nigeria the dynamics of a growing gas market presentation to the africa energy forum 2008

Nigeria: The Dynamics of a Growing GasNigeria: The Dynamics of a Growing Gas Market

Dr. Adeoye AdefuluOdujinrin & Adefulu

Barristers Solicitors & Notaries PublicBarristers, Solicitors & Notaries PublicLagos – Abuja – Port‐Harcourt

OutlineOutline

• Outline of Nigeria’s gas industry and market;

• Nigeria’s Gas Master Plan;Nigeria s Gas Master Plan;

• Some issues raised by the Master Plan.

Odujinrin & Adefuluestd. 197221/09/2009 2

Nigeria has an abundance of excellent gas resources…g g

• Nigeria has an estimated 182 TCF of proven natural gas reserves;gas reserves;

• 7th largest natural gas reserve holder in the world;reserve holder in the world;

• High grade quality: 0% sulphur & rich in NGLsp


…its reserve base position has come about despite the lack of a concerted effort in exploring for, developing and utilising its p g , p g g

gas resources…

• All gas discoveries have been made in the process of exploring for oil;p p g

• Nigeria is globally the No. 1 gas flarer :40% f Ni i ’ l d ti i fl d– 40% of Nigeria’s annual production is flared;

– The country accounts for 12.5% of the gas flared in the world (Source: World Bank).

• The current legal and fiscal framework for the gpetroleum industry is geared towards oil production and utilisation with very little

Odujinrin & Adefuluestd. 1972

production and utilisation with very little focus on gas21/09/2009 4

… gas development, utilisation and infrastructure have thus far been developed in a haphazard manner and with a very p p y

heavy focus on export projects…

• LNG– Nigeria LNG has grown significantly since the completion of its 1st

hphase in 1999• NLNG now on its 6th train (total annual capacity of 22 MTPA) with a proposed 7th train under discussion;

– Other greenfield LNG projects –Olokola LNG and Brass LNG are at different stages of development

Oth G tili ti j t• Other Gas utilisation projects– Chevron’s EGTL, WAGP, TSGP (proposed), NGL & NGL II, Oso

Condensate

• Gas pipeline infrastructure has been mainly point to point to serve these projects


…the focus on export projects has however been detrimental t th d l t f d ti tili tito the development of domestic gas utilisation…

• A demand boom is expected in domestic utilisation with projected annual growth rate p j gof 15‐18%;– Significant growth is projected especially in the– Significant growth is projected especially in the power sector, which is currently operating below capacitycapacity

– There is however a gap between projected d d d l ith l b i ff t ddemand and supply, with supply being affected significantly by the lack of an interconnected grid

t d th i it i f t tOdujinrin & Adefuluestd. 1972

system and other requisite infrastructure.21/09/2009 6

…the new paradigm requires a concerted planning effort as well as investment in infrastructure ‐ this has led to the

Nigeria Gas Master Plan…

Gas Infrastructure Bl i t

Gas Pricing Regime Domestic Gas SupplyObli tiBlueprint Obligation

Envisages the development of:•3 Central processingFacilities;

Pricing regime to bedifferentiated across sectors:St t i D ti S t

Regulation to impose:•Mandatory reserves allocationf d tiFacilities;

•A network of gas transmissionpipelines;•LPG storage & supplyFacilities.

•Strategic Domestic Sector(cost of supply basis)•Strategic Industrial Sector(product netback basis)St t i i l t

for domestic use;•Compliance to be acondition of export

Facilities. •Strategic commercial sector(alternative fuels basis)


… the NGMP provides a useful foundation, however certain ti i dquestions remain unanswered…

• Who will provide the required infrastructure?– NGMP suggests a private sector led approach

• Infrastructure security; stability of legal regime; adequate incentives;• Infrastructure security; stability of legal regime; adequate incentives; government guarantees

• Would domestic market obligation amount to expropriation? – DMO may be sold at less than export price

• How does the NGMP affect the flare‐down target?

• When would the appropriate legal framework be put in place?


…additional questions may be directed to …

• [email protected]


nigeria the dynamics of a growing gas market presentation to the africa energy forum 2008

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