All articles in the Gas Monetization Section:


Mozambique: Shared Value, Local Partnerships and The Future of Work

By Mario Fernades, Deloitte

Two LNG projects are currently under construction in Mozambique.

Several others are imminent.

The proposed ‘LNG System’ in the country will effectively be rolled out in four stages.

The Coral FLNG, operated by ENI, sanctioned in 2017, will produce about 3.4Million tonnes per annum by 2024.

The TOTAL operated Mozambique LNG in Area 1, sanctioned mid-2019, will be producing 12.8MMTPA  by 2026.

Final Investment Decisions FID has been delayed for the ExxonMobil led Area 4, but the project is aiming to produce about 15.2Million tonnes per annum.

The projects for Phase 2 trains have not yet been decided, but the operators are starting to think about them and they could potentially add another 30Million tonnes per annum, with FID probably around about 2024. So, of what is potentially on the cards and being planned is about 31Million tonnes per annum. This is enormous. This could make Mozambique the fourth largest in the world. Qatar which is the largest, is producing about 77Million tonnes per annum and it took them 14 years and it brought tremendous economic benefits for the country. The EPC contractors for Area 1 are largely led by Saipem, Chiyoda and McDermott.  Area 4 EPCs include TechniqFMC, JGC and Fluor.

Opportunities for Local Investors and Their Partners-, TOTAL for Area 1 is targeting to spend about $2.5Billion for Mozambican registered or owned companies. It allows for foreign investors who want to come into the country and invest with local players or establish operations in the country. Area 1 project has already spent about $850Million over the last five years. What’s important are the priority industries that investors could look forward to considering.

Some of the lower values but highly mature markets where you’ll see some of the local players in Mozambique get involved because it doesn’t have a lot of technical complexities are areas like food and water supply, accounting services and general consulting. Where we believe this need to evolve to and it’s the opportunities for foreign direct investments, is higher value and more mature investments including Civil construction services, transport and logistics, mechanical and electrical instrumentation, IT Systems, Pipes, Vessels, Metallurgy and welding activities. This is where the real value is going to be developed over the next few years and represents significant investment opportunities. Given the low maturity of some of the industries in the country, you’d probably see in the future, a lot of collaboration between the government, operators in EPCs, local companies, the business associations in Mozambique, as well as any foreign investors who are interested in investing in some of these value chains. Key value chains and opportunities like civil construction, are not well understood and there will be a need to identify the gaps and opportunities for business out there, both local and foreign. Another thing is what is being done currently by these big operators and the EPC’s to close the gap on the skills and the local business in Mozambique. There are plans to establish the Enterprise Development Centres (EDCs) where the objective is to build capabilities, expose these local companies to international OEMs and expertise promote collaboration and certification which is a big requirement from a lot of these big capital projects, that these companies have the right levels of certification in order to provide services. Critical to sustaining the value and the expectation that everyone has of these projects, is to drive the concept of shared value. This is building on lessons from the past in the country. The concept of “Shared value” is how can both shareholders who looking for a financial return on their investments, government stakeholders are looking for a return in the country and citizens who live in the remote areas of where this gas was found or in the country itself, achieve the kind of benefits that they’re looking for. It is complex to match and balance these expectations. Very often we tend to see that companies tend to do the “pickbox compliance” approach but we believe you have to go beyond some of these. It’s important that these companies, governments and so forth create a platform in which collaboration can happen. The government creates the right policy around employment and procurement to ensure that companies are incentivized to invest in local procurement and so forth.

From the operators’ perspectives and the companies building the infrastructure, it’s important to be top of mind to be relevant to these communities and to really develop processes to effectively measure the social returns that these stakeholders are looking for. It is easy to measure the financial return, but quite another thing to measure the social economic return in a holistic manner.

