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1
Commercial Opportunities in Nigerian Oil and Gas Sector
Engnr. Funsho KupolukunGroup Managing Director
Nigeria National Petroleum Corporation
Gulf of Guinea Breakfast SessionOTC 2007, Houston
May 2, 2007
2
Global Oil and the Gulf of Guinea
Overview of Nigerian Oil and Gas Industry
The Growth Agenda
Emerging Commercial Opportunities
Key Enablers and Interventions
Concluding Remarks
CONTENT
3
In both oil and gas, there has been a band shift in prices occasioned by supply tightness and growing demand. Secure supplies is therefore a major agenda issue for the global oil and gas industry as well as governments alike
GLOBAL OIL AND THE GULF OF GUINEAPrice Shifts
4
Whilst OPEC remains the primary point of call for global capacity additions, the Gulf of Guinea countries, particularly Nigeria and Angola, are evolving as geo-strategically important suppliers to the global market, particularly to the USA
NIGERIA
SENEGAL
GHANA
CAMEROON
CHAD
ANGOLA
LIBERIA
COTE D’IVOIRE
BURKINA FASO
SIERRA LEONE
GUINEA
MALINIGER
GABON
CONGO DRCONGO B
EQ. GUINEA
CAR
Index Map
Fig. 3.1: GULF OF GUINEA COUNTRIES
NIGERIA
SENEGAL
GHANA
CAMEROON
CHAD
ANGOLA
LIBERIA
COTE D’IVOIRE
BURKINA FASO
SIERRA LEONE
GUINEA
MALINIGER
GABON
CONGO DRCONGO B
EQ. GUINEA
CAR
Index Map
Fig. 3.1: GULF OF GUINEA COUNTRIES
GLOBAL OIL AND THE GULF OF GUINEAGrowing Importance of Gulf of Guinea
5
Deepwater Comparative Reserves
The Gulf of Guinea’s growing importance is supported by a high level of prospectivity. Almost 40% (14 bn bbls) of global deepwater discoveries have come from this region. About half of this is from Nigeria. Recent discoveries have brought the region to the forefront of deepwater technologies
Deepwater Discoveries
GLOBAL OIL AND THE GULF OF GUINEAGulf of Guinea Prospectivity
6
From this robust base, a significant contribution is expected from this region to global capacity. An estimated 7mmb/d or 9% of worlds total daily production is expected to come from this region in 2007. Relative to the world average of 3%, production capacity growth in Africa (specifically Gulf of Guinea) is forecast to be highest at about 7% annually
THE GULF OF GUINEA Projected West African Crude Oil Output
World Average 3%
7
Global Oil and the Gulf of Guinea
Overview of Nigerian Oil and Gas Industry
The Growth Agenda
Emerging Commercial Opportunities
Key Enablers and Interventions
Concluding Remarks
CONTENT
8
Nigeria is a key component of the Gulf of Guinea. It represents 70% of total Gulf of Guinea reserves and is the anchor country for the region in terms of supply
THE NIGERIAN OIL AND GAS INDUSTRY Nigeria In the Gulf of Guinea
Angola 22%
Others 6%
Nigeria
52%
Congo B 6%
Eq. Guinea 6%
Gabon 8%
Gabon
5%
Congo B
4%
Eq. Guinea
4%
Angola
13%
Others
4%
Nigeria 70%
ReservesProduction
9
Nigeria’s aspirations for its oil and gas industry are anchored on 2 key elements – capacity growth and economic integration of the industry with the macro-economy. The nation aspires to grow GDP at a 10% rate. The strategic thrust is therefore that of alignment between global and domestic objectives.
