Nigeria Associated Gas U0lizaon Study

NigeriaAssociatedGasU0liza0onStudy

ThankstoAlbertBressandandThomasMitrofortheirthoroughpeer-review

PerrineToledanoandBelindaArchibong

Fiscalandlegalregula0onforAPGuseandoutlet

APGprojects:NLNG

Pipelines:non-integratedandnotmaintained

UnaHrac0vegasandpowerpricing

Underdevelopeddomes0cmarket

Deficientgovernance

Endorsementofthezerorou0neflaringby2030ini0a0ve

Summaryoffindings

S  NigeriahasanextensiveregulatoryandfiscalframeworksurroundingflaringandAssociatedPetroleumGas(APG)use,aswellasnetworksofdomes0candinterna0onalpipelines(suchastheWestAfricanGasPipeline).

S  ThishasspurredafewAPGuseprojectsinthecountryincludingthelandmarkNLNGprojectusingAPGforLNGproduc0onforexport.

S  However,deficientmaintenanceofnon-integratedgaspipelinesandunaHrac0vegasandpowerpricingactasdisincen0vesforAPGuseandinvestmentinthedomes0ceconomy,par0cularlythepowersector.

S  DeficientgovernanceoftheoilsectormarkedbythelackofanindependentregulatorandahistoryofpaymentdefaultsonthepartoftheNNPCandthepoweru0lity,combinedwithsomeunstructuredregula0onlikethe2014direc0vebytheMPRurgingoilcompaniestogiveflaredgasto3rdpartyinvestorsforAPGu0liza0onprojectshassparkedmuchcontroversyamongoilmajorsopera0nginthecountry.

S  Nigeria’smostrecentendorsementoftheWorldBank’sZeroRou0neFlaringby2030mightgivetheimpetusforadeepreformofthelegalframeworkandinvestmentclimatenecessarytoenableAPGuse.Infact,Nigeriajustsetitsownflaringoutdateasbeing2020.

Thesta0s0csofAPGflaringinNigeria:Howbadisit?

OverviewstatsonAPGflaring

Onthecompaniesinvolved

Overthelastdecade

Andtheirflaringtrendover0me

37.4

14.611.4

9.47.1

5 4.7 4.1 3.7

0

5

10

15

20

25

30

35

40

Gasflared

(billioncubicmeters(bcm)

Top10GasFlaringCountries2011

S  Nigeriaaccountsforjustover2%ofglobaloilproduc0onandabout10%ofgasflaredgloballyin2011.

S  Economiccostofflaringhasbeenassessedatabout$72bnfrom1970-2006=about$2.5bn/yearinrevenuelosses.

S  Accordingtothe2015sta0s0calreportoftheOrganiza0onofPetroleumExpor0ngCountries(OPEC)Nigeriaproduced86.3bcmofgasandflared10.7bcmin2014.AccordingtoNNPC,gasflaringrepresentedalossofupto$868.8million,aboutN173.76billionin2014.

Source:NOAAsatellitees0mates,2011

Thesta0s0csofAPGflaringinNigeria:Howbadisit?



Overthelastdecade


S  Ofthe2400billionstandardcubicfeet(bscf)ofgasproducedin2011,1800bscforabout75%wasAPG.About28%ofthisAPGwasflaredinadecreasingtrendfrom2006con0nuingtoday.About12%ofAPGwasflaredin2014accordingtoNNPC.

S  Asof2008,Nigeriawasexpor0ngabout3billionstandardcubicfeetperday(bscf/d)ofgasinLNGform,whileflaringabout2.5bscf/dandprovidingonly0.5bscf/dtothedomes0cpowersectorwhichaccountedforabout70%ofdomes0cgasconsump0on.

Source:DepartmentofPetroleumResources(DPR)Nigeria,2011

Trend:APGProducedandFlaredsince2006

Thesta0s0csofAPGflaringinNigeria:Whoisinvolved?

S  Shellhasbeenthetopflareronacumula0vebasisoveralmostadecade,followedcloselybyExxon,ENIandChevron.

28%

21%19%

8%

20%

2000-2008%shareofgasflaredbyCompanyinNigeria

Shell(SPDC)

ExxonMobil

Chevron

Total

ENI(NAOC)

Source:Oni,2011,Madueme,2010

Overthelastdecade





S  Shellhasseenthemostdrama0cdecreaseingasflaredoverthepastdecadespurredpresumablybyacombina0onofaHrac0vefiscalincen0vesandpublicopprobriumconcerningtheirac0onsintheNigerDeltaregionofthecountry.

