Yinka Ibukun Lagos

STEEL pipe manufacturing in Nigeria was set to expand on the back of a law that reserved supplies to the energy industry for local companies, the implementing agency said yesterday.

The 2010 Nigerian Content Act requires international energy companies working in the oil and gas industry to end imports of pipes and buy from local firms to meet annual demand of 800 000 tons a year.

Royal Dutch Shell, Chevron, Exxon Mobil, Total and Eni run joint ventures with state-owned Nigerian National Petroleum Corporation, which pumps 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 built new gas pipe networks and replaced old ones, Ernest Nwapa, the executive secretary of the Nigerian Content Development and Monitoring Board (NCDMB), said early this month. “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.

Among the early investors in domestic steel pipe production is Lagos-based Technova Africa Group, which is building a $200 million (R2.2 billion) mill and coating facility to be completed in September next year in southern Edo state, according to chief executive Norbert Oleah.

“The lifeblood of the oil industry is pipes,” Oleah said last month. “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 $1.2bn 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 and is negotiating with the world’s largest steelmaker, ArcelorMittal, for the supply of raw materials, according to Oleah.

Nigeria’s steel pipe output capacity will reach 300 000 tons a year when Technova’s 200 000 ton facility starts production. It will add to the 100 000 tons currently produced by the country’s only existing mill, run by Abuja-based SCC.

The existing gaps are met through imports.

Nwapa said the NCDMB was discussing plans with investors to set up a 250 000-ton-a-year pipe mill in southern Bayelsa state to further boost self-sufficiency.

“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 Tianjin Pipe. – Bloomberg