Nigeria’s gas demand to rise by 400% in 2013

LAGOS-The Nigerian Government has forecast a rise in daily domestic demand for gas to 400 per cent by the year 2013.

According to the government, demand is expected to rise fivefold to five billion standard cubic feet per day in 2013 from its current one billion scf/d in 2011.

Under the Nigeria Gas Master Plan initiative, the Federal Government aims to leverage this resource base to meet the target of growing the economy at 10 per cent per annum under its Vision 2020 programme.

Nigeria holds the seventh largest natural gas reserves in the world, with proven reserves of over 187 trillion cubic feet.

To meet this demand, the government has set domestic gas supply obligations for producers as well as the basis for pricing gas sold to different types of consumers.

According to Shell in Nigeria Briefing Notes, the three categories of gas consumers identified are the strategic power sector, industrial and commercial users and industries that use gas as feedstock.

Nigeria has about 5,000 megawatts of installed electricity generation capacity, but only about 3,000 to 4,000MW of that is currently in operation. Alongside goals to increase gas production, government has also set targets to increase the country’s actual power generation to 14 GW by the end of 2013 and 40 GW by 2020.

Much of the additional gas demand growth will therefore be needed to generate electricity, Shell Petroleum Development Company said.

Commitment and the process for achieving these electricity generation targets have been articulated in the Road Map for Power Sector Reform.

SPDC said it was participating actively in the reform agenda of the government and was currently at advanced stages of negotiations to supply natural gas to the power sector under the Nigerian Gas Master Plan new market model.

However, it was gathered that inadequacy of government funding had stalled many projects designed to gather associated gas – that is, gas that is produced along with oil – and to reduce flaring.

Security concerns, it was learnt, had continued to impact negatively on delivery of gas and other projects, especially onshore Niger Delta.

In addition, the investment climate in Nigeria needs to become clearer and more certain. The government is developing a new oil and gas industry legislation – the Petroleum Industry Bill – which among other things proposes new parameters affecting investments.

The large investments required to develop the Nigerian gas industry will only be forthcoming once an attractive investment climate is firmly established despite funding and security challenges, major projects that will help boost Nigeria’s gas and power supply for years to come are being inaugurated.

For example, the SPDC JV Integrated Okoloma gas plant (with capacity to process 240 MMscf/d) and the 650 MW Afam VI combined-cycle power plant were constructed and delivered within 30 months despite very tough security challenges.

In August 2008, the SPDC JV began generating electricity from the Afam VI power plant fed by natural gas from the SPDC JV’s Okoloma gas plant.

The power plant began supplying over 400 MW to the national grid via the open cycle phase and recently attained a generation capacity of 620 MW through the full combined cycle phase.

This integrated project has contributed up to 20 per cent to Nigeria’s current power supply and up to 20 per cent to its gas supply. Gas from Okoloma also serves industrial and other users within the eastern grid network.

Work is also progressing on the Gbaran Ubie integrated oil and gas project. Phase one of the project was completed with the inauguration of the Central Processing Facility in June 2010 with initial production of about 200 million standard cubic feet of gas a day.

This has gradually ramped up to the plant capacity of one billion standard cubic feet (1bcf/d) of gas a day – which was achieved in February 2011, in addition to oil and condensate production of more than 40,000 barrels a day. New pipelines will gather and fully utilise all associated gas from surrounding oil producing fields.

Gas from the project is expected to supply the Bayelsa State Government power plant at Imiringi and a new Federal Government 225MW power plant at Gbaran under the National Integrated Power Project.

The Gbaran Ubie project is a key example of the SPDC JV’s commitment to gas and power development in Nigeria as well as Nigerian Content Development.

Another example is the multi-million dollar pipeline contract signed in April 2010 between the SPDC JV and Daewoo Nigeria Limited. The agreement will enable the SPDC JV to supply more gas to power stations in the country.

The contract will involve the construction of pipelines that will take gas from the SPDC JV to the domestic gas network owned and operated by the Nigerian Gas Company. On completion of the project, SPDC will deliver some 250 million standard cubic feet of gas per day from that project.

Stakeholders in the sector have said getting the legislation and the National Gas Master Plan right, as well as effective coordination, were essential to attracting the billions of dollars of investment that are needed to meet government goals for gas and power.

Some international oil companies are ready to undertake more gas and power projects in Nigeria – so long as they are commercially viable.

“We have also been working closely with the government to ensure there is an effective commercial framework to underpin the entire sector, supported by appropriate legislative and fiscal rules,” one of the oil majors said in a report.

 

Security and unhindered access to project sites, according to industry sources, were necessary to develop these domestic gas supply projects. Urgent actions are also needed to meet the deadlines.

Gas projects typically take between two and four years to come on-stream after the final investment decision is taken.

Alongside these projects, Nigeria needs associated gas distribution infrastructure, power plants and electricity transmission and distribution networks to ensure that the additional supply of natural gas can have a real impact on the domestic economy.

Sustained progress in the development and implementation of solid regulatory and commercial frameworks, including payment securities will go a long way in making the sector robust, Shell Nigeria recently said.

“The recently issued gas-pricing framework must be implemented to ensure investors earn a fair profit, otherwise investment along the gas and power value chain will remain stunted.

Power tariffs need to be deregulated and freed from unsustainable subsidies in order to support the required power chain investment,” the firm added.

 


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