The Future of Work -Challenges like COVID-19 are really disrupting the way projects are executed, and are forcing companies to plan on how they would operate in this new normal. Companies need to rethink how work would change in this new normal. For example, how do you enable effective remote supervision? It’s one thing to work in a desktop type job, it’s quite another to build the infrastructure of the magnitude that we’re talking. The same restrictions that we’re all facing in challenges like COVID-19 are also being felt in large projects like this. How do you define new roles and responsibilities for the workforce that is there? Probably you don’t need to have as many people on site and you have to adopt concepts of social distancing, how do you redefine these roles? What tools and technologies will you need to enable this kind of new reality of the future of work? Companies will have to decide what tools and policies, what labour policies will be put in place in order to enable these future work teams? Lastly, I want to talk with you about innovation. We think that digital is going to be a key enabler here. Concepts that we all thought were very futuristic are now a reality and being thought through as real tools to ensure that the project continues to be delivered on budget and as scheduled. Another thing we’re trying to see as well is a lot of these safety analytics and how persons are wearing safety gear, helmets and video imaging which detects if a person is wearing protective gear or not, and then take corrective action. Another big innovation area that we’re starting to see is around “Sentiment Analysis”, which is all about how to use technology to collect and measure the pulse of your workforce of your communities that are impacted by the project and quickly identify and innovate with them to understand what their needs are so that you can quickly adapt your actions to that. Sentiment Analysis is all about measuring the pulse of your stakeholders.

Mario Fernades- Partner at Deloitte Consulting, based in Mozambique, heading up the practice there. Deloitte offers Consulting, Risk Advisory, Taxation, Audit & Assurance and Green Dot(Future of Energy and Goods). Fernades spoke at an Africa Oil Week produced webinar panel including Paul Eardley-Taylor, head of Oil and Gas Southern Africa, Standard Bank,and Trey (Lyman) Armstrong, MD, Project and Structured Finance, US EXIM Bank. It was moderated by Dexter Wang, Asia Market Engagement Partner at S&P Global Platts. This is an abridged version of the conversation, monitored in Lagos, Nigeria and transcribed by Foluso Ogunsan and Akpelu Paul Kelechi.

 


Egypt to Triple Natural Gas Stations, as it Converts 1.8Million Cars

The Egyptian government plans to triple the number of natural gas filling stations in the country from 190 to 556 in 2020.

It is part of the five-year national programme, announced earlier this year, to convert 1.8Million cars to run on both natural gas and gasoline.

Ultimately, President Abdel Fatah el-Sisi has said, Vehice licencing will be conditional on cars being equipped with natural gas engines.

Through the initiative, owners of vehicles over 20 years old will receive low interest loans through MSME Development Agency to purchase new dual-fueled vehicle. Owners of newer vehicles can access zero interest finance to outfit them with new engines.

A key player in the government’s implementation of this programme is the Egyptian International Gas Technology (Gastec), a joint stock company affiliated to the Egyptian Ministry of Petroleum, established on June 1996 pursuant to the Egyptian Investment Law # 8 of year 1997 on the Investment Guarantees and incentives with 60% participation of Egyptian companies and 40% of ENI International B.V.

Gastec runs 100 out of the 190 natural gas filling stations currently in the country. It plans to open 23 new natural gas filling stations and five integrated natural gas and gasoline stations in 2020.

Manufacturers in the country have shown interest in the scheme. Toyota agreed to manufacture 240,000 natural gas-powered minibuses. Volkswagen said it was keen to produce natural gas cars locally. 11 global auto companies were approached by The Arab Organisation for industrialization to partner on replacing diesel buses with natural gas-powered vehicles.

The national conversion project follows up on a 2009 scheme that sought to replace 70,000 old taxicabs with zero- interest loan new vehicles fitted with dual fuel engines

Although the programme fits into the standard Egyptian government’s effort to utilize natural gas in the country, officials say that this scheme is targeted at ameliorating the cost of living. Whereas a litter of 80-octane gasoline, (the cheapest) fetches $0.39, the same volume of natural gas can be purchased for $0.21, at any of Egypt’s filling stations.


AKK: Why the Viability is Fuzzy and Delivery Timeline in Doubt

By Toyin Akinosho, Publisher Africa Oil+Gas Report

At 614 kilometres long, and running through four states, the Ajaokuta -Kaduna-Kano (AKK) National Gas Pipeline in Nigeria is the kind of infrastructure project that is described in the country’s Economic Growth Plan as transformational.

If the theory holds true that gas utilisation projects have a way of following the availability of the core trunk lines. and that every $1 spent investing in gas development and infrastructure will translate to a $3 increase in GDP, we should applaud the inauguration of AKK’s construction.

What has invited so much scrutiny is the Nigerian government’s decision to provide Sovereign Guarantees for the loan taken to construct the Project.

It is so, in part because, this is the first of several gas pipeline projects by NNPC that would come with a loan tag. The state hydrocarbon company constructed the Escravos Lagos Pipeline System and the Oben Ajaokuta gas pipeline from its balance sheet. NNPC has not disclosed that it is borrowing money to construct the 130km, 48 inch Oben-Obiafu /Obrikom pipeline, the biggest such infrastructure in the country.

