ECONOMIC DIVERSIFICATION

MAXIMIZING THE BENEFITS OF GAS IN NIGERIA

-

- ROLE OF ENGINEERS -

A PAPER PRESENTED AT

THE NIGERIA SOCIETY OF ENGINEERS

MAITAMA BRANCH, F.C.T.

BY

EJU, MAGOSE ABRAHAM (PhD, MBA)

8TH OCTOBER, 2015

CONTENT

• INTRODUCTION

• NIGERIAN ECONOMY

• ECONOMIC DIVERSIFICATION: GAS OPPORTUNITIES

• THE ROLE OF ENGINEERS

• CONCLUSIONS

1. INTRODUCTION

Engineering Assembly Theme – REMINDER!!!

“OVERCOMING THE CHALLENGES OF NIGERIAN MONOLITHIC ECONOMY:

The Role of Engineering Profession”

Monolithic Economy

• A Monolithic Economy is one that is largely depended on one commodity / service for it’s export earnings.

Engineering

• Engineering is the application of scientific knowledge / principles to design, build, maintain, and improve structures, machines, devices, systems, materials and processes.

2. NIGERIAN ECONOMY

NIGERIAN ECONOMY - FACTS

• Nigeria’s Economy is currently the largest in Africa and the 21st largest in the world by Gross Domestic Product (GDP), according to IMF data (2014).

• Rebased GDP stands at $510 Billion (as at April 2014).

• Sectoral Contribution to GDP (April 2014 data):

SECTOR % OF GDP

Services (finance, insurance, ITC, real estate, etc) 52

Industry 25.7

Agriculture 22

Telecommunication 8.69

Manufacturing 6.83

Entertainment (Nollywood, music, broadcasting) 1.42

NIGERIAN ECONOMY – FACTS (cont.)

• Nigeria’s Economy is import-dependent

• Crude Oil accounts for over 70% of export earnings.

• Per Capital Income in Nigeria is $3,293.

• Nigeria’s Per Capital Income is 14th in Africa and 122nd in the world, according to IMF data (2014).

• Note:

- The Gross Domestic Product (GDP) provides data for the value of products and services manufactured in a country.

- Per Capital Income is the average earning of the people in a country. Also known as income per person, it’s the mean income of the people in an economic unit such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross national income) and dividing it by the total population.

Background of Nigeria’s Monolithic Economy

• Crude oil was discovered in commercial quantity in Nigeria in 1956.

• Nigeria joined the ranks of oil producers in 1958 when its first oil field came on stream producing 5,100 bpd.

• By the late sixties and early seventies, Nigeria had attained a production level of over 2 million barrels of crude oil a day.

• By the mid-70s, crude oil export had grown to be the largest export-commodity of Nigeria.

• Agriculture was the mainstay of the Nigerian economy before the discovery / exportation of oil.

• Crude oil production and export play a dominant role in Nigeria's economy and account for about 90% of her current gross foreign exchange earnings.

Challenges of Nigeria’s Monolithic (Oil) Economy

• Nigerian economy is highly sensitive to the adverse price movements in the international oil market.

• The volatile nature of international oil prices often creates obstacles in undertaking public policy measures.

• Slump in the price of oil translates to revenue shock for the Nigerian government. It also repressed foreign reserves.

• Oil producers in Nigeria and experts in the sector have stated that Nigeria may lose over N2tn in 2015 alone, if the fall in the crude oil prices persists (source: PUNCH 26/4/15).

• Discovery of oil deposits in other countries and the continued development of new / alternative fuel efficient technologies.

• Due to high growth of population, the economy of Nigeria faces the problem of high unemployment with limited opportunities in the oil sector (since oil sector provides very limited scope of large scale employment).

• Oil is a depleting resource. The cyclicality of that resource reinforces the need to diversifying the Nigerian economy.

3. ECONOMIC DIVERSIFICATION: GAS OPPORTUNITIES

Natural Gas

• Natural gas is gas obtained from a natural reservoir and generally contains large quantity of methane along with some heavier hydrocarbons and some non-hydrocarbons.

• Natural gas can occur in an associated or non-associated form in reservoirs below the earth.

• Natural gas is an energy source often used for heating, cooking, and electricity generation. It is also used as fuel for vehicles and as a chemical feedstock in the manufacture of plastics and other commercially important organic chemicals

• The processing of natural gas consists of the extraction of imbedded NGLs / LPGs and the removal of water vapour and other contaminants to form (i) a stream of marketable natural gas and (ii) a stream of mixed NGLs / LPGs.

• Natural gas is often informally referred to simply as "gas", especially when compared to other energy sources such as oil or coal.

Natural Gas in Nigeria

• According to the 2008 BP Statistical Energy Survey, Nigeria has proven natural gas reserves of 188 trillion cubic feet (Tcf), or almost 3% of the world total.

• In addition, Nigeria has about 600 Tcf of undiscovered gas potential.

• Nigeria has the largest natural gas reserves in Africa, and ranking 7th in the world.

• Associated gas encountered during the normal course of oil production has been largely flared. Nigeria is reputed to be the second largest gas-flaring country in the world.

• According to data from NNPC, about 296 billion standard cubic feet (scf) of natural gas was flared between January and September 2014. This is equivalent to about 1 billion USD.

• Nigeria currently utilise only about 30% of her gas reserve. Current daily gas production is about 8.25 bscf/d.

• By not fully harnessing its gas resources, Nigeria loses an estimated 18.2 million U.S. dollars daily!

Gas Opportunities in Nigeria

• Gas-to-Power.

