The document discusses Nigeria's growing natural gas market and its Gas Master Plan. Nigeria has significant natural gas reserves of 182 TCF, the 7th largest in the world, however gas development has been haphazard with a focus on export projects over domestic use. The Gas Master Plan aims to develop gas infrastructure and pricing to boost domestic supply and utilization through obligations on reserves, but questions remain around infrastructure funding, domestic market obligations, the flare-down target, and legal framework implementation.

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. 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.
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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
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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
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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
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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
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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)
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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?
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9. …additional questions may be directed to
…
• adeoye.adefulu@odujinrinadefulu.com
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