embark on the opportunity above has come merely as a result of the huge gap that exists in the demand for generated electricity in Nigeria, regardless of the available alternatives already in existence.
Energy Culture, commenced work on the development of a grid connect electricity project in February 2014, this project will serve as a utility that contributes in addressing the serious capacity shortfall and as well create an avenue for gas consumption through leveraging the country’s abundant fossil and natural energy sources.
The structure of this project, like many others, is fully commercial and will be operated under a 20 years Power Purchase Agreement (PPA) between a consortium set up by the company and the Federal Government of Nigeria as the off-take counterpart on the electricity side and a gas producer on the fuel supply side. Both relationships benefit from the typical “take or pay” contractual obligations.
As applicable under sector guidelines, the electricity generated will be purchased by the Nigerian Bulk Electricity Trading PLC (NBET), a wholly Government subsidiary that is jointly owned by the Federal Ministry of Finance (FMOF) and the Bureau of Public Enterprise (BPE), vested with full sovereign powers via the Electric Power Sector Reform Act, to administer the resources required to off-set payments for any electricity supplied to the grid, as applicable under market rules of the Nigerian Electricity Regulatory Commission (NERC), while the Natural Gas to be used for production of the electricity required, is supplied either through a gas producer, via a pipeline system, operated under a Gas Transportation Agreement with the Nigerian Gas company (NGC).
The electricity supplied to the grid is charged using a wholesale pricing mechanism, derived through a series of computations developed to function as a floating tariff system, referred to as the Multi Year Tariff Order (MYTO). This system takes cognizance of factors that relate to inflation, foreign exchange, fuel costs, cost of capital and etc.
Most of the Natural Gas produced in Nigeria, is sourced from oil production as a valuable byproduct of the process. Large amount of this vital energy component is flared during the production process. Over the years, more gas has been flared in Nigeria than anywhere else in Africa and only second to Russian in the world, with daily estimates of roughly 2.5bcf. This is equivalent to around 40% of all Africa´s natural gas consumption, and an annual financial loss exceeding several billions of dollars.
Gas flaring contributes to major environmental pollution problems, which affect the immediate and wider oil production settlements.
For the fact that Natural Gas production is associated with crude oil in most cases, it presents operational risks during exploration and processing. To prevent these risks, additional infrastructure needs to be set up to collect the gas and safely dispose or monetize. By monetizing the gas, a financial challenge is presented to so many oil exploration campaigns, chemical plant operations and refining processes, thus adopting the means to dispose by flaring, which then results in very huge environmental, health and resource management problems.
The gas produced along with crude oil is known as Associated Gas (AG). This gas is found in association with oils in either dissolved form or as a cap of free gas above the oil. Drilling companies choose to routinely flare or vent this gas for safety reasons or as an unwanted by-product of the oil production. There is a substantial reduction of gas flaring in developed countries, partly due to the ever increasing demand, viability of pricing and the discovery of alternative uses for the gas, such as for the manufacturing of fertilizer, the generation of electricity, etc. According to the World Bank estimates (2009), more than 100bcm of AG are flared or vented worldwide annually, and Africa contributes to about 37bcm out of this quantity.
In order to adequately harness the ample opportunities around monetizing Natural Gas in Nigeria, Energy Culture has deployed a strategy that involves making direct investments into third-party projects, using a mix debt and equity to effectively manage the process under a Tenured Investment Amortization (“TIA or the Investment”) structure that creates a mutually beneficial collaboration between Energy Culture and the asset holder to produce the available Natural Gas within its given asset and use to reduce the supply uncertainties surrounding this Gas to other projects requiring it as feedstock.
Notwithstanding the quantum of risk involved in collaborating to develop a Natural Gas asset, Energy Culture's participation inevitably increases the project’s enterprise value and creates significant attraction to extend every commitment necessary to raise the required funding and tap into a network of technical and managerial supports that will enable exploitation of the opportunity.
Through the adoption of a TIA project development mechanism, Energy Culture becomes directly involved in financing, planning and execution of the project under an operating agreement with an asset holder. This form of collaboration to develop projects’ enables a non-asset owner to invest in a project at an early stage and then recover the investment made through off-taking a portion of the project’s deliverables over a pre-agreed period (similar to stream financing). It also creates a transparent mode of engagement between the parties involved as every component of the project is first of all evaluated and agreed upon, before inclusion as part of the arrangement.
All matters relating to the available reserves, project cost, equipment specification, project schedule, scope of work and procurement activities, are duly examined by Energy Culture and the results included in a legal structure to guide the terms of collaboration.
Subsequently, by equitably sharing responsibilities, the Natural Gas produced from the asset, is then jointly sold to third-parties and the proceeds shared after all initial CAPEX & OPEX allowances, taxes, royalties, etc have been duly deducted. It is anticipated that the arrangement will exist for a pre-agreed period, negotiated on a mutually exclusive basis, until the investment made is profitably amortized.
As a professional project development and management entity, Energy Culture is confident of the value collaborating with asset holders bring to the development of the environment and society at large.
Energy Culture’s business focus in this segment is mainly to identify Natural Gas co-development opportunities and seek collaboration with technical and financial partners, to bring the gas on stream for the benefit of the environment and stakeholder’s economic interest.