By Angus Djibouti
FO HEAR THE COUNTRY’ S MINISTER of energy tell it, Nigeria’s domestic gas utilization is low. “The power sector accounts for 90% of domestic consumption” says Edmund Dakouru. For the time being, that is no more than 800Million standard cubic feet per day, supplied to four thermal stations, collectively generating 2,500MW at peak. Other potential consumers of relatively large volumes of gas, such as cement manufacturers and the fertilizer industry, are only just scrambling to get up to their feet. Nigeria’s still struggling to increase the in-country demand for Liquefied Petroleum gas, targeting a measly per capita consumption of 3kg by 2008. All of which explain why the offshore market is the main destination of Nigerian gas.
But several initiatives, related to the ongoing power sector reform, the privatization of government owned companies and the emboldening of local enterprise, are giving rise to projects that will lead to projects that can only boost domestic gas use. A 150MW power plant, constructed by the River State government, was commissioned late November. Its turbines are being run with 45MMscf/d of gas from Agip’s Obrikom gas field.
The Nigerian government itself is constructing seven Thermo electric plants, under the Niger Delta Independent Power Project (NIPP), expected to consume as much as 650MMscf/d at peak capacity by 2010. Outside of the NIPP, four other government owned thermal plants are under construction in Geregu in the north of the country, Alaoji in the east, as well as Omotosho and Papalanto in the west. They will all guzzle 430MMscf/d. Pressured by the Nigerian government, major oil operators in the country-Shell, Chevron and TOTAL -are all currently engaged in various stages of construction of IPPs. Agip’s 480MW IPP has been put on stream, and its gas consumption is already accounted for in the figures stated above. ExxonMobil has been quiet on commitment to build IPP, which the Government encourages fervently, but Shell, Chevron and TOTAL have publicly stated their commitment to build power plants with total capacity of 1,828MW, expected to consume around 533MMscf/d at full throttle.
The liberalised power sector witnessed the commissioning, late 2006, of a 135MW plant to energise a new cement factory in Obajana, in Nigeria’s middlebelt. An eight inch, 90km buried gas pipeline was built from the main ObenAjaokuta gas pipeline to the site of the cement factory, supplying 60MMsf/d at take off, for firing the gas turbines as well as the kilns, with the capacity to grow to 90MMscf/d when the entire cement plant is completed.
The same gas entity, the Nigerian Gas Company, will be supplying an initial 48MMscf/d to Notore Chemicals, which recently bought over the state owned fertilizer company, the National Fertiliser Company. It would be the first time ever that a fertiliser company in Nigeria would be requiring natural gas. Under Notore’s 20 year
contract, the initial 48 MMscf per day is expected to rise to 143 MMscf per day to support Notore’s aggressive expansion programme. Notore hopes to produce 1,700 tonnes per day of urea on commencement in March 2007, increasing to 3500 tonnes per of urea by 2010 under a second project phase. The 20 year contract will cater for the first two phases of Notore’s urea production, but the company is looking ahead to a third project phase with the construction of a large scale plant which will take its urea production capacity up to 6,500 tonnes per day.
In Lagos, Shell is expected to supply gas to Shoreline Power, a Nigerian company planning to build a 40MW power plant in Agbara, in the west of the country. Shoreline Power acquired the ABB switchgear manufacturing facility in Lagos and is working on purchase of the ABB manufacturing facility and this is its first project outside of those it inherited. Shell is also supplying gas to a proposed power plant to be cited near the Aba industrial city in eastern Nigeria, but the project too is still at formative stage. Shell Nigeria gas says it would be supplying up to 25mscf to the IPP and other industrial customers around Ossisioma and gas supply would be extended to Owerrinta and other nearby industrial facilities in the near future.
What’s significant about these activities is that they may be small individually, but they are all coming together at the same time.
Initial oil production had associated gas which was flared, since the production areas in the Niger Delta were too remote from nascent industrial areas in the western region. Earliest use of gas in the sixties were solely for power generation while the first gas utilization for a petrochemical plant was at Eleme (now Indorama) Petrochemical in 1993. The first gas export was in the form of LPG from the Escravos Gas Project in 1997. An exponential increase in gas export was achieved in 1999 with the commissioning of the Nigerian LNG at Bonny which has been expanded from one to five trains with a sixth under construction. The success of the NLNG Bonny in response to global energy demand has resulted in the planned establishment of two other LNG projects to be sited at Brass and Olokola. These two LNG projects are expected to be operational in 2009. The 11 power plants currently under construction by the Nigerian government as well as those being built by the oil and gas operators are expected to add 7,250MW to the national grid. The resulting upsurge in the demand for gas for new projects has thrown up challenges that Dakouru, the energy minister, considers urgent, “in order to enable monetization of gas assets match the revenue accruing from oil by 2010, based on our projections”. The challenges include: Gas gathering infrastructure (backbone network in both onshore offshore with looping to enable switching of supplies in the pipeline network to where gas is mostly required)
- Fair pricing mechanism
- Determining actual gas reserves through collating dispersed gas data from all operators
- Effective gas policy sustained by an effective regulatory agency to administer the sector
- Securing investment from international investors to reduce dependence on projects from JV operators
- Creating avenues for involvement in the gas chain
- Investment in the development of new gas technology in order to be in the vanguard of cutting edge technology.