But with the AKK project, the cash strapped petrostate is staking money from its depleted treasury to shoulder as much as $2.1Billion, net of interest, should there be the most extreme default in paying the loan from The Bank of China and Sinosure, a Chinese export and credit insurance corporation.

The timing and prioritization of the AKK project, in the context of other urgent deliverables in the Nigerian gas grid, the opportunity deliberately thrown away for private sector investment in our infrastructure queue as well as NNPC’s poor record of project delivery, are other issues that make the state’s financing of the AKK quite concerning.

Lenders, as a rule, call for offtake agreements as well as evidence of ability to pay, as preconditions for loans to gas projects.

The NNPC, promoter of this wide diameter (40 inch) line, does not have any Gas Sales Agreement with any factory, manufacturer, or plant, for gas from the project. Instead, it has pledged its entire receivables from gas flows from the existing pipelines today (Escravos Lagos Pipeline System ELPS, Oben-Ajaokuta Pipeline and West Africa Gas Pipeline WAGP) and used that to pledge in terms of the tariff. The tariff-receiving companies are the two gas subsidiaries of the NNPC: Nigerian Gas Processing and Transportation Company and the Nigerian Gas Marketing Company.

NNPC has admitted, in public, that generating the revenue to pay the loan is a tall order. Indeed, the need to convince the lenders it could raise financing for the project, hastened the government’s decision to launch the Gas Transmission Network Code, which takes off in mid-August 2020.

“We didn’t want to burden the National Treasury with funding the construction of the AKK pipeline”, Yussuf Usman, the corporation’s Chief Operating Officer Gas and Power, told a panel session at the Sub Sahara Africa International Petroleum Conference (SAIPEC) in Lagos in late February 2020.  “But when we went out to financiers, and told them we would guarantee the loan with payment from the gas in the various domestic gas transmission pipelines, they asked for volumes”, he explained. “The volumes did not add up”, he said.  “We knew we had to launch the Gas Network Code so that there would be assured volumes and they can be determined”.

President Muhammadu Buhari declares that the pipeline would provide gas for the generation of power and for gas-based industries to facilitate the development of new industries. The president promises that AKK would “ensure the revival of moribund industries along transit towns in Kogi, Abuja, Niger, Kaduna and Kano states”.

For one, the power plant Mr. Buhari refers to, is still on the drawing board.  It was only last February that NNPC received a USAID grant for its feasibility studies.

For another, moribund industries along the AKK corridor notwithstanding, the anticipated industrialization will take time to fledge, but the loan repayment will start being called before any sizeable industrial project takes hold.

Supporters of the AKK project stretch the argument when they compare this project with the ELPS, which some recall, in the original plan, was proposed to be a 12 inch pipeline. “NNPC in its wisdom decided to build a 36” pipeline”, these supporters contend. “As of ten years ago, that capacity, 1Billion standard cubic feet per day (1Bscf/d), was already filled up because gas is about availability”, they enthuse. “Today, we are building a loop around ELPS to double the capacity”, they cheer.

These “facts” have hidden one uncomfortable truth: the ELPS never achieves 100% uptime, so the 1Bscf/d, under NNPC management, has been a façade.

35 years ago, as a young energy reporter for The Guardian of Lagos, I was at the commissioning of the 1,300MW Egbin Power Station in Ikorodu, in the north of Lagos. Tam David West, who was then the Nigerian Minister of Power, said that the nation was anticipating the construction of the ELPS to deliver the gas that would replace the High Pour Fuel Oil, that was being used to fire the turbines at Egbin at the time.

When the ELPS was commissioned 14 years later, the market was ready with, apart from the largest power plant in the country, industrial enterprises along the Ikeja-Ikorodu corridor that were offtakers of natural gas.

The AKK is unlikely to be delivering, in the near future, to that sort of market, so its funding should have been differently thought through. And a key question is why NNPC is insistent on throwing itself at this project which started with the Korea National Oil Company proposing to execute-net of Nigerian national treasury-as part of their taking up two deepwater exploration acreages?.

NNPC, as project manager and executor, is itself a poor advertising for the timeous delivery of any project. It has been constructing two similar grid length gas pipelines, planned for four year execution, for over eight years without visible indication of their completion. It has been looping (constructing a parallel line of the same length) the Escravos Lagos Pipeline System since 2012.  It has also been constructing the Obiafu-Obrikom Oben (OB3) pipeline since 2012. There is no clear line of sight to completion of these projects. And in none of its reports has there been indication of what the delays on the projects mean in terms of haemorraging value.