S  Howeverin2014,accordingtoNNPCShell’sincreasedlevelsofoilproduc0onresultedinanaugmenta0onofthevolumesofflaredgasby12%overtheyear,andof9%inflaringintensity.Shellishoweverclaimingthatin2015theyreducedflaringby28%ascomparedto2014andflaringintensityby15%.




Overthelastdecade

Source:GE,2011

0

1

2

3

4

5

6

7

8

9

2000-2002 2003-2005 2006 2007 2008 2009

Gasflared

(bcm

)

Year

GasflaredbyCompanyinNigeriafromyears2000-2009

Shell(SPDC)

ExxonMobil

Chevron

Total

Eni(NAOC)

Others

S  OfthemajorIOCs,Chevronhasflaredthegreatestshareofitstotalgasproducedforthelastdecade,withflaredgasmakingupasmuchas64%oftotalgasproducedasof2008;incomparisonShellhasflared12%oftotalgasproducedasof2008.

S  AccordingtoNNPC,in2014Chevron(CNL)wass0llthebiggestoffenderamongcompanieswith53.6bscfofgasburnt.Shellfollowedwith51.92bscf,Exxonwith42.86bscfandNigeriaAgipOilCompany(NAOC)with35.79billionSCF.

S  Thesmalleroffendersare:AddaxPetroleumDevelopmentCompanywhichburnt35.6bscf,TotalExplora0onandProduc0on,22.78bscf,TotalUpstreamNigeria18.73bscf,Esso4.517bscf,ChevronTexaco4.43bscfandAmniPetroleum3.87bscf.





Overthelastdecade Source:Madueme,2010

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000-2002 2003-2005 2006 2007 2008

Shareofflared

gasasa

%oftotalgasprodu

ced

Year

Flaredgasasa%oftotalgasproducedbycompanyfromyears2000-2008

Shell(SPDC)

ExxonMobil

Chevron

Total

Eni(NAOC)

Others

Whatisthelegalandfiscalframeworkinplacetostopflaringandincen0vizeAPGuse?

Regula0on:Agenciesand

analysis

Regula0on:Legalframeworkand

analysis

Regula0on:Fiscalframeworkand

analysis

GovernmentinsKtuKonsinvolvedinregulaKonofoilproducKon/flaring

DescripKon

FederalMinistryofPetroleumResources(MPR)

HeadedbytheMinister.Inchargeofformula0ngoilandgaspoliciesandregula0ngExplora0on&Produc0on(E&P)ac0vi0esbygran0ngflaringallowancesandmonitoringE&Pac0vi0es.ControlstheNNPCandDPR

DepartmentofPetroleumResources(DPR)

OriginallythefirstlegalagencycreatedtoregulatethepetroleumsectorinNigeria;iscurrentlytheenforcementarmoftheMPR

NigerianNaKonalPetroleumCorporaKon(NNPC)

Governmentoilcorpora0on,exertsNigeria’sinterestsinthepetroleumindustry.TheNigerianGasCompany(NGC)isoneofabout11subsidiariesoftheNNPCandisresponsibleforthedevelopmentofanefficientgasindustry.NNPChasgenerally60%stateequityshareintheprojectsthatithastroublehonoring

FederalMinistryofEnvironment(FMENV)

Federalministryresponsibleforprotec0onandimprovementofwater,air,land,forestandwildlifeinNigeria(note:exceptoilandgas)

TheNaKonalEnvironmentalStandardsandRegulaKonsEnforcementAgency(NESREA)

SubsidiaryofFMENV,createdtoenforceenvironmentallaws,policiesandregula0onsinNigeria.ActsastheregulatoryarmofFMNEV


Regula0on:Agenciesand

analysis


analysis


analysis S  70%ofFGNrevenuecomesfromNNPCearnings

S  TheFederalGovernmentofNigeria(FGN),throughNNPC,holdsabout55-60%interestsinmostoftheseIOCsinvolvedingasflaringwhichimpedesindependentregula0onandgoodgovernance.

