GAS UTILIZATION, CHALLENGES, PROSPECT AND THE WAY FORWARD

ONYIJE ISRAEL JACKSON

Emerald Energy Institute, University of Port Harcourt

OUTLINE

Nigeria Gas ResourcesGas UtilizationChallenges/Constraints to Gas UtilizationProspects for Gas UtilizationWay ForwardRecommendation

NIGERIA’S GAS RESOURCES

Nigeria is a gas-rich country(Gas province). Nigeria is a gas-rich country(Gas province).

Current estimates put the proven reserves Current estimates put the proven reserves at about 183Tcf at about 183Tcf

Probable gas reserves may be over 600Tcf.Probable gas reserves may be over 600Tcf.

This makes Nigeria the country with the This makes Nigeria the country with the highest gas reserves in Africa and the 9th in highest gas reserves in Africa and the 9th in the worldthe world

GAS

LNG (EXPORT) POWER PETROCHEMICALS

NGLs, LPGs & CONDENSATES

NH3/UREA FERTILIZER PHARMACEUTICALS MENTHANOL

ETC.

ANIMAL PROTEIN

GAS SECTOR VALUE CHAIN

GAS SECTOR VALUE CHAIN

TOP 10 GAS RICH COUNTRIES

…and an abundant natural resource in Nigeria

SOURCE: BP Statistical Review of World Energy June 2011

159

187

193

213

273

283

284

Algeria

NigeriaVenezuela

United Arab Emirates

US

Saudi Arabia

Turkmenistan

Qatar 894

Iran 1,046

Russian Federation 1,581

Proved gas reserves (Tcf)1

1

countries

POTENTIALS OF GAS UTILIZATION OPPORTUNITIES

SOURCE: OECD; US federal statistic office; Team analysis

Energy competitivenessMmscf gas used per m$ output, Nigeria

110

100

90

80

70

60

50

40

30

20

10

0

Total job impactTotal jobs created per mmscfd of gas used, 1

2,4001, 1001, 0009008007006005004003002001000

Power generationLNG export

Methanol

Cement

Petrochemicals (ethylene from LPGs)

Nitrogenous fertilizers

Pulp

Aluminium

Synthetic rubber

Iron & Steel

Corn

Paper

Downstream plasticsGlass

1 Estimate based on USA impact and x3 - 4 ratio for job creation and x1,2 energy efficiency between developed and developing count ries2. Ethylene feedstock in Nigeria would be LPGs, consumption of natural gas is only utility needed for conversion vs feedstock . D ownstream

plastics, only non - ethylene energy required is taken into account not initial feedstock needs.

Absolute import to Nigeria (2009, Mn USD)

Illustrative, relative mapping of Power and Export

GAS UTILIZATION

Current gas production in Current gas production in Nigeria is about 4.6bcfd Nigeria is about 4.6bcfd

The utilization of gas The utilization of gas currently produced goes currently produced goes to:to: Power generationPower generation Export projectsExport projects IndustriesIndustries Other domestic usesOther domestic uses ReinjectionReinjection FlaringFlaring

SECTORIAL DISTRIBUTION OF GAS UTILIZATION (JANUARY TO SEPTEMBER 2015)

CHALLENGES TO GAS DEVELOPMENT

Inadequate Gas Supply InfrastructureInadequate Gas Supply InfrastructureInappropriate/ unrealistic pricing of gas, Inappropriate/ unrealistic pricing of gas, especially for domestic useespecially for domestic useLow level of industrializationLow level of industrializationInadequate consumptive capacitiesInadequate consumptive capacities

THE GAS SECTOR: ISSUES & CHALLENGES

Continued flaring of gas

Inadequate investment in gas value chain

Limited institutional, legal and regulatory framework for gas, including associated gas use

THE GAS SECTOR: ISSUES & CHALLENGES

Gas storageSecurity of supplyUnderdeveloped domestic market for gas and gas products (LPG, CNG, fuel methanol, power etc) Funding constraints

MAIN CONSTRAINT: GAS FLARING

MAIN CONSTRAINT: GAS FLARING

The NNPC in its Annual Statistical Bulletin, for 2014, disclosed that oil and gas firms in the country flared 289.6 billion standard cubic feet, SCF, of gas, representing 11.47 per cent of the total gas produced in the country in that year.