These two projects are more urgent, in respect of immediate inflow of investment and cash to the Nigerian economy, than the AKK.

Take a few examples.

The ELPS is the primary ferry from the biggest gas processing plants, aimed at the domestic market. These processing plants; Chevron operated Escravos Gas Processing Plant, Seplat operated Oben Gas Plant, and NPDC operated, with NDWestern, Utorogu and Ughelli plants, have the combined capacity to deliver 1.3Billlion standard cubic feet of gas per day, but persistent downtime on the ELPS ensures the gas volumes cannot fully be pumped into this artery and our power plants, those of them that could offtake, don’t receive what they could. So, while NNPC claims it is doubling the capacity of the ELPS, neither the “original” line, nor the “new” line under construction, combined, is delivering anywhere near 80% of a single line (800MMscf/d).

The Dangote Fertiliser gas offtake agreement (75MMscf/d) with Chevron depends on the flip flop of the ELPS uptime, so does Axxela Ltd’s plan to export gas (30MMscf/d) from the western Niger Delta to Togo. Axxela is even working with NNPC to see how they can complete the looping project. This is the scale of incapacity of a company that wants to “own and operate” one more transmission gas pipeline!

The OB3 gas line is the first attempt to turn our gas transmission lines to a grid. It would deliver gas from the rich reservoirs in the east to the captive markets in the west. It is also the source of the gas that will be pumped into the AKK, because the AKK is to originate from Ajaokuta, which is fed from Oben, the terminal point of the OB3. As it is, NNPC has pushed the completion date of OB3 several times over its eight-year construction span.

A $1+Billion gas production and distribution project that depends on the OB3 is the 600MMscf/d ANOH facility, led by Shell and Seplat. Whereas Shell wants to supply the gas to factories in eastern Nigeria, Seplat wants to pump the molecules into the line, straight to Oben in Edo State, for its offtakers in the west of Nigeria. NNPC even forced itself to construct the short gas lines from the processing plants to the OB3 trunk line. These companies went ahead and took final investment decisions on the midstream part of the project, but are they likely to be idly chewing their thumbs after their plants are completed and they can’t evacuate the gas? Last time I checked; they were scrambling for alternative routes to transport the molecules.

NNPC knows what to do. But if you ask the apparatchiks in the company’s towers to spinoff the Nigerian Gas Transmission Company and the Nigerian Gas Marketing Company and sell hefty stakes to the private sector, they will kick and kick, just as they’ve done with the refineries, holding on to zero value. There is enough gas transportation infrastructure to form a very decent balance sheet for a gas transportation company run efficiently by the private sector. But who cares?


US EXIM Bank Provides the Largest Financing for Moza LNG, with $4.7Billion

United States’ Export Import (EXIM) bank says it has initiated “the process of providing $4.7Billion in financing a major integrated liquefied natural gas (LNG) project in Mozambique”.

The money is the largest committed by any lender to the 13 Million Tonnes Per Annum project, led by French major TOTAL.

The Mozambique LNG project will cost $20Billion to develop, but TOTAL is borrowing $14.9Billion from 28 financiers.

EXIM bank is one of eight Export Credit Agencies financing the project, the priciest hydrocarbon development on the continent. Other ECAs, aprt from US EXIM Bank, are: Japan Bank for International Corporation (JBIC), Nippon Export and Investment Insurance (NEXI), UK Export Finance (UKEF), Servizi Assicurativi del Commercio Estero of Italy (SACE), Export Credit Insurance Corporation of South Africa (ECIC), Atradius Dutch State Business (Atradius), Export-Import Bank of Thailand (EXIM Thailand)”,

There are also 19 commercial banks involved, of which Standard Bank of South Africa, is leading with $485Million loan. The Africa Development Bank, which is neither an ECA nor a commercial bank, is putting $4000Million in financing.

US EXIM bank’s involvement is primarily to support American contractors involved in the project. It says its funding “will support an estimated 16,700 American jobs over the five-year construction period”. Those jobs are at 68 suppliers located in eight states — Florida, Georgia, Louisiana, New York, Oklahoma, Pennsylvania, Tennessee, and Texas — and the District of Columbia. Follow-on sales are expected to support thousands of additional jobs across the United States.