FGN

MPR

DPR NNPC

NGC NLNG

FMENV

NESREA

GovernmentinsKtuKonsregulaKngoilproducKonandflaring


RegulaKon/PoliciesonGasFlaring/APGuse

DescripKon

1969PetroleumActandRegulaKons EncourageduseofAPG,exemptedmul0na0onaloilcompaniesfrompayingroyal0es

1979AssociatedGasRe-injecKonAct(APGRA)

ForbadeflaringofAPGaoerJan1,1984withoutpermissionfromMinisterofPetroleum(notmet)

1985AssociatedGasReinjecKonActAmendmentDecree7

Insignificantfine(about$0.46per1000scfflaredby1998)

1992AssociatedGasFrameworkAgreement(APGFA)

Fiscalincen0vesforcompaniesinvolvedinAPGu0liza0on

2004AssociatedGasReinjecKonActandAssociatedGasReinjecKonAmendmentAct

ProhibitedflaringwithoutpermissionfromMinisterofPetroleum.Obligatedalloilproducingcompaniesincountrytosubmitdetailedplansforgasu0liza0on(notmet)

2008NigeriaGasMasterPlan InvitedforeignIOCstoassistinconstruc0onofgasgatheringplantsandpipelinestosupplyweakpowersector.Alsoincludedaflareouttargetdateforcompaniestostopgasflaringby2008(notmet)

2008NaKonalDomesKcGasSupplyandPricingPolicyandRegulaKons

Establishedadomes0cgassupplyobliga0onarrangementthatguaranteedthesupplyofasufficientamountofgasbyoilandgasproducerstoallac0vepowerplantsinthecountry.Policywouldalsoregulatethepriceofgasusedinthedownstreamgassector

Regula0on:Agencies


analysis


analysis


S  2010AssociatedGasReinjec0on(Amendment)Bill

o  ProposedbillwasseqnganewdeadlineforflareoutatDec.31,2012withallowanceforaTemporaryGasFlaringpermitfromtheMPRwithpaymentofafee.

o  TheBill,neverpassed,alsos0pulatedthatcompanieswithoutfacili0esforAPGusewouldnotbepermiHedtoengageinoilproduc0on.

S  2010FGNAcceleratedFlaredGasDevelopmentprogramo  Controversialdirec0vefromtheFGNtoIOCsmanda0ngthecompanies

toallow13thirdpartyinvestorsaccesstooilfields,flowsta0onsorwellheadstogetgasthatwouldotherwisebeflaredandemployitinpowergenera0onandotherAPGuseprojects.AMoUwassignedbetweentheMPRandtheprivateinvestorsbutdirec0vehasfacedconsiderableopposi0onfrommanyIOCs.

o  SomecompanieslikeShell’sSPDCarerepor0ngcompliancewiththedirec0ve:for10%ofitssites,Shellhasbeenlookingforthirdpartyinvestors(withShell/NNPCjoint-venturebuildingitselfthegasgatheringfacili0esfor90%ofthesites).

o  AspartofabroaderGasDevelopmentprogram,NNPCisalsoseekingtoaHractprivateinvestmentforlargerbackbonepipelines,inpar0cularthe395-kmCalabar-Ajaokutapipelineandthe740-kmAjaokuta-Kaduna-Kanopipeline,dueforcomple0onin2017.

S  Acontroversial2012PetroleumIndustryBillo  Wouldcompletelyoverhaulmostoftheaboveactsandraisetaxeson

IOCs,crea0ngacomprehensivelegalframeworkfortheexploita0onofgasandpetroleumresourcesinthecountry.Currentlybeingdebated.

Regula0on:Agencies


analysis


analysis


S  2012PetroleumIndustryBill

Aspartofitsaims,thePIBisexpectedto:o  “Enhanceexplora0onandexploita0onofpetroleumandpar0cularlygas

resourcesinNigeriaandforNigerianpeopleo  Op0mizedomes0cgassupplies,especiallyforpowergenera0onand

industrialdevelopmentso  Deregulateandliberalizethedownstreampetroleumsectoro  Createefficientandeffec0veregulatoryagencies”

S  ThePIBalsoincludesprovisionslike:o  Thecrea0onof2regulatoryen00es-1fortechnicalandcommercial

maHersrelatedtoupstreamandnamedtheUpstreamPetroleumInspectorate,andonefordownstreamresponsibili0esandnamedtheDownstreamPetroleumRegulatoryAgency

o  ProvisionsforbreakinguptheNNPCinto3parts(includingana0onaloilandna0onalgascompany)andpriva0zing2parts

o  AnemphasisontheDomes0cSupplyObliga0on(DSO)forgascreatedinthe2008Domes0cGaspricingpolicy

o  However,thepenal0esins0tutediftheIOCfailstomeettheDSOareweak

S  Aswellasprovisionsforapossibletransi0onalgaspricing.ThereiscurrentlynothingconcreteregardinggaspricingintheBill.

