Nigeria The Dynamics Of A Growing Gas Market Presentation To The Africa Energy Forum 2008

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Nigeria The Dynamics Of A Growing Gas Market Presentation To The Africa Energy Forum 2008

  1. 1. Nigeria: The Dynamics of a Growing Gas  Nigeria: The Dynamics of a Growing Gas Market Dr. Adeoye Adefulu Odujinrin & Adefulu Barristers, Solicitors & Notaries Public Barristers  Solicitors & Notaries Public Lagos – Abuja – Port‐Harcourt
  2. 2. Outline  Outline • 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. 21/09/2009 Odujinrin & Adefuluestd. 1972 2
  3. 3. 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 NGLs p 21/09/2009 Odujinrin & Adefuluestd. 1972 3
  4. 4. …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  p process of exploring for oil; p g • Nigeria is globally the No. 1 gas flarer : – 40% f Ni i ’ 40% of Nigeria’s annual production is flared; l d ti i fl d – The country accounts for 12.5% of the gas flared  in the world (Source: World Bank). • The current legal and fiscal framework for the  g petroleum industry is geared towards oil  production and utilisation with very little  production and utilisation with very little focus on gas 21/09/2009 Odujinrin & Adefuluestd. 1972 4
  5. 5. … 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 phase in 1999 h • 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 Other Gas utilisation projects tili ti j t – Chevron’s EGTL, WAGP, TSGP (proposed), NGL & NGL II, Oso  Condensate • Gas pipeline infrastructure has been mainly point to point to  serve these projects 21/09/2009 Odujinrin & Adefuluestd. 1972 5
  6. 6. …the focus on export projects has however been detrimental  to the development of domestic gas utilisation… t th d l t fd ti tili ti • A demand boom is expected in domestic  p j g utilisation with projected annual growth rate  of 15‐18%; – Significant growth is projected especially in the Significant growth is projected especially in the  power sector, which is currently operating below  capacity – There is however a gap between projected  demand and supply, with supply being affected  d d d l ith l b i ff t d significantly by the lack of an interconnected grid  system and other requisite infrastructure. t d th i it i f t t 21/09/2009 Odujinrin & Adefuluestd. 1972 6
  7. 7. …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 Gas Pricing Regime Domestic Gas Supply Blueprint Bl i t Obligation Obli ti Envisages the development of: Pricing regime to be Regulation to impose: •3 Central processing differentiated across sectors: •Mandatory reserves allocation Facilities; •Strategic D St t i Domestic S t ti Sector for domestic use; f d ti •A network of gas transmission (cost of supply basis) •Compliance to be a pipelines; •Strategic Industrial Sector condition of export •LPG storage & supply (product netback basis) Facilities. •Strategic commercial sector St t i i l t (alternative fuels basis) 21/09/2009 Odujinrin & Adefuluestd. 1972 7
  8. 8. … the NGMP provides a useful foundation, however certain  questions remain unanswered… ti i d • 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? 21/09/2009 Odujinrin & Adefuluestd. 1972 8
  9. 9. …additional questions may be directed to  … • adeoye.adefulu@odujinrinadefulu.com 21/09/2009 Odujinrin & Adefuluestd. 1972 9

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