“As the Mozambique LNG project marks further milestones, we want to underscore EXIM’s continuing commitment to this project,” said EXIM President and Chairman Kimberly A. Reed. “This project continues to serve as a great example of how a revitalized EXIM can help ‘Made in the USA’ products and services compete in a fierce global marketplace and counter competition from countries like China and Russia. It also reinforces EXIM’s strong support for President Trump’s Prosper Africa initiative to unlock opportunities for U.S. businesses in Africa. This authorization will stand as a reminder to companies across the board in all industries: EXIM is open, and we want to work with you to help fill financing gaps in the market to support our great American workers and exporters.”

A US EXIM Bank press release says that the transaction supports the Trump Administration’s Prosper Africa Initiative, “a whole-of-government economic effort to substantially increase two-way trade and investment between the United States and Africa.”

Launched in December 2018, Prosper Africa brings together the resources of more than 15 U.S. government agencies, including EXIM, to connect U.S. and African businesses with new buyers, suppliers, and investment opportunities.

 


TOTAL Signs $15Billion Mozambique LNG Financing with Lenders

French major TOTAL has announced the signing of a $14.9Billion senior debt financing agreement for Mozambique LNG.

The project is the country’s first onshore LNG development. It includes the development of the Golfinho and Atum natural gas fields located in Offshore Area 1 concession and the construction of a two-train liquefaction plant with a total capacity of 13.1 million tons per annum.

Mozambique LNG represents a total post-FID investment of $20Billion. The project financing amounts to $14.9Billion, the biggest ever in Africa, and includes direct and covered loans from 8 Export Credit Agencies (ECAs), 19 commercial bank facilities, and a loan from the African Development Bank.

“The ECAs participating in the financing include Export Import Bank of the United-States (US-Exim), Japan Bank for International Corporation (JBIC), Nippon Export and Investment Insurance (NEXI), UK Export Finance (UKEF), Servizi Assicurativi del Commercio Estero of Italy (SACE), Export Credit Insurance Corporation of South Africa (ECIC), Atradius Dutch State Business (Atradius), Export-Import Bank of Thailand (EXIM Thailand)”, TOTAL says in a statement.

 


Where is the Gas Market, in Africa Itself?

Egypt couldn’t get enough natural gas, before COVID-19 intruded, to fire its power turbines, feed its methanol plants and heat the boilers in its industries.

A 30 Trillion cubic feet (30Tcf) discovery, made five years ago, in 2,000 metres of water, is already producing over 2Billion cubic feet a day for the local economy.

That kind of absorptive capacity is not comparable with anywhere else in Africa.

South Africa is a potentially large market for gas, but we won’t find out until the country, boldly takes actions, to invite inward investment that allow natural gas inflow into the economy.

That not many countries in Africa can consume even midsize volumes of these light hydrocarbon molecules, is the reason why the continent’s highly populated countries are forever scurrying around the globe looking to export either by LNG or piped gas.

We’ve been tracking the domestic gas markets all over Africa for over five years and what we get is creeping increases, not a surge.

Construction is underway at the 13Million Tonnes per Annum (MMMTPA) Mozambican LNG, the 8MMTPA Nigerian LNG Train 7 and the 600MMscf/d ANOH gas projects, because the Financial Investment Decisions were taken on these projects last year.

We are inclined to single out the ANOH project for salutation because it is dedicated to the domestic market, but pulling off the deals for those two large LNG projects are also, in themselves, the stuff of true grit.

Let us take a survey of what’s exciting in African Gas. Click here.

The Africa Oil+Gas Report provides peerless perspective and insight on policy issues and technical innovation, backgrounded by high quality energy intelligence to guide everyone from the prospecting E&P company to the project finance institution. Published by the Festac News Press Limited since November 2001, AOGR is a paid subscription based monthly, hardcopy and pdf (e-copy) publication delivered around the world.

Its website remains www.africaoilgasreport.com and the contact email address is info@africaoilgasreport.com . Contact telephone numbers in our West African regional headquarters in Lagos are +2348130733523, +2347062420127, +2348036525979 and +2348023902519.

 


Natural Gas at a Turning Point: Notes From Gas Cartel Workshop

Increased cooperation between producers and buyers, digitalisation across the value-chain, investment in infrastructure and research and development in innovative technologies will play a pivotal role in positioning natural gas as a fuel of choice for the 21st century global economy.
These were some of the key messages of the distinguished line-up of international gas industry leaders and panellists who participated in the 3rd GECF Annual Workshop on Promotion of Natural Gas Demand.