Regula0on:Agencies


analysis


analysis


Regula0on:Agencies


analysis


analysis

S  Defini0onandboundariesnotfollowedo  Flareoutdatesarerepeatedlyshioedforwardandnotmeto  Weakmonitoringandenforcementofregula0on

o  Nosignificantpenal0esforflaringoverthelastdecade,andfeebleenforcementofpenal0esisanissue

S  Noindependentregulatoro  MPRisbothapar0cipantin,throughtheNNPC,and

regulatorof,throughtheDPR,oilandgasac0vi0esinNigeria,crea0ngconflictsofinterestsreflectedinthelaxenforcementofflaringregula0on.Atthesame0me,asajoint-venturepartnerataveryhighlevel(around60%),NNPChasbeenmorethan1-2yearslateinpayingitsequityshareofcashcalls.Bothproblemshavecreatedalotofmistrustamongthecommunityofinvestors.


Regula0on:Agencies


analysis


analysis

S  HighPetroleumProfitsTaxAct(PPTA)rates(upto85%ofprofits)(ins0tutedin1959)actedasadisincen0vetogasu0liza0onandspurredtheintroduc0onofanincen0veregime(PPPTA-Sec0on10AamendedbyDecreeNo.30of1999):o  Anyamountinvestedinthesepara0onofgasandcrudeoilfromareservoiraswellasanyamount

associatedwithgasdelivery,is‘Allowableexpenseforupstreamopera0ons’o  Gasproducedandtransferredfromthenaturalgasliquidfacilitytothegas-to-liquidsfacili0estaxed

at0%taxand0%royaltyo  Capitalexpenditureassociatedwithgas-toliquidfacilityiscost-recoverable

o  Condensatesthatarere-injectedwillnotleadtoincen0ves

o  Thoseincen0vesarealsoapplicabletonon-associatedgas

S  Asof1998,alldownstreamgasu0liza0onproject-associatedprofitsaretaxedundertheCompaniesIncomeTaxAct(30%)andbenefitfromtheincen0vesspecifiedbyitsSec0on28G:o  Op0ons:Companieseligiblefora3-yeartaxholidayora35%capitalallowanceo  Taxdeduc0bleinterestonanyinterestpayableonanyloantakenforagasproject

o  VATexemp0ononanyplantandequipmentboughtforgasu0liza0ono  Tax-freedividendsundercertaincondi0ons(downstreaminvestmentmadeinforeigncurrencyor

goodsimportsduringthetax-freeperiodaccountformin.30%ofthecompany'sequity;notapplicableifthecompanychosethe35%capitalallowance)

o  Acceleratedcapitalallowanceposttaxholiday-90%(+15%ifcompanyoptedfortaxholiday)

u  Pricingpolicyofgassupplyandpowerseenasadisincen0ve:o  Belowmarket-pricesfordomes0cgas(asof2009$0.12/mmbtudomes0callyvs.$0.50/mmbtuon

exportmarkets),denominatedinlocalcurrency,coupledwiththeterriblecreditra0ngofthePHCN,formerpowerpublicu0lityaswellashighlyunreliablegaspipelines

WhataresomecurrentAPGuseprojectsthatcouldserveasablueprintforfutureprojects?

PowerGenera0on(IPP)

LiquefiedNaturalGas(LNG)

NaturalGasLiquids(NGL)

GastoLiquidConversion(GTL)

S  NotableAPGuseprojects:theNigeriaLNG(NLNG)projectwithNNPCandShellasprimaryshareholdersandsomeGTL,NGLandIPPprojects.

S  Someaddi0onalLNGproject(OlokolaLNG(OK-LNG)andBrassLNG)aswellaspowerplantsaretremendouslydelayed.