Core Sector Aspirations
Grow Crude oil reserves to 40bn barrels by 2010 Production capacity to 4.5mmb/d by 2010 Gas revenues to match crude oil revenues Domestic gas market and address
environmental issues
Maximize sector value to the Nigerian economy Improve Nigerian capacity and content in
industry Enhance multiplier effect on economy Transit oil to an integrated oil and gas economy
Recent Presidential Mandate
… Attain a GDP growth rate of 10%
THE NIGERIAN OIL AND GAS INDUSTRYNational Aspiration for Oil and Gas
10
To deliver the aspirations, between 1999-2007, the industry has refocused strategically on 7 key areas vital to coping with the rapidly evolving global and local industry landscape. These 7 areas have anchored industry operational focus and the achievements to date
1. Crude Oil Capacity Growth Aggressive exploration and development to arrest production decline and grow
capacity to 4mmb/d by 2010
2. Enable / Sustain Linkage of Industry to Economic Growth Aggressive development of the National Content Agenda to facilitate manufacturing
and industrial capacity growth The Renewable Energy Initiative to stimulate agriculture sector growth The Marginal Fields Initiative to stimulate local participation
3. Stimulating Gas Sector Growth Aggressive growth of export sector to leverage evolving opportunities in global
growth in gas Stimulate domestic sector gas growth to underpin economic growth
THE NIGERIAN OIL AND GAS INDUSTRY7 Industry Focus Areas
11
4. Stimulate Downstream Product Availability and Growth Refinery performance improvement Retail outlet growth Private sector participation in product marketing
5. Develop Sustainable Financing Solutions for the Industry Activity
6. Developing Legal and Fiscal Environment to Support Sector Aspirations
7. Develop Organisational Capacity in NNPC to Manage and Exploit Evolving Industry Challenges and Opportunities Respectively
THE NIGERIAN OIL AND GAS INDUSTRY7 Industry Focus Areas
12
Reserves have continued to grow steadily in Nigeria. Over 7bn bbls have been discovered in the deepwater acreages bringing the total national crude oil reserves to about 35bn bbls from about 22bn bbls pre 1999. Significant scope for reserves growth still exists
THE NIGERIAN OIL AND GAS INDUSTRYPerformance Update - Reserves Growth
59% increase
13
Similarly, production capacity has grown steadily to an installed capacity of about 3mmb/d in 2007. More recently in 2005/2006, an additional 790mmboed was added to the nations supply capacity. In essence despite major disruptions to production, the industry has been able to sustain production at within quota limits in view of the robust and diverse supply base
THE NIGERIAN OIL AND GAS INDUSTRYPerformance Update – Production Capacity Growth
% Flared
Gas flares have reduced significantly to about 32% by end 2006. Significant growth in domestic and export gas utilisation will end flares by 2008.
Steady drop in
% gas flared
14
THE NIGERIAN OIL AND GAS INDUSTRYPerformance Update - Gas Sector
15
• T12 started 10/99
• T45 FID 03/02
• T3 started 12/02
• T6 FID 07/04
• T4 started 07/05T4 started 07/05
• T5 started 12/05T5 started 12/05
• T6 RFSU 2008
• ~$1.5 bn 3rd Party financed
• USD 569million dividend
• Over 500 cargoes delivered
Total Investment - $11.4 bn($bn) T1&2 T3 T4&5 T6
Plant 3.3 1.4 2.1 1.7
Ships 0.3 0.4 1.4 0.8
L N GBGT
NLNG
22 Mtpa LNG, 3.5 Mtpa NGLs
24 dedicated LNG tankers
10.4%
15% 49%Total
E
N
25.6%
49%
10.4%10.4%
15% 49%Total
E
N
E
N
E
N
25.6%
49%
10.4%
Highlights
NLNG was commissioned in 1999 with 2 Trains at startup. It has since expanded rapidly to 5 trains by 2005 and the 6th is planned for commissioning in 2008. To date, the NLNG project has delivered over $3.6bn in revenues to Nigeria, part of which has been reinvested for further growth.