The widely attended workshop, held virtually, was organised by the GECF (Gas Exporting Countries Forum) at a critical time for the gas industry which is facing unprecedented levels of complexity and market upheaval brought on by the COVID-19 pandemic and persistently mild winter. In spite of this, the speakers opined that natural gas is the fuel that can achieve the UN Sustainable Development Goals and the objectives of Paris Agreement as its credentials far outweigh that of other energy sources such as coal and oil.

Welcoming the audience, Yury Sentyurin the GECF Secretary General, outlined the salient points that leverage gas industry’s growth and highlighted the Forum’s efforts in promotion of natural gas, in line with the GECF Statute, the GECF Long-Term Strategy, and the Declaration of Malabo at the conclusion the 5th GECF Summit of Heads of States and Government, all of which guide the GECF to advocate for the versatility of natural gas based on fair pricing policies and a level playing field, amongst other factors.

“We recognise the vital role that natural gas has to play in energy transition and sustainable development as we strive for energy security for all nations. Now more than ever, there must be a spirit of collective collaboration amongst industry players in order to sustain existing markets, and more so to create new promising ones,” said Mr. Sentyurin.

“We also recognise the crucial role of digitalisation as we strive to reduce cost across the natural gas value chain and enhance the competitiveness of natural gas.”

The Secretary General noted that the workshop was instrumental in increasing awareness of natural gas within the framework of global energy security and provided potential strategies to promote natural gas demand, some of which include the crucial role of advocacy for natural gas, government policies that need to encourage natural gas utilisation, cooperation amongst market stakeholders, the role of technological disruptions, importance of robust pricing mechanisms to secure sustainability of supply, investment in infrastructure in consumer countries, and other actions that will be studied further in the GECF Secretariat for future actions.

The keynote speakers included Joe M. Kang, the President of International Gas Union (IGU), N. J. Ayuk, Executive Chairman of African Energy Chamber Magdy Galal, Chairman of Egyptian Natural Gas Holding Company (EGAS), and Shamsairi Mohd Ibrahim, Vice President LNG Marketing & Trading of Petronas.

The session was followed by two immersive panel sessions.

In his intervention, Mr. Kang referred to the messages published in the IGU’s latest report, ‘Gas Technology and Innovation for a Sustainable Future’, and focused his remarks on the potential that technology can offer in reducing greenhouse gas emissions and improving energy access. He also highlighted the urgency of investment decisions to be made if this potential is to be realised.

Mr. Ayuk thanked the GECF for bringing the natural gas agenda to Africa, particularly by hosting the Forum’s Summit in Equatorial Guinea, and thereby in Africa for the first time, in 2019. He also appreciated the GECF’s work in promoting further cooperation with African countries to use gas as the core source of energy in the development programmes and climate change policies, in delivering energy to the continent’s consumers, more broadly in alleviating energy poverty. Mr. Ayuk emphasised the crucial need for development of the gas industry in Africa through investment in infrastructure and industries.

Following this, Dr. Galal pointed out the steps taken by the Egyptian government in stemming the decline in consumption in Egypt due to the COVID-19 impact, which has seen a drop in demand by 13% between January and May 2020 compared to last year. According to him, whilst the government lowered the price of gas in the industrial sector, more incentives needed to be provided by it, especially in the upstream activity by providing flexible terms in the concession agreements. Over the long-term, he said, serious actions should be considered by the gas industry in terms of adapting new strategies to ensure sustainability of the business. This might include significant structural and organisational changes.

Mr. Ibrahim of Petronas pointed out that the rising number of LNG importing countries from merely 15 in 2005 to 39 countries in 2019 shows that LNG is well positioned to prosper as the most significant source of energy in the future. He also highlighted some creative LNG solutions including LNG bunkering, virtual pipeline system, small-scale break-bulking and vertical integration that will create new and niche markets. Furthermore, Mr Ibrahim stated that the value of natural gas should be preserved while creating a level-playing field between producers and consumers.

The GECF Gas Market Analysis Department Head Ms Mahdjouba Belaifa then spoke about the importance of this annual workshop for the industry and the GECF’s role in aligning many voices as one voice. She explained that in the previous two workshops the key identified areas for natural gas were held with a focus on cost competitiveness, policy advocacy, importance of long-term oil indexed contracts for the security of supply, development of infrastructure, and new business models. She highlighted some of the proposed actions after the workshops such as reinforcement of dialogue, role of R&D, fair access to technology, engagement of policymakers in advocacy for fair policies towards natural gas, the role of social media to sensitise various segments of the public, as well as digital technologies to improve productivity.

