Gas Monetization - Africa’s premier report on the oil, gas and energy landscape. - Page 2

All articles in the Gas Monetization Section:


Nigerian Domestic Gas Market: How We Threw It All Away

BOOK EXCERPT

Author: Charles A. Osezua

It was a balmy Wednesday afternoon in May 1989, when news came over the radio that the Armed Forces Ruling Council (AFRC), Nigeria’s highest decision-making body, had approved the Gas Pricing Policy my team and I had worked on for nearly three years.

With hugs, high fives and jubilation in the room, we congratulated each other and basked in the euphoria for the rest of the day. To many, the news would have been no more than another news bulletin highlighting some government action, but to us and many industry players and watchers, the announcement signalled something monumental and, in many ways, the key to unlocking the development of Nigeria’s abundant natural gas resources had been given legal imprimatur.

I was excited and felt very proud to be a Nigerian and I could envision, immediately, the economic development and transformation of my country facilitated by gas which would fuel power and petrochemical plants, as well as fertiliser companies with other multiplier effects. It was an opportunity for Nigeria to industrialise, stamp her authority as the leading economy in Africa, and perhaps dictate the pace of, or become the go-to-nation for Gas Policy and Pricing dynamics.

The making of the Gas Pricing Policy was a massive undertaking spanning over 18 months spent gathering data and meeting requirements by professionals from the Nigerian National Petroleum Corporation (NNPC) and Shell Petroleum Development Company (SPDC), with support from their home offices in London and The Hague. We had spent several months in London at Shell Centre, relentlessly working and carefully reviewing the output from a computer model called The Pathfinder.

Given the diversity of interests and attempts to fairly satisfy varying parties in the country, the model had to go through a lot of re-works, which eventually gave birth to an agreed blueprint with timelines across the gas value chain for the various actions and activities from gas production through transportation all the way to utilisation.

Days and weeks were spent inside the chilly offices and corridors of the corporate planning department of the defunct National Electric Power Authority (NEPA), and the Ministry of Industries, Power and Steel, to meticulously gather data on existing and planned power projects, fertiliser plants, steel plants, and rolling mills, in order to provide base load estimates for the proposed National Gas Supply Master Plan.

This was followed by months of technical and commercial presentations to oil and gas industry stakeholders, top NNPC management, key decision makers of international oil companies, owners and producers of gas, NEPA, industrialists, and relevant government ministries, to ensure their buy-in.

Finally, Nigeria had the approval of the Armed Forces Ruling Council for a Gas Pricing Policy that would drive the development of gas infrastructure for the first time in the (by then) thirty one years since the production of oil and gas began in the country. At that point, the general feeling was that the country had ultimately set its sights on transforming the lives of its people by directly and indirectly creating employment for thousands and even millions, using gas as energy for economic growth and sustainable development.

Given the assumptions that went into the economic model for the gas pricing policy, we envisaged mass investments across the gas value chain propelled by growth in power generation, petrochemical industries, as well as re-energised and expanded industrial estates.

Our joy was, however, short-lived as our celebration was abruptly shattered.

Two weeks after the passage of the Gas Pricing Policy into law, there was an unprecedented development. The new law to be documented in the Federal Government Gazette was suspended! This was unexpected and had never happened before.

I was shocked and had to ask, “Is this real? Have we surrendered to mediocrity? Have we suspended our future as a nation that was set to dictate the pace for other emerging economies in Africa?” We were all perplexed and our faces were grim, as if the world had crashed around us. Indeed, we were grossly disappointed, and couldn’t fathom what had happened.

“What happened?” was the question.

We soon had an answer. An Air Force chief with responsibility for Power, Steel and Industry who was absent from the council meeting when the approval was granted, raised objections. He was said to have declared that “my ministry cannot pay the approved tariff’.

Shockingly, the Commander in-Chief had vacillated and the council decided to review the policy. Hitherto, as I was informed, nobody could reverse the decision of the Commander in-Chief in a military government, let alone a decision backed by the Armed Forces Ruling