Nigeria could turn from oil to gas giant with these projects

by | November 20, 2017 2:00 am

Nigeria could transform from oil to gas giant in the mould of Qatar with the completion of three major gas projects.

These are the planned extension of the West Africa Gas Pipeline (WAGP) to Cote d’Ivoire, the East-West Offshore Gas Gathering System (EWOGGS) and the Trans Saharan Gas Pipeline.
The three projects valued at over $15 billion will create thousands of new jobs, spur domestic gas demand, create an opportunity to diversify revenue of the Nigerian government, strengthen the country’s revenue base and turn Nigeria into a dominant geopolitical player in Africa, using its gas resources, just like Russia or Qatar.
The extension of the 678-kilometre pipeline WAGP from Ghana to Cote d’Ivoire will create new markets for Nigeria’s gas to a country yearning to improve gas-to-power constraints for its people and profit from electricity exports to its neighbours.
Cote d’Ivoire is looking for more investors in the power sector, but shortages in natural gas supply have made it harder to attract new partners. It is counting on gas supplies through the WAGP to assist its plan to ramp up capacity to 4,000MW by 2020, and deliver more electricity for export to Ghana, Mali, Togo and Burkina Faso.
Currently, the existing pipeline, which runs from Nigeria to Togo, is underutilised with only 70 million standard cubic feet per day of gas (mmscf/d) available in the 150mmscf/d capacity pipeline.
With headquarters in Accra, WAGP is owned by Chevron West African Gas Pipeline Limited (36.9%); NNPC (24.9%); Shell Overseas Holdings Limited (17.9%); Takoradi Power Company Limited (16.3%), Societe Togolaise de Gaz (2%), and Societe BenGaz S.A. (2%).
The pipeline, built at the cost of $1 billion, is connected to Escravos-Lagos pipeline from Itoki area of Ogun State and goes through Agido near Badagry in Lagos, passing through 33 Nigerian communities and thereafter goes offshore to the three countries.
For EWOGGS, Dangote Industries Limited in partnership with First E&P are behind the project that aims to connect gas resources in the East with the domestic gas demand in the West through a 3 billion cubic feet per day of open-access offshore gas pipeline system.
The EWOGGS gas pipeline system will have provisions for seven offshore gas injection connection points and two offshore gas discharge connection points.
This infrastructure will allow stranded assets along its trajectory to be developed as a gas monetisation route becomes available. The project is currently in the development phase, and is scheduled to be completed next year.
“The EWOGGS pipeline project, on which $3 billion will be sunk and located near Bonny Island to Lekki Free Trade 4 zone, will unlock significant gas supply for industry and supply gas to generate 12,000 megawatts of power,” Aliko Dangote, Africa’s richest man, told a roomful of investors early this year.
Dangote further said the gas pipeline project could supply fuel to central power plants to generate electricity for households and would save over $7.5 billion for Nigeria annually, through import substitution.
The $12 billion Trans Saharan Gas Pipeline is a 4,401 kilometres natural gas project to be constructed from Warri, Delta State, Nigeria, to Algeria through Niger Republic, and from Algeria to Spain.
The proposed gas pipeline, to be built through a partnership between the NNPC and Algeria’s Sonatrach, would stretch 1,037 kilometres from Nigeria to Niger Republic border, 841 kilometres from Niger Republic to Algeria, 2,303 kilometres across Algeria and 220 kilometres from Algeria to Spain, and would have an estimated annual capacity of 30 billion cubic litres of natural gas. It is expected to be operational from 2020.
“We believe some of these projects could be quite transformative for the region, especially the West Africa region where pre-construction work on major gas transmission pipeline projects are expected to commence from 2018,” said Dolapo Oni, head of energy research at Ecobank.
Analysts at Ecobank research believe that given the largely negative long-term outlook for oil, gas offers Nigeria an opportunity to diversify government revenue and strengthen its economic base.
“We’ve seen regulatory moves in Nigeria, Ghana, Mozambique and others to support investments in gas,” Oni said.
Nigeria’s huge gas finds have been left stranded for decades to become only paper assets by a lack of vision from the government that has firm control over the petroleum sector.
Exxon Mobil, Shell and other oil explorers’ active in Nigeria since the 1960s have discovered about 182 trillion cubic feet (Tcf) proven reserves of mostly associated gas, according to Nigerian National Petroleum Corporation (NNPC) data.
Associated gas is referred to as reserves discovered while exploring and drilling for oil with industry analysts projecting that there is still about 600Tcf of yet undiscovered gas potential in total.
The proven gas reserves of 182Tcf would be worth about $577 billion, based on Friday’s spot price of $3.15 per million British Thermal Units (MMBtu), according to BusinessDay calculations.
Meanwhile the Nigerian National Petroleum Corporation (NNPC) and Chevron Nigeria Limited (CNL) have executed the second and final phase of an Alternative Financing Agreement that would increase crude oil production in the country by about 39,000 barrels per day.
The agreement, which was signed in London at the weekend, is also expected to achieve an incremental peak production of about 283 mmscfd of gas.
Maikanti Baru, Group Managing Director of the NNPC, who signed on behalf of his Corporation, said the increment to be achieved by the agreement would spread “over the remaining life of the asset (until 2045).”

