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 has said, reports Bloomberg.

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, Chevron Corp., Exxon Mobil Corp., Total SA and Eni SpA run joint ventures with stateowned 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 (NCDMB), said in an October 5 interview in 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.

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 Edo State, according to chief executive officer Norbert Oleah.

“The lifeblood of the oil industry is pipes,” Oleah said in a September 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. 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 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 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, Moscow-based TMK OAO 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.

Source: http://www.businessdayonline.com/