S  Giventheirdistrustofthegovernanceoftheoilandgassector,IOCscurrentlypreferhighreturnexportop0onslikeLNGandGTLprojectstonecessaryIPPprojectsforthecountry.Thatsaid,1)aPIBGaspricingpolicyshioingtowardsmarketpricesforgasandobliga0ngIOCstoallocateaspecifiedamountofgastothedomes0cmarketalongwith2)the2013PHCNpriva0za0onandpowertariffhikes(duetowithdrawalofsubsidies)mayshiothistrend.HoweversomeIOCsnowstatethattheyhavealreadycommiHedtheirgasreservesintolongtermGasSalesandPurchaseAgreementsintheexportmarkets.

Whatpowerneedscouldtheflaredgassa0sfy?

PowerGenera0on(IPP)




S  Significantgasreservesooenreferredtoasa“gascountrywithsomeoilinit”o  Provenreservesat180.5trillioncubicfeet(tcf)asof2011

S  Thepowersectormakesupover70%ofthetotaldomes0cgasdemand.

S  Withanelectricityaccessrateof51%andopera0onalinstalledcapacityofonly3500MWthereissignificantpoten0alintheuseofflaredAPGtomeetthecountry’selectricityneeds.

Whatpowerneedscouldtheflaredgassa0sfy?

PowerGenera0on(IPP)




S  Demandinthepowersectorisexpectedtogrowsignificantlyincomingyearswithmoregaspowerplantsbeingbuilt/renovatedfollowingthepriva0za0onofPHCN.

S  APGcanbeu0lizedtomeetthisdemand.

Source:NwachukwuandEboh,2013

SowhyisAPGnotbeingusedprimarilyforpowergenera0on?

PowerGenera0on(IPP)




S  UnaHrac0vegaspricingandelectricitytariffregimesinthecountry(asdescribedpreviously)

S  UnreliablegaspipelinenetworksbecauseofpoormaintenanceonthepartofNGC

S  ByoneDPRsource,somepreviousAPGforpowergenera0onprojectsfromIOCsspurredbythedirec0vetomeettheGasPlan’s2008flareoutdeadlinewere:o  A350MWplantinBonnybyMobil

o  A900MW,two-partconstruc0onplantinOkpaibyAgip

o  ThetakeoveroftheAfamandSapeleplantsbyShellandtheaddi0onof700MW

S  Theseeffortsfailedlargely(exceptforpart1oftheOkpaiplantbyAgipandpartoftheAfamplantbyShellpresentedaoer)dueto:o  RefusaloftheFGNtoguaranteesteadypaymentstotheIOCsforanypower

generatedandsoldtothePHCN

o  AssociatedwarinessofIOCsduetoPHCN’sterriblecreditra0ng(itwasowingover$60milliontotheNNPCforgassuppliedasof2009)

S  The2013PHCNpriva0za0oneffortsandthenewPIBGasPricingpolicymightmakeAPGuseforthedomes0cpowersectormoreaHrac0veforoilcompanies.

APGusecompanycasestudy:EniOkpaipowerplant(IPP)

PowerGenera0on(IPP)




S  ProjectParKcipants:

o  NAOC-ajointventureofNNPC(60%),Eni(20%andprojectoperator)andConocoPhilips(20%)

S  ProjectDescripKonandMoKvaKon:

o  Nigeria’s1stIPP,completedin2005byENI.

o  PartofEni’s2008“ZeroGasFlaring”policyandtoadhereto2008FGNFlareoutdeadline,alsoaCDMproject.Itwasoriginallyintendedasatwo-part900MWconstruc0onbutscaledbackduetofactorsmen0onedinprecedingslide.

o  Generates480MWofpower.450MWofthiselectricityistransferredforconsump0onbyNigeria’seasternregion,while30MWareusedbyEni.

S  ProjectLocaKon:

o  NeartheNAOC’sOilandGasProcessingPlant(OGPP)intheKwaleregioninDeltastateinsoutheasternNigeria

S  AssociatedGasUse:

o  Usesabout80millioncubicfeetperday(mmcfd)

o  UsesformerlyflaredAPGatKwale’sOGPPoperatedbyNAOC

o  AlsousesgasextractedfromitsoilareasintheDeltastates

S  ProjectTechnology:

o  Integratedcycledplantwith2gasturbinesand1steamturbine

o  14kmpipelinefortranspor0ngfuelgasfromNAOCsystemtopowerplant,commissionedbyNAOC

o  Overheadtransmissionlineof130kv,54kmsinlength,joinsplanttona0onalgridinOnitsha,AnambrainEasternNigeria

APGusecompanycasestudy:EniOkpaipowerplant(IPP)

PowerGenera0on(IPP)



GastoLiquidConversion(GTL) Figure:Eni(NAOC)OkpaiIPPAPGprojectschema0c.