At NGC’s price of $3 per 1,000 SCF of gas, at the current exchange rate realities, the flaring of 289.6 billion SCF of gas translated to a loss of $868.8 million, an equivalent of N173.76 billion.

… How much is the minimum requirement for Bank capitalization in Nigeria?

Gas flaring is Not only a waste of a valuable national resource, but an acknowledged

negative impact on the environment

PROSPECTS TO GAS UTILIZATION

FRAMEWORK FOR NIGERIA’S GAS INDUSTRY

The Gas Reform is anchored on a robust strategic framework that is focused on maximum economic impact through gas. Aims to drive linkages with agriculture, manufacturing and dispersed small enterprise through Power

GAS TO POWER“… By 2014, we would have positioned Nigeria firmly as the undisputed regional hub for gas-based industries such as fertilizer, petrochemicals and methanol.”

GAS BASED INDUSTRIALISATION HIGH VALUE EXPORT

STRATEGIC FRAMEWORK FOR NIGERIAN GAS

Consolidate Nigeria’s position and market share in high value export marketsTargeted LNG export opportunities

Regional gas pipelines that help consolidate nation’s footprint and influence

Deliver on President’s Gas Revolution Agenda to:Position Nigeria as the regional hub for gas-based industries such as fertilizer, petrochemical and methanol

Transform gas sector to value adding sector

Significantly increase gas supply to the Power Sector

Focused delivery plan to support existing and ongoing power plants by PHCN and NIPP

Deliver Gas for at least 12GW by 2015

LNGRegional Pipelines

PROSPECTS FOR GAS DEVELOPMENT

The prospects for gas development and The prospects for gas development and utilization is very bright in Nigeriautilization is very bright in Nigeria

International and local investors are International and local investors are interestedinterested

Appropriate regulatory and institutional Appropriate regulatory and institutional reforms to enhance investment reforms to enhance investment environment are on courseenvironment are on course

PROSPECTS FOR GAS UTILIZATION

Domestic- Oriented Domestic- Oriented ProjectsProjects

Power Projects – current Power Projects – current power projections show that power projections show that gas will be very prominent. gas will be very prominent.

Major oil companies are Major oil companies are planning or have already planning or have already established gas fired established gas fired Independent Power Plants Independent Power Plants (IPPs) (IPPs)

PROSPECTS FOR GAS UTILIZATION

Domestic- Oriented ProjectsDomestic- Oriented Projects

LPG ProgrammeLPG Programme

Establishment of NGLs, GTLsEstablishment of NGLs, GTLs

CNG/NGVCNG/NGV

Use of gas as Energy Source in Use of gas as Energy Source in Industries – Cement Plants, Steel Industries – Cement Plants, Steel Plants, fertilizers and Plants, fertilizers and petrochemicalspetrochemicals

PROMISING TECHNOLOGIES (DISTRIBUTED SCALE LNG PRODUCTION) -A SOLUTION FOR OTHERWISE FLARED OR STRANDED GAS

ONYIJE ISRAEL JACKSON

Paratransit & Shuttle Vans

OTHER GAS UTILIZATION OPTIONS

WAY FORWADReform of the sector – policy and market structure Appropriate pricing: is the existing framework delivering desired results?Design incentives for more market participants along the value chainEncourage freely negotiated bilateral contracts Investment in infrastructure and coordination in the use of existing infrastructureAddress Security of supplyOptimization of power plant location between gas source and power marketsAlternative ways for delivering gas to power plants

WAY FORWARD

Enforce gas flare down policy. Empower regulators to deal effectively with gas flaring and venting Regulators should be independent of the operators Clearly define circumstances for the approval of gas flaring Finalize all outstanding legal and regulatory framework initiatives for the gas sector.

RECOMMENDATION

• Regular monitoring of gas supply and enforcement of domestic gas supply obligations

• Downstream Gas Law needs be finalized to create a legal and regulatory framework for private investments in gas pipelines.

THANK YOU