• Liquefied Natural Gas (LNG).

• Natural Gas Liquids (NGL).

• Liquefied Petroleum Gas (LPG).

• Compressed Natural Gas (CNG)

• Gas-Based Industries (Petrochemicals, Fertilizers, Methanol, etc)

Gas-to-Power

• Natural gas has been designated as the proffered fuel for generation of electric power in Nigeria.

• Natural Gas provides 23% of world energy and about 70% of electricity in Nigeria.

• Nigeria aspires to a 40GW generating capacity by the turn of the decade. Average of 4GW (4,000 MW) is generated currently.

• It is estimated that over 2.5 bscfd of natural gas will be deployed to power in 2015. About 10 bscfd of gas can generate 30,000MW of electricity.

• Nigeria requires an estimated 120GW to meet her demand.

• Increased power supply will result in industrial / manufacturing growth, etc.

• This will deepen the diversification of the Nigerian economy.

Liquefied Natural Gas

• LNG is produced by cooling natural Gas to -161 ºC at atmospheric pressure.

• This reduces the overall volume by 600 times, making it easier to transport by ships or trucks.

• At its final destination, LNG is regassified and distributed through pipelines, cylinders, etc to end users.

• Nigeria currently has one existing 22MTPA LNG facility in Bonny Island.

• Between 1999 when the Bonny LNG facility came on stream and now, it has realised some $85 billion from exports of LNG to buyers in Europe, America and Asia.

• Nigeria is pursuing two additional LNG projects at Brass (10MTPA) and Olokola (12.6MTPA).

LNG Value Chain

Liquefied Petroleum Gas (LPG)

• LPG is a mixture or gaseous concoction of some hydrocarbons. It includes butylenes, propylene, butane as well as propane.

• LPG can be liquefied (under moderate pressure or low temperature), which facilitates its transportation and distribution.

• LPG used as fuel in heating appliances, cooking equipment, and vehicles. It is increasingly used as a refrigerant, replacing chlorofluorocarbons in an effort to reduce damage to the ozone layer.

• Nigeria currently produce about 3.1 million tonnes per annum LPG. Majority of this is exported.

• LPG is used for cooking in many countries for economic reasons, for convenience or because it is the preferred fuel source.

• Only about 5% of Nigerian population uses LPG for cooking presently.

Compressed Natural Gas (CNG)

• CNG is natural gas compressed to less than 1% of the volume it occupies at standard atmospheric pressure.

• CNG can be usually stored in cylindrical steel or composite containers at a pressure of 200 to 300 bar (2900 to 4351 psi) and, can be transported over short / medium distances (10 km to 250 km).

• It can be used in a wide range of applications as a fuel for vehicles, power generation, industrial burners, boilers and oven.

• CNG can provide a unique platform for meeting natural gas needs, where gas pipeline is none existent and/or pipeline connection is uneconomical vis-à-vis volume required.

Gas Based Industries

• Petrochemicals, Fertilisers, and Methanol plants requires large volumes of natural gas to operate.

• The gas based industries can be leveraged to catalyze numerous downstream manufacturing industries anchored on natural gas fuel.

• Nigeria can become a regional hub for gas based industries by leveraging on her abundant gas reserves.

Examples from Other Countries

• Qatar, a small Arab Gulf State, has the world’s highest GDP per capital. Qatar’s growth is solely anchored on Natural Gas.

• Saudi Arabia has also through natural gas positioned itself as the world’s hub for petrochemicals, leading to job creation and industrialization.

• Trinidad and Tobago has recorded remarkable increase in GDP and employment rate by exploiting her modest natural gas resources.

• Russia has taken advantage of her enormous natural gas resources to transform her economy and entrench her relevance in Europe and globally.

QUESTION: Why Not Nigeria?

4. HARNESSING GAS OPPORTUNITIES: ROLE OF ENGINEERS

Engineering Solutions

• Answers to a questions, problems or challenges based on the application of scientific knowledge / principles.

• Engineers play key roles in the development of nations by providing Engineering Solutions to Questions, Problems and Challenges.

Technology

• Gas business is a technology driven business. Engineering practitioners will have to fashion out / design cost effective and efficient technologies for developing the abundant gas reserves of Nigeria (exploration, exploitation, production, processing).

Creativity

• Creativity is the ability to see connections and relationships where others have not. Engineering is a creative profession!

• Nigerian Engineers have to be creative in discovering / developing new ways to harnessing and utilising the gas.

Capacity Building

• Nigerian Engineers have to develop the right skill-set locally via synergy between the practitioners and academia.

Policy Advice

• Nigerian Engineers are to ensure that sound policy advice are provided for the government in terms of developing / harnessing the gas potential of Nigeria.

Ethics / Principles / Values

• Nigerian Engineers must hold high ethical standards, principles and values in other to uphold the dignity of the profession.

5. CONCLUSION

Conclusion

• Nigeria’s monolithic economy poses huge challenges now and in the future.

• The is need to urgently diversify the Nigerian economy to overcome the challenges of “monolithic economy”.

• Opportunities abound in the harnessing and utilization of the abundant gas reserve of Nigeria as one of the vehicles for economic diversification.

• Engineering practitioners have key roles to play in the harnessing and utilization of the gas opportunities in Nigeria.

• Beside gas, there are other areas of diversification opportunities in Nigeria, e.g., solid minerals, agriculture, tourism, entertainment, financial / technological services, manufacturing, etc.

• Engineering practitioners are duty-bound to provide engineering solutions to overcome the challenges posed by the current Nigerian Monolithic Economy!

THANK YOU!