Gas Operations

DISCOVERY OF GAS

In the beginning, gas production was incidental to oil discovery. Following the discovery of oil at Oloibiri in 1956, the facilities that were built to produce oil did not include gas processing and export units. This lack of utilization plan resulted in the flaring of most of the Associated Gas (AG) produced except for that used as fuel.

GAS COMMERCIALIZATION PROGRAMME

Gas ccommercialisation and utilisation efforts began in earnest with the promulgation of "Associated Gas Framework Agreement of 1991. This agreement provided fiscal incentives to improve the economics of gas utilisation projects and was aimed at reducing or eliminating flaring by allowing the Oil companies to offset their capital expenditures in gas projects from oil revenue.

Initial gas commercialisation programmes focused on the recovery of low and medium pressure gas from oil separators that were hitherto flared. Up till 1999 when the Nigeria Liquefied Natural Gas (NLNG) plant started operations, over 2.8 Bscfd or 74% of associated gas produced in the course of oil production was flared.

In recent times, conscious efforts have been made to develop Non-Associated Gas (NAG) wells to ensure reliability of supply as AG production fluctuates with oil production and cannot be used to guarantee gas supply commitments.  This has caused gas utilisation in Nigeria to grow over the years from about 1.7 Bscfd in 1995 to 6.4 Bscfd in 2017. Within the same period, routine gas flaring reduced from 2.8 Bscfd in 1995 (74 % of total gas production) to 0.7 Bscfd in 2017 (10 % of total gas production).

So far, most of the progress made in the utilisation of Nigeria's gas resource has been largely through conversion to Liquefied Natural Gas (LNG) for export. As a result, growth in gas utilisation has not had significant impact on the domestic economy. This is obvious from the 2017 gas disposal statistics which shows that only 10% of gas produced was utilised domestically for power and industry, while 45% was exported as LNG and NGLs, 35% re-injected and about 10% was flared.

GAS UTILISATION PROJECTS

In order to diversify its revenue through gas and reduce the huge wastage of valuable resource as well as the degradation of the environment arising from the flaring of gas, the Nigerian Government, through the Nigerian National Petroleum Corporation (NNPC) in partnership with various Oil companies have implemented a number of laudable natural gas utilisation projects, amongst which are:

Gas-to-Liquid (GTL) Projects

GTL is a refining process that converts natural gas or other gaseous hydrocarbons into longer-chain hydrocarbons such as gasoline or diesel fuel by direct conversion or by using synthetic gas (syngas) as an intermediate through the Fisher Tropsch process. 

The first project in Nigeria to utilise the GTL technology is the Escravos Gas-to-Liquid (EGTL) plant which is jointly owned by Chevron and NNPC under an equity ratio of 75% and 25% respectively.

EGTL is a two-train plant designed to convert 330 MMscfd of natural gas into syngas. The gas is then chemically reacted over a catalyst to produce  34,000 barrels per day equivalent of environmentally-friendly products. EGTL plant commenced beneficial operation in July 2014 and has capacity to produce 22,100 bpd of GTL diesel, 10,200 bpd of Naphtha and about 1,000 bpd of LPG.

Liquefied Natural Gas (LNG) Projects

LNG is natural gas (predominantly methane with some mixture of ethane) that has been condensed into liquid, at close to atmospheric pressure, by cooling it to approximately -162oC. The liquefaction process involves removal of certain components such as dust, acid gases, helium, water, and heavy hydrocarbon. LNG only occupies about 1/600th the volume of natural gas in the gaseous state (at standard conditions of temperature and pressure) and this makes it easy to store and transport

NLNG operates a six(6)-train LNG plant which can produce 22 Million Tonnes Per Annum (MTPA) of LNG, and 5 MTPA of NGLs (LPG and Condensate) from 3.5 Billion standard cubic feet per day (Bscfd) of natural gas intake. It is owned by NNPC (49%); Shell (25.6%); Total (15%) and Eni (10.4%). 

NLNG currently supplies about 40% of the annual Domestic Cooking Gas or Liquefied Petroleum Gas (LPG) consumption requirement.