Source:Linzi,Eni

S  ProjectParKcipants:o  TheShellPetroleumDevelopmentCompanyofNigeriaLimited(SPDC)(JVincluding

NNPC(55%),Shell(30%),TEPNG(10%),NAOC(5%)),Shellistheoperator

S  ProjectDescripKonandMoKvaKon:o  Mo0vatedinpartby2008GasMasterplanwhichs0pulatedaflareoutdeadlineof2008

o  ACDMproject,theAfamVIpowerplantgeneratesgridelectricityfromahighefficiencyplantu0lizinglowcarbonintensitygaswithsomeallowanceforthesystemtoabsorbAPG.

o  Opera0onalin2008-investmentcostsbyitsJVpartnersofupto$1.3billion.

o  Genera0ng650MWthepowerplantscontributes14%ofNigeria’sgrid-connectedpowergenera0ngcapacityin2015.

o  Duetoreportedgasshortages,theplanthassufferednumerousshutdownssinceitbecameopera0onal.

S  ProjectLocaKon:o  Powersta0onlocatedinRiversState,intheNigerDeltaregion

S  AssociatedGasUse:o  GassupplyismainlyfromtheOkolomagasplant,withgasfromtheAfamNAPGfield,a

produc0oncapacityof240mmscfdofnon-associatedgasbutallowingthesystemthecapacitytoabsorbAPGthroughtheNGCregionalgasnetwork.

S  ProjectTechnology:o  Installa0onofnewcombinedcyclegasturbinesinaplantfiHedwithair-cooled

condensersand40mhighstacks

o  Addi0onally,theAfamVIplantreplacesexis0ngAfamI-IVunits,whichhadnotbeenopera0onalforsome0me.

APGusecompanycasestudy:ShellAfampowerplant(IPP)

PowerGenera0on(IPP)




APGusecompanycasestudy:ShellAfampowerplant(IPP)

PowerGenera0on(IPP)



GastoLiquidConversion(GTL) Figure:ShellAfamVI(inpurple)IPPAPGprojectschema0c.

Source:UNFCC,CDM


o  NLNG:NNPC(49%)andShell(25.6%),TotalLNG(15%),Eni(10.4%)o  NLNGInlong-termgassupplyagreementswith3jointventures:SPDC(Shell),TEPNG(former

EPNL)andNAOC(Eni)

S  ProjectDescripKonandMoKvaKon:

o  OneofthemostsignificantAPGuseprojectsinNigeria

o  Earlymo0va0onwasadesiretou0lizecountry’ssignificantnaturalgasreservesandmeetrisinginterna0onaldemandandaHrac0vepricesforLNG

o  6liquefac0onunitsortrainspossessingaproduc0oncapacityof22mtpaofLNG;Firstproduc0onofLNGin1999

o  Costofthefirst2trainswasabout$3.6bnandfinancedbyNLNG’sshareholders(withNNGC’ssharecarriedbyShell).The3rdtrain’scostofabout$1.8billionwasfinancedby3rdpartyinvestorswithloansin2002.Thenext2trains,4and5,costaround$2.2billionandwerefinancedbyamixofrevenuegeneratedin-houseand3rdpartyloansintheamountofabout$1.06billion.Train6cost$1.7billionandwasfinancedbytheshareholders.

o  Currentlymanages16long-termLNGsalescontracts(thesebuyersincludeEnel,RepsolGasNaturalLNG(Stream),Botas,GDFSuez,GALPGN,BGLNG,Endesa,ENI,Iberdrola,ShellWesternLNGBVandTotalGasandPowerLtd.)

S  ProjectLocaKon:

o  Constructedon2.27squarekmofmostlyreclaimedlandinFinima,BonnyIslandinRiversStateinSouthernNigeria

S  AssociatedGasUse:

o  Asoftoday,NLNGhasconvertedsome119bcmor4.2tcfofAPGtoLNG/NGLproductsforexport

o  Gascollectedbythe3jointventuresinsupplyagreementswithNLNGfromtheiroilfields

o  NLNGhassignedSalesandPurchaseAgreements(SPAs)withoff-takers(allNigeriancompanies)todeliver250,000tonsofLPGintotheNigerianmarketannually.Thefirstdeliverywasin2007.