In the first panel discussion, ‘Improving the competitiveness of natural gas through Cost Optimisation and Digitalisation’, the participants discussed a number of themes affecting the global gas and LNG markets. Moderated by Stuart Elliot, Senior Writer of European Gas & LNG at S&P Global Platts, joining this debate were Robbin Mills, CEO of Qamar Energy and Vincent Demoury, General Delegate of International Group of LNG Importers (GIIGNL).

Mr. Mills focused his views on the Middle East region, where he mentioned that gas demand growth is expected to shift from power to the industrial sector in the long-term due to increasing renewables deployment and improved efficiency. As it relates to a gas surplus in the region, this could bring several opportunities, including new lighter industries, intra-regional export projects (gas, LNG and electricity), enhanced oil recovery, hydrogen production, and expansion of e-vehicles, which will support a growth in electricity demand.

Mr. Demoury held the view that although LNG has been growing at a healthy pace over the last few years it faces several challenges in a post-COVID-19 world, including economic growth, volatility, affordability, and environmental policies. As such, there is a need that producers, consumers, and policymakers work together to develop methodologies and invest in technology for decarbonising the gas industry and innovation to improve its competitiveness and sustainability.

The second panel, ‘Adapting to new gas market realities in a post-COVID-19 situation: Low Prices and Weakened Demand’, was moderated by Nikolay Kozhanov, Research Associate Professor at the Gulf Studies Centre at the Qatar University, and featured the presentations of Mr Ayuk, as well as Sergei Komlev, Head of Contract Structuring and Pricing Directorate from Gazprom Export and Mike Fulwood, Senior Research Fellow at the Oxford Institute for Energy Studies.

Mr. Fulwood maintained that while there are opportunities for growth in gas demand in Sub-Saharan Africa and emerging Asian LNG markets, gas will continue to face competition from coal in Asia. On the other hand, Mr. Sergei drew the audience’s attention to spot prices which he believed tended to overreact to even minor market imbalances while in his opinion oil-indexation provided a more stable gas price.

NJ Ayuk reiterated the issue of lack of infrastructure in Africa, in particular, a deficit in regasification facilities. He signalled out the huge potential of gas monetisation in Africa, where gas industry development will trigger social and economic growth and create jobs.

Throughout the workshop, regular Q&A sessions took place whilst a few real-time polls were also conducted.

The Annual Workshop on Promotion of Natural Gas Demand is a premier industry event and is designed to empower professionals and observers in the field of gas market to gain a deeper understanding of the market conditions, look at the common challenges,  and think collectively on ways to promote natural gas to enhance its prospects as the fuel of choice for sustainable development.

This report was written by the public relations department of the Gas Exporting Countries Forum

 


Ghana’s Gas Master Plan is “Outdated”, Critic Claims, and “No Longer Fit for Purpose”

Ghana’s four-year-old Gas Master Plan has been dragged into the national conversation around whether the country’s Gas Company should be subsumed into the flagship state hydrocarbon company, the Ghana National Petroleum Corporation (GNPC), as a subsidiary.
“The infrastructure plan is obsolete and needs revision”, submits Ernest Owusu Bempah, a public policy analyst, “and none of the supply and demand data in the plan are applicable.”
Mr. Bempah was responding to a presentation by the Africa Centre for Energy Policy (ACEP), a policy think tank that is highly revered in the West African country. ACEP had, in that presentation, revisited the lingering debate over whether the Ghana Gas Company should be, like in the Nigerian model, a subsidiary of GNPC or, like in the Egyptian model, be an entity by itself.
But it is the submission that Bempah makes about the Master Plan that the Africa Oil+Gas Report considers most crucial. Part of his summary:
• Gas Master Plans (GMPs) are meant to address two issues: Design Optimization and Operational Optimization.
• The current Gas Master Plan addresses only the former. Ghana Gas Team and their counterparts from Trinidad and Tobago have addressed the latter. Furthermore, a GMP is also a working document, which requires regular update. None of the supply and demand data in the GMP are applicable.
• The infrastructure plan is also obsolete, and needs revision. However, some of the recommendations and procedures are still worth considering. It will also require an expanded scope to include operational optimization
• Ghana Gas’ core business has three key components – Daily operations, which takes about 80% of the life-cycle time, periodic Maintenance which takes about 10% of the time and occasional expansion which takes the remaining 10% of the life cycle time.
• So, Ghana Gas’ key job description is to deliver gas for power generation for Ghanaians, through reliable and uninterrupted operations. Not necessarily expansion projects.
• Ghana’s Gas industry still riddled with legacy that; and Ghana Gas is owed the most by sister agencies. This is a very unusual circumstance by any standard. ACEP should be providing ideas to address this recurring legacy problem in the sector, instead of espousing short sighted band-aid solutions.
• It is important not to base lasting policy decisions, including Institutional Arrangements, just on ability to Finance new facilities or expansion of existing ones or someone’s Balance Sheet as suggested by ACEP.
• The 4 year-old GMP is hardly fit for purpose and requires an update and therefore cannot be used as bases for recommendation by ACEP.