According to him, the project, which is about 92 percent completed, will cost about $1.7 bn, with $780mn expected to be funded by third-party, while it will produce natural gas liquids and condensate extracted from the Sonam and Okan fields located in OML 90 and 91 in the Niger Delta.

Baru said the project would also include the completion of the Sonam non-associated gas (“NAG”) well platform and Sonam living quarters platform; drilling of seven wells in the Sonam field and the Okan 30E NAG well; as well as the completion of the 20“ x 32Km Sonam pipeline and Okan pig receiver platform and development of the associated facilities.

“As we speak now, the facilities are 100% completed while wells are 40% executed,” Baru stated.

In carrying out the project, the NNPC/CNL JV adopted a 2-staged financing approach. While Stage 1 which provided $400mn sourced from Nigerian Commercial Banks (NCBs) achieved financial close on 1st August 2017, Stage 2, (signed today), is set to provide $380mn from International Commercial Banks (ICBs).

Out of the US$780mn total financing for both stages, Chevron’s Co-lending totals US$312mn while NNPC’s portion of the total facility stands at is US$468mn.

Earlier in his remarks, Jeff Ewing Managing Director of CNL, said his company supported the Federal Government’s aspirations to sustain oil and gas production.

“We know the important role gas supply to the domestic market plays in growing power generation. We also understand government’s need to seek alternative sources to fund profitable and bankable JV Projects,” Ewing added.

It would be recalled that in August this year, two sets of alternative financing agreements on JV projects were executed between the NNPC/CNL JV (project Falcon) and the NNPC/SPDC JV (Project Santolina).

Both are aimed at boosting reserves and production in line with parts of the federal government’s aspirations for the Oil and Gas Industry.
Stakeholders say poor fiscal terms, the low government dictated gas prices and lack of infrastructure, are the major impediments to investments that would have unleashed gas and gas revenues into Nigeria’s domestic economy, helping to boost industry, jobs and growth rates.
“West Africa’s domestic electricity market is an obvious first choice consumer for the region’s gas, but electricity tariffs are not cost-reflective enough to encourage investment in gas infrastructure,” Oni said.
Some of the huge gas finds worth billions of dollars that remain undeveloped by the Nigerian government and some international oil companies who own the assets include Bosi, which is reported to contain as much as 5-7tcf of gas; the Nnwa/Doro structure reportedly carrying 6-9tcf of gas; the Ngolo trap (OPL 219) and Assa-North.
Some of the fields were discovered as far back as in the 1990s, and have been plugged after successful production test were carried out.