S  ProjectTechnology:

o  DiversifiedgassupplyfromAPGandNAPGand6primarygastransmissionpipelineswith4onshorepipelinesthroughmorethan110communi0es

APGusecompanycasestudy:NLNG(LNG)

PowerGenera0on(IPP)




APGusecompanycasestudy:NLNG(LNG)

PowerGenera0on(IPP)



GastoLiquidConversion(GTL) Figure:OverviewofNigeriaLNGproject.

Source:hHp://www.hydrocarbons-technology.com/projects/bonny/bonny1.html


o  TotalE&PNigeriaoperatesOML102witha40%interest,withNNPCholding60%.

S  ProjectDescripKonandMoKvaKon:o  Rou0neflaringwascompletelyhaltedinDecember2014whichrepresenteda

10%reduc0onintheoverallflaringofTotalo  MostoftheAPGfromtheOfonfieldisexportedviaanew70kmpipelinetothe

Amenamoffshoregashub,andisthenbroughttotheNLNGfacilityo  Someofthegasisalsore-injectedtoenhanceoilrecoveryo  Averysmallpartisalsousedforown-sitepowergenera0ono  AttheGlobalForumoftheGlobalGasFlaringReduc0onPartnership(GGFR),of

September9,2015,Total’sNigeriansubsidiaryreceivedaGGFRExcellenceAward,recognizingtheelimina0onofrou0neflaringontheOfonfield.

S  ProjectLocaKon:o  TheOfonfieldislocated65kmsoffshoreinwaterdepthsof40meters.

Produc0onstartedin1997andiscurrentlyat25,000barrelsofoilequivalentaday.

S  AssociatedGasUse:o  1millioncubicmeterperdayofgasaremone0zedo  Inphase2oftheproject,Totalhasbeendrilling24newwells.Whentheseare

completed,3millioncubicmetersperdayofAPGwillbemone0zed.

PowerGenera0on(IPP)




APGusecompanycasestudy:Total’sOfon(OML102)

S  ProjectParKcipants:o  ExxonMobil:35%,NNPC:65%

S  ProjectDescripKonandMoKvaKon:o  APGusedforreinjec0ontorecoverNGLs.Producing110,000barrelsperday(bpd)Natural

GasLiquid(NGL)fortheexportmarket.o  Expected,atitsincep0onin1998,torecover350millionbarrelsofNGLfromExxon’sOso

condensatefieldoverits20+yearlifespano  Costofprojectreportedtobebetween$218-$900million.Mobilfron0ng35%ofthetotal

costoftheprojectinequity,NNPC’s65%shareintheprojectcostiscoveredbyaloanfromtheWorldBank,theInterna0onalFinanceCorpora0on(IFC),amongothers-firstupstreampetroleumprojecttobesponsoredbytheWorldBankinNigeria.

S  ProjectLocaKon:o  Proceedsfromanoffshoreloca0onattheOsofieldandanonshoreoneattheBonnyRiver

OilTerminallinkedbypipelineso  OilMiningLeaseNo.70,about35milesoffshorefromMobil’sQuaIboeoilterminalin

Ibeno,Akwa-IbomstateinsoutheastNigeria

S  AssociatedGasUse:o  Mone0zeNGLsthatareproducedtogetherwiththenaturalgasflowfromtheOso

condensatefieldand‘otherassociatedgasproduc0on’o  APGisre-injectedasanimportantNGLrecoverysystem,therebyminimizingflaring.

S  ProjectTechnology:o  Theprojectconsistsof21oil/condensatewells,8playorms,1pointmooring,and130miles

ofoffshorepipelines.Italsohas3primarystoragetanksandloadingfacili0esonshoreatQuaIboeterminal.