THE NIGERIAN OIL AND GAS INDUSTRYPerformance Update - Gas Sector
16
Global Oil and the Gulf of Guinea
Overview of Nigerian Oil and Gas Industry
The Growth Agenda
Emerging Commercial Opportunities
Key Enablers and Interventions
Concluding Remarks
CONTENT
17
To deliver the GDP aspiration as well as contribute to global economy growth, Nigeria needs to grow capacity significantly. The sector has assembled and is progressing a robust portfolio of projects planned to grow capacity to about 4mmb/d by 2010. The portfolio comprises a mix of deepwater and conventional terrain projects
THE GROWTH AGENDACrude Oil Capacity - Future Capacity Growth
18
THE GROWTH AGENDAOverview of Key Projects – Conventional Terrain
Over 2.0mmb/d additional capacity is planned from the shallow offshore concessions between 2006 - 2011.
19
Over 1.0mmb/d of additional capacity is anticipated from about 7 major deepwater projects.
THE GROWTH AGENDAOverview of Key Projects – Deepwater Terrain
20
In gas, there is a major transformation in forecast utilisation for both the domestic and export sector. Domestic demand will grow to about 1000mmscf/d by 2006 and forecast to grow to over 10,000mmscf/d by 2010. LNG capacity has equally grown from zero to 22MTPA in 2006 and forecast to grow to 50MTPA by 2011 – second fastest growth in the world. Nigeria’s forecast gas growth is one of world’s most aggressive
THE GROWTH AGENDAGas Sector Growth
21
Underpinning the gas demand growth is a robust portfolio of projects. The portfolio comprises Methanol, GTL, Power and Fertilizer projects
THE GROWTH AGENDAGas Sector Growth – Diverse Portfolio Opportunities
22
10.4%
15% 49%Total
E
N
25.6%
49%
10.4%10.4%
15% 49%Total
E
N
E
N
E
N
25.6%
49%
10.4%
THE GROWTH AGENDA Major Export Projects - LNG Projects
NLNG NLNG capacity forecast 30MTPA by 2012, fastest growing LNG plant in the world
Total Investment - $11.4bn; Project has delivered over $3.6bn in revenue to date
22MTPA LNG, 3.5 MTPA NGLs
T1-5 on production; T6 FID 07/04;
Over 500 cargoes delivered
OKLNG project will boost Nigeria LNG capacity by 22MTPA from 2011 22 million tonnes/year LNG Project ; 4 LNG trains of 5.5 million tonnes/yr
Trains 1 & 2 produce 100kb/d NGLs Launch Project – trains 1 & 2 ; trains 3 & 4 to be added thereafter FEED Commenced Feb 2006
OKLNG
Project sponsors – NNPC, NAOC, ConocoPhillips
Two LNG trains of 5MTPA capacity each
All agreements including shareholders’ agreement have been concluded
FEED for the plant and facilities nearing completion
FID targeted for December 2007
BRASS LNG
23
WAGP 630 km pipeline to deliver gas to Benin, Ghana and Togo by
Q1 2007 Initial capacity is 200 mmscf/d but will grow to 580 mmscf/d
Position Nigeria to effectively capture the emerging markets of West Africa
Construction commenced in 2005, commissioned April 2007
2 Key Projects Equatorial Guinea Gas Supply Trans-Sahara Gas Pipeline
About 650mmscf/d to Equatorial Guinea and 2bcf/d thro the TSGP
Strengthen regional cooperation and economic stability Anchors Nigeria as regional supply hub
Other Regional Gas Pipeline Projects
THE GROWTH AGENDAMajor Export Projects – Other Pipeline Projects
The crude oil capacity growth has translated into major investment inflow in the industry. For instance between 2000 and 2006, FGN funding levels more than doubled from about $2.5bn to over $6bn.