The full article by Mr Bempah was published in The Ghanaweb and the June 2020 edition of Africa Oil+Gas Report.


Most of Ghana’s Gas Is Stranded

By Foluso Ogunsan

More than half of natural gas produced in Ghana in 2019 has had to be reinjected for lack of availability of off takers, the country’s annual petroleum industry report has indicated.

“In spite of the fact that Ghana National Gas Company(GNGC), managed to bring on stream new off takers during the reporting period, namely Amandi Energy at Aboadze, Karpowership at Sekondi, Genser, at Tarkwa, and shipment of gas from Takoradi to Tema, through the West Africa Gas Pipeline, a substantial amount of the country’s gas remains stranded”, the Public Interest Accountability Committee (PIAC) notes in its 2019 annual report, released recently.

More than half (56.87%) of total gas produced from Jubilee, TEN, and SGN had to be reinjected during the period.

The committee says that “2018 price of lean gas was slashed by 31.23% in 2019. The reduction means cheaper fuel for thermal power generation”.

The PIAC is Ghana’s equivalent of an Extractive Industry Transparency Initiative (EITI).

The report says that Ghana National Petroleum Corporation (GNPC), supplied $334,636,806.22 (~$334.6Million) worth of raw gas to GNGC, but no payment was received, largely on account of the inability of the Volta River Authority, the state power utility, to pay GNGC for the lean gas supplied.

“Added to the outstanding balance of $333,481,539.82 (~$333Million), this brings the total indebtedness of GNGC to GNPC in respect of lean gas supplies to $668,118,346.04 (~$668Million).

The GNGC is on course to become Africa’s most indebted state hydrocarbon company.

 

 


Sasol Closer to Selling Stakes in EGTL, Moza Gas Pipeline

By Toyin Akinosho

South African synfuels giant Sasol, says it has signed an agreement with Chevron Corporation for the sale of its indirect beneficial interest in the Escravos Gas to Liquids (EGTL) plant, in Nigeria.

The company has also inched close to finalizing the sale of its equity in the Republic of Mozambique Pipeline Investment Company (Rompco) and the Central Termica de Ressano Garcia gas-fired power plant, also in Mozambique.

EGTL commenced beneficial operations in June 2014, 15 years after the idea first came on the drawing board. Its original cost started out at $1.9Billion, when Final Investment Decision was taken in 2005. The cost rose to $5.9Bllion in 2009 but continued to escalate, raising government and partner concerns.  The plant has an initial capacity of 34,000 barrels per day.

Chevron Corp signed global JV with Sasol Ltd as well as the global JV supplementary agreement that specifically related to Nigeria. In the beginning it was 50:50 risk sharing agreement between the two companies. The agreement with Sasol is offshore and managed as such. In Nigeria, state owned firm NNPC took 25% and Chevron Nigeria had 75%. As costs escalated and the project was delayed, Sasol drastically reduced its stake.

 In its release, Sasol did not disclose how much it expected to make for the EGTL disposal, but it did say that the transaction had an agreed economic effective date of September 1, 2019.

The Rompco pipeline, an 865km facility which transports around 500Million standard cubic feet a day of gas from Sasol’s Pande and Temane gasfields, in southern Mozambique, to South Africa, is a more strategic asset to Sasol.

The other shareholders in the pipeline include the Mozambican state hydrocarbon company Companhia Mocambiçana de Gasoduto (25%) and the South African Gas Development Company (25%), also known as iGas, a subsidiary of South Africa’s Central Energy Fund (CEF).

Sasol is aiming to realise between $2- and $5-Billion in proceeds from the disposals, initiated to help reduce its $10Billion debt burden by $6-billion by the end of its 2021 financial year.

© 2020 Festac News Press Ltd..