NLNG Gas Supplier Projects

Feed gas to NLNG trains 1-6 plant comes from various gas producers, namely Shell, Eni and Total. Most of these facilities were purposely built to supply gas to NLNG facilities and they include the following amongst others:

  • 1.25 Bscfd Gbaran Ubie Gas Plant (Shell)
  • 1.04 Bscfd Soku Gas Plant (Shell)
  • 0.21 Bscfd Bonga FPSO ( Shell Exploration - PSC)
  • 0.53 Bscfd Obite Gas Plant (Total)
  • 0.45 Bscfd Amenam Production Platform (Total )
  • 0.32 Bscfd Akpo FPSO (Total Upstream -PSC)
  • 1.07 Bscfd Obiafu Obrikom Gas Plant ( ENI)

Gas-to-Power Projects

One of the options adopted for gas monetization in Nigeria is Gas to Power (GTP). GTP enables the generation of power by burning natural gas in Gas Turbine Generators (GTGs), either in simple or combined-cycle configurations. Simple-cycle plants use GTGs without heat recovery, while Combined-cycle plants use GTGs and recover the waste heat from their exhaust-gas streams with heat-recovery steam generators to make steam to run steam turbine generators, thus producing additional power. NNPC in partnership with Shell and ENI JVs have separately implemented the construction of two GTPs, namely Afam VI and Okpai Independent Power Plants respectively.

Okpai Independent Power Plant

The Okpai power plant is jointly owned by NNPC (60%) and Eni (40%). It is one aspect of the opportunity for harnessing Nigeria's natural gas resource. Okpai IPP is based on a combined cycle technology. It has an installed capacity of 480 MW and consumed 120 MMscfd of gas. The plant has been in operation since 2005.

Afam VI Independent Power Plant

SPDC JV built Afam VI power plant in 2008 with an installed capacity of 630MW. It is the second largest thermal power plant in Nigerian and utilises combined cycle gas turbine technology.

Natural Gas Liquid (NGL) Projects

Nigeria, through Chevron, Mobil and Eni and other companies has NGL Extraction Plants which produce mixed LPG, Propane, Butane, Natural Gas Liquids (NGLs) and Condensates for export. Some of the NGL facilities include:

Escravos Gas Plant (EGP)

EGP is a two-train gas processing plant with a combined rich gas processing capacity of 680 MMscfd and produces mixed LPG for export and Lean gas for EGTL and Domestic Gas market. The first and second trains were built in 1997 and 2010 respectively.

Oso NGL Plant

Mobil JV operates a two-train 550 MMscfd capacity NGL plant located at its Oso field in the South Eastern part of Nigeria. It started production for export in 1998. The NGLs produced from this facility is piped to Bonny River Terminal for fractionation into propane and butane for export.


GAS PIPELINE PROJECTS

Escravos Lagos Pipeline System (ELPS)

ELPS is the domestic gas supply pipeline network servicing the Western part of Nigeria. It was built by the NNPC in 1989 and comprises mainly 24/36 inch diameter pipeline segments with a total length of 514km. Expansion works are in progress to double the ELPS capacity from 1,100MMscfd to 2,200MMscfd.  ELPS provides domestic gas to power plants, local industries and the West Africa Gas Pipeline.

West African Gas Pipeline (WAGP)

WAGP comprises 20/30 inch diameter pipeline segments with a total length of 678km and a capacity of 180 Billion cubic feet (Bcf) of natural gas per year. It supplies gas to some ECOWAS countries including Ghana, Benin and Togo from two Nigerian gas producers, namely Chevron and Shell.  The pipeline is owned by West African Gas Pipeline Company Limited (WAGPCo), with equity distribution of Chevron (36.7%), NNPC (25%), Shell (18%) VRA (16.3%), SoToGaz (2%), SoBeGaz (2%).

GAS FLARE-OUT POLICIES

Routine gas flaring has been an issue since the first oil well was drilled in 1956. This problem existed for a long time in Nigeria due to lack of enabling laws and fiscal frameworks for the commercialization of natural gas. Though the Petroleum act of 1962 and Decree 51 provided that all Licensees shall submit a feasibility study for the utilisation of natural gas , majority of the International Oil Companies (IOCs) did not   implement   any   gas   utilisation   project because it was not commercially attractive.  

In view of this development, the government of Nigeria over the years issued various regulations and policies geared towards the elimination of routine gas flaring. The Associated Gas Re-injection Decree 99 of 1979 stipulated a flare-out deadline of January 1, 1980. However, this was not effective as it permitted the Minister of Petroleum to grant exceptions (which all the operating companies got). The decree was amended in 1985, 1988, 1992, and 1999 to provide for the payment of flare penalty put at N10/Mscf.

In 1991, the Associated Gas Framework Agreement (AGFA) which provided fiscal incentives to improve the economics of gas utilisation project was developed to encourage implementation of gas utilisation projects. This agreement allowed the IOCs to offset their capital cost for gas projects from oil revenues. This agreement encouraged the developments of many gas projects, including most of the projects mentioned above. Prior to AGFA regime, investment in gas was not considered attractive by the IOCs as it required a lot more funds and the products have lower market value compared to crude oil.