NB:- 2006 investment includes IPP
UPSTREAM PERFORMANCE 1999-2007 Crude Oil Capacity Growth – Funding Capacity Additions
24
25
Over $60bn is anticipated to be spent through to 2008 alone and significantly more in future years. Relative to competing OPEC countries, Nigeria is experiencing one of the highest investment inflows in the industry creating opportunities
THE GROWTH AGENDAIndustry Investment Levels
26
Global Oil and the Gulf of Guinea
Overview of Nigerian Oil and Gas Industry
The Growth Agenda
Emerging Commercial Opportunities
Key Enablers and Interventions
Concluding Remarks
CONTENT
27
EMERGING OPPORTUNITIESGas Pipeline Infrastructure
To support the growth in gas utilisation, a major growth in gas pipeline infrastructure is planned. An infrastructure blueprint is currently being developed which will triple the gas transmission capacity in the next few years
Pipeline Capacity Growth and Extensions:
Expand existing ELPS throughput
capacity
New pipeline linkages from South to
North
Interconnector between East and
Western grid
Connectors between domestic and
export
Proposed Gas Pipeline Network
28
EMERGING OPPORTUNITIESGas Processing Plants
About 3-4 gas processing plants with capability to strip NGLs is required by 2009/2010. These could be merchant plants
Central Processing Facilities
About 3-4 gas processing plants are
required to support growth
Plants will be able to strip NGLs
Plants may be tolling / merchant plants
or owned by the equity owners of the
gas
The CPFs need to be in place by
2009/2010 when gas demand peaks
29
EMERGING OPPORTUNITIESOther Gas Support Services
In addition, there will be numerous opportunities in the support services for gas to cope with the massive growth in gas delivery systems
Metering, monitoring and Control Systems
Pipeline integrity systems
Gas specification management systems
Other maintenance and support systems
30
EMERGING OPPORTUNITIESENGINEERING & FABRICATION
With over $85bn spend in the next 5 years and Policy requirements to domicile Engineering Design and over 50% of fabrication works in country, international EPC companies, Investors & engineering companies are welcome to set up in Nigeria
31
EMERGING OPPORTUNITIESCONSTRUCTION & INSTALLATION
Pipe-lay & Crane Barges
Inspection services & project Mgt support
Marine construction equipment & support bases
Pipe Spooling facilities
Support clusters & skilled Maintenance crew
•Over 4000 km of med/ large dia pipeline to be installed•Installation of jackets, decks, platforms, etc(1250k MT)•Integration, hook-up & commissioning of all future FPSOs & Platforms
Identified gaps
KEY INDICATORS FOR INVESTMENT OPPORTUNITIES
The Nigerian Content Policy is strongly linked to the cabotage act which requires Nigerian Flagging of vessels operating in Nigerian waters. Coupled with the spike in work load, opportunities abound for new entrants to buy into this emerging segment.
MC Dermott Lay barge
32
EMERGING OPPORTUNITIESSHIPPING & MARINE SERVICES
The Nigerian Oil and Gas industry is open to investors who are keen to partner with Nigerian companies in the provision of Tankers and coastal vessels to service the operations. This will offer additional opportunity in the areas of Ship Management expertise and training of seafarers
33
Global Oil and the Gulf of Guinea
Overview of Nigerian Oil and Gas Industry
The Growth Agenda
Emerging Commercial Opportunities
Key Enablers and Interventions
Concluding Remarks
CONTENT
34
ENABLING INITIATIVES Targeted Incentives for Investors
Effort is ongoing to secure a targeted set of incentives for would-be investors who need to install major capacity in Nigeria. The incentives include some guaranteed work to justify investment
35
Key Incentives
Free trade zones will provide significant incentives for oil and gas investors by lowering investment barriers and enhancing project profitability
4 Free Trade Zones
Calabar
Lekki
Olokola
Onne
No corporate income tax
No customs & excise duty on imports
Centralised approval process for permits – one stop shop
Excise duty on exports only
ENABLING INITIATIVES Free Trade Zones
36
Despite investment by successive governments and corporations, the level of success of many of the past initiatives have been largely low and unsustained
ENABLING INITIATIVES Niger Delta Interventions
37
Global Oil and the Gulf of Guinea
Overview of Nigerian Oil and Gas Industry
Emerging Commercial Opportunities
Key Enablers and Interventions
Concluding Remarks
CONTENT
38
CONCLUDING REMARKS
The opportunities are immense at over $60bn and the landscape is being prepared for willing investors to
participate. Please join us.
Rapid Capacity Growth
Huge Opportunities
A New Dawn
The Nigerian Oil and Gas industry is set for a second phase of growth.
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