APGusecompanycasestudy:ExxonMobilOsocondensateproject(NGL)

PowerGenera0on(IPP)




APGusecompanycasestudy:ExxonMobilOsocondensateproject(NGL)

PowerGenera0on(IPP)




Figure:ExxonMobilAPGuse:OsoNGLprojectloca0onSource:OffshoreMagazineVol58Issue10

APGusecompanycasestudy:ChevronEscravosproject(GTL)

PowerGenera0on(IPP)




S  ProjectParKcipants:o  75%Chevron(CNL)15%NNPCand10%Sasolo  SasolbringinghereitsFischer–Tropschprocesstechnology

S  ProjectDescripKonandMoKvaKon:o  ConvertsAPGtoGTLdieselandGTLnaphthao  Project’smo0va0onsincludedtheestablishmentofincen0vesbytheNigerianNa0onalGas

PolicyofMarch1995(materializedbytheincen0vesofPPTAandCITAestablishedin98-99).o  Mo0va0onsalsoincludedthecrea0onofagreementwithNGCtoacceptanddeliverlean

(dry)gasfromAPGtodomes0cmarkets.o  Theprojecthasacapacityof34,000bpdwithan0cipatedexpansionto120,000bpd.o  Construc0onstartedin2005andtheprojectcameonlinein2014.

S  ProjectLocaKon:o  LocatedintheEscravosregionintheNigerDeltaregionofNigeria

S  AssociatedGasUse:o  AssociatedgasfromtheOkanandMefaoilfieldsintheOilMiningLease49,Deltaregionof

Nigeria

S  ProjectTechnology:o  Thetechnologyusedconsistsofanoffshoregasgatheringandcompressionplayorm(GSCP),

agasplantonshore,andafloa0ngstorageandoffloadingvessel.o  Aoertheliquidsareextractedfromtheassociatedgas,theleo-overleangaswouldbe

compressedanddeliveredintoa16-ingaspipelinetotheNGC.o  TheWestAfricanGaspipelinelinkstoChevron’sexis0ngEscravos-Lagosgaspipeline

APGusecompanycasestudy:ChevronEscravosproject(GTL)

PowerGenera0on(IPP)



GastoLiquidConversion(GTL) Figure:ChevronEscravosGTLprojectschema0c

Source:OilandGasJournalVol.96Issue16

Poten0alfutureprojects

PowerGenera0on(IPP)




S  SomepotenKalAPG-unlockinginfrastructureprojects:

o  PowerPlants:ThegovernmentisrequiringallIOCstobuildatleastoneIPPaspartofthe2008GasMasterplan.Asaresult,Totalhasplannedtodevelopa400MWIPPonOML58inRiversStateandExxonisplanningtoconstructa500MWIPPatitsQuaIboeTerminal.Theprojectswereslatedtogoonlineafewyearsago.Theyarecurrentlydelayedbytonon-availabilityofupstreamprojectstosupplygasfeedstocktotheplants.

o  GasGatheringFacili4es:ShellthroughitsSPDCisinves0ng$2bnintwoprojectstoextendgas-gatheringfacili0esto90%ofitsopera0ons:theSouthernSwampAssociatedGasSolu0on(SSAPGS)andtheshallow-waterForcados-Yokriprojects,withacombinedcapacityof185,000barrelsofoilequivalentadayatitspeak.Itisalsointendedtoproducegasfordomes0cpowerconsump0on.Oncecompleted,itshouldreduceShell’sgasflaringby95%.Thereportishoweverdelayedbyalackoffunding.

o  Addi4onalpipelines:NNPChasbeentryingtoaHractfundingforlargerbackbonepipeline(395-kmCalabar-Ajaokutapipelineandthe740-kmAjaokuta-Kaduna-Kanopipeline).Nigeriahasalsotheambi0ontobuildatrans-Saharangaspipeline(firstproposedin2002)thatwouldtravelthroughNigerandAlgeria,andlinkDeltagasreservestoEuropeanmarkets.TotalandRussia’sGazpromhaveshowninterestintheprojectbuttheheoycostes0mates(ofabove$30bn)andanunstablesecuritysitua0onintheDeltaandSahararegionshavestalledtheproject.

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S  Nwachukwu,Clara,andMichaelEboh."PowerCrisisEndsSoonasFGIncreasesGasSupply–Alison-Madueke."VanguardNews.VanguardNews,30July2013.

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S  Ososami,Lolade."Nigeria:DevelopmentsInNigeria´sTaxRegimeForGasU0liza0onProjects."Mondaq.Abraham&Co,1Dec.2008.

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Nigeria Associated Gas U0lizaon Study

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