Gas Flare out - Forward Plan

The current aspiration of government is to ensure the implementation of zero routine gas flaring by the year 2020. Consequently, the 2017 National Gas Policy proposes a sliding scale gas flare penalty for existing brown fields; while all new oil development projects must have integrated gas utilisation plans.

Today, there are over 80 gas processing facilities across the country with a combined gas production capacity of about 9 Bscfd. Hence, routine gas flaring from AG facilities has been significantly reduced to less than 10% in 2017.

Some the on-going Integrated Oil and Gas Development Projects include the following:

Forcados Yokri Integrated Project

This project involves the installation of flow stations and gas plant, upgrade of power plants, construction of pipelines and the drilling/ completion of wells. The project will supply treated gas to the Domestic market and act as a hub for other fields' gas export. The project aims to re-direct the export gas to domestic market via the Escravos- Lagos Pipeline System (ELPS).

Southern Swamp Integrated Oil and Gas Project

This project seeks to provide gas processing and export capacity of 160 MMScfd at Tunu and supply to the Domestic gas network (ELPS) by 2018. It will ensure the elimination of routine flaring of Associated Gas and harness it for domestic supply of up to 100 MMscfd.

Assa North/Ohaji South (AN-OH) Project

The project seeks to develop 4.3Tcf of NAG resource and 215 MMbbls of Condensates from Shell's Assa North field (OML 21) and Seplat's JV's Ohaji South field (OML 53).  It involves the installation of a 2 x 300MMscfd gas processing facility and a 120 Mbpd liquid handling facility to deliver 500 MMscfd to the Domestic Market by 2019. The gas will be supplied through the OB/OB - Oben (OB-3) pipeline.

The Assa North / Ohaji South is a Unit Asset that straddles between two concessions – OML-21 owned by SPDC Joint Venture and OML53 owned by the Seplat Joint Venture. The asset Unitization is based on a 50% - 50% Tract Participation.

GAS INVESTMENT OPPORTUNITIES

Nigeria has the 9th largest proven natural gas reserve of over 192 trillion cubic feet (DPR, 2016), made up of 51% Associated Gas (AG) and 49% Non-Associated Gas (NAG). However, Nigeria ranks 28th in terms of natural gas production.  This simply means that we are yet to fully harness the benefits derivable from our natural gas resource.

The Nigerian government since 2008 has been making concerted efforts to develop the domestic gas sector through special budgetary provisions in line with the objectives of the National Gas Master Plan. Hence, from 2008 to 2017, over US$12 billion was provided under the DomGas/JV IPP Ring-fenced Budget to develop both upstream and midstream gas supply and processing facilities.

The current aspiration of government is to increase domestic gas monetization to  5 Bscfd by 2020 and expand pipelines. Consequently, there is still a lot of room for investment in areas like the construction of Central Processing Facilities, Independent Power Plants, Natural Gas Liquid Recovery Plants, Methanol Plants, Fertilizer Plants, and Domestic gas supply to local industries.

Domestic Gas market

The Nigerian domestic gas market is regulated and most of the domestic gas supply pipelines are owned by NNPC. However, these facilities are inadequate for effective distribution of gas nation-wide. Consequently, NNPC in joint venture with some investors is developing the following pipeline extension projects, amongst others:

  • Aba-Owerri-Nnewi-Onitsha Pipeline Project;
  • Calabar-Ajaokuta Pipeline (CAP) Project;
  • Ajaokuta-Kaduna-Kano (AKK) Pipeline Project;
  • ELP-Ibadan-Jebba Pipeline Project;
  • Obiafu-Obrikom-Oben (OB3) Pipeline Project;
  • Expansion of ELP Phase 2 Project;
  • Oso Platform to QIT Pipeline Project;
  • Erha / Bosi Pipeline Project


Challenges 

Gas development is an enormous and challenging business that requires a holistic approach, from Exploration to Production, Processing and Marketing of the Products. This is so because of the challenge of gas storage and distribution to the end user. Unlike oil development, you need to first establish the market for the gas before you can go ahead to carry out the development. Hence the sales and transportation contracts have to be put in place and this requires time and huge capital resources.

Forward Plan

Due to the huge capital requirements, domestic gas development projects are often said to be uneconomical because their economics are based on only tangible returns on the investment. This has been a major hindrance to accelerated development of the domestic gas sector in Nigeria. As a way forward, the economics of Gas projects should also factor in the intangible benefits: for instance, implementation of flare-out solutions that will provide a national domestic gas supply will help to mitigate the problems of deforestation, environmental degradation and reduction of global warming, amongst others. The gas based industries will create jobs for our teeming youth which will have a multiplier effect on the economy and reduction in crime rate.

Gas development should therefore be seen as a corporate social responsibility by both the Government and the Oil companies.



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