Developing gas resources for economic growth

Investments are being channelled into massive pipeline outlay and other projects aimed at driving the Federal Government’s gas utilisation aspirations, writes DAYO OKETOLA

When the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, said recently that Nigeria was resolute about developing and monetising its natural gas resources, not many were surprised, the country being the ninth largest natural gas reserves holder in the world; and the largest in Africa.

With estimated 182 trillion cubic feet of proven natural gas reserves as of January 2013, Nigeria’s gas reserve endowment may be up to 600 trillion cubic feet due to the high proportion of natural gas in the Niger Delta as well as substantial discoveries made in the deep offshore area.

This, the minister said, would naturally catapult the country to the world’s fourth largest gas reserves holder.

Despite the huge gas reserves, Alison-Madueke said the nation’s gas production was less than one billion cubic feet, while the gas utilisation remained at only 6.6bcfd.

She said this was largely due to under-utilisation of gas caused by the under-developed domestic market, non-availability of gas-based industries and inadequate gas pipelines, among others.

Amid the inadequate infrastructural base for gas utilisation in Nigeria, the International Oil Companies operating in the country have continued to flare 1.4 billion cubic feet of gas across oil fields every day.

The Director, Department of Petroleum Resources, Mr. George Osahon, said the 1.4bcfd flared gas was costing the Federal Government $4.9m daily at $3.50/1,000 standard cubic feet.

When put together, the Federal Government is losing about $1.79bn (N289.60bn) to gas flaring annually, a situation largely attributed to the gross under-utilisation of gas in the country.

In spite of this, Alison-Madueke said the country’s aspiration was to grow the gas resource aggressively for rapid economic growth.

In view of this, she said the gas sector reform, anchored on the Nigerian Gas Master Plan, would monetise the natural gas reserves and eliminate flaring, while also enhancing greater private sector investment in gas production, transportation and distribution infrastructure.

She said,  “Nigeria, with gas reserves of 182Tcf (trillion cubic feet) as at the end of 2012, compared with the total crude oil reserves of 36.8 billion barrels for the same period, is more of a gas country than a crude oil country.”

Alison-Madueke said the gas revolution would enhance gas to power supply for electricity generation; lead to the establishment of commercial framework for gas and the development of gas infrastructure across the country.

She added that the global shift to gas as a cleaner energy made the emphasis on gas development imperative for sustainable long term economic development in Nigeria.

Though the minister said, “Our hope is that domestic gas will become a major staple in Nigeria,” she stressed that she was not oblivious of the huge infrastructure hurdles confronting the country’s gas utilisation aspiration.

As such, Alison-Madueke said that the gas infrastructure development was ongoing across the country, adding that Abuja and the northern part of the country would be linked with gas pipelines for rapid industrialisation by 2015.

She listed some of the completed and ongoing gas infrastructure projects to include the Escravos-Oben Pipeline, the expansion of Oben-Lagos Pipeline, Calabar-Ajaokuta and Ajaokuta-Kano Pipeline Systems, among others.

The minister said the Nigerian National Petroleum Corporation, on behalf of the Federal Government, had recently invited interested investors to partake in $5bn East-North gas pipeline transmission systems.

She stressed that steady and sustainable progress was being made on the gas to power project, adding that the gas supply had grown from 620 million standard cubic feet per day to 920mmscfd between 2010 and 2013.

She said, “Supply grew at an average annual rate of 20 per cent in the last three years to 1500mmscfd. The non-power sector has almost doubled from 185mmscfd to 310mmscfd. Similarly, over 360km of gas pipelines has been completed and commissioned.”

She projected that by the second quarter of 2015, the gas demand for the power sector would grow to 2200mmcfd, noting that with the massive outlay of pipelines, the NNPC would continue to grow gas supply exponentially to meet the demand.

She, however, lamented that vandalism of gas pipelines had constituted a great challenge to power supply in the country.

The Group Managing Director of the NNPC, Mr. Andrew Yakubu, who said the intention was to fund the pipeline, preferably through a combination of debt/equity 60/40 ratio, which meant that interested parties would provide equity and debt.

“The NNPC, on behalf of the Federal Government, will co-invest, providing equity and debt from a combination of planned sources including annual appropriation through the Federal Government budget process and other sources such as the ongoing Ministry of Finance Eurobond issue,” he said.

According to him, it is anticipated that by the end of 2018, effective throughput across the network will be about 1.5 billion cubic feet/ day.

The Group Executive Director, Gas, NNPC, Dr. David Ige, said that the Federal Government’s Gas Master Plan was in progress, adding that the plan had paved the way for an unprecedented gas sector growth.

“In the next three years, we are going to have gas pipelines that span all over the country,” he added.

Ige also said the government would soon kick start the construction of a $15bn gas-based industrial park in Ogidigben in Delta, adding that the proposed park would offer investment opportunities in petrochemical, fertilizer, methanol and other non-oil sectors of the Nigerian economy.

The Federal Government and the private sector are expected to invest $15bn (N2.39tn) in the 2,700-hectare gas-based industrial park.

The contractors were to have moved to the project site by now.

Ige said, “Though this project is late relative to our timing, we are making progress. The Ogidigben Industrial Park will have a fertilizer plant, a petrochemical plant, a central processing facility and a power plant of 350 megawatt capacity. There will be big commercial and residential areas. It is going to be the biggest gas-based industrial park in Africa.”

The Managing Director, Nigerian Petroleum Development Company, Mr. Iyowuna Briggs, in an interview with our correspondent, said the state-owned company was currently delivering 410 million metric standard cubic feet of gas per day to consumers for domestic use.

He said about 60 million standard cubic feet of gas was being flared at its offshore facility, but added that this would be stopped by 2016 with the gas utilisation aspiration of the government.

He said a final investment decision would be taken by the middle of this year for a gas gathering facility aimed at collecting the 60MSCUF of gas currently being flared for onward utilisation by 2016.

Generally, the Escravos gas-to-liquids plant, Brass LNG, Escravos gas plant development, Sonam field development, Onshore asset gas management project, Assa-North/Ohaji-South development, Gbaran-Ubie, the Idu project, and the Tuomo gas field are some of the gas projects expected to galvanise the country’s gas development initiative.

But experts have warned that the delay in the commencement of the $12bn Nigeria LNG’s Train 7, $10bn Olokola LNG and the $15bn Brass LNG projects could jeopardise the country’s gas monitisation aspirations.

A business intelligent firm, Oxford Business Group, had in a recent report estimated the total cost of the three LNG projects at $37bn, and experts expressed worry that continuous political interference from the Federal Government would further jeopardise the objectives of these projects.

According to the OGB, the NNPC is forging ahead with five key pipeline projects.

It stated the 136km Oben-Geregu pipeline was completed at a cost of $245m in November 2011, ensuring gas supply to the Geregu power plant.

The 41km, $41m Itoki-Olorunshogo pipeline came on-line in 2012, supplying gas to the NIPP power plants in Olorunshogo.

It said work had also been focused on developing a large-capacity backbone infrastructure, beginning with the expansion of the ELPS pipeline loop.

The 104km Escravos-Warri ELPS-A pipeline, costing $258m, was also completed, linking stranded gas at Escravos to Warri and adding 150m cf/day in production by October 2012.

It said the ELPS 2 project covering 324km from Warri-Oben to Lagos was due to be completed in 2013, and aimed to double its capacity to two billion cf/day for power and industrial consumers in the South-West.

Finally, the OBG said the 127km, East-West pipeline from Obiafu-Obrikom to Obenand, costing $662m, was due for completion by the third quarter of 2015, adding that the pipe laying for the project was scheduled to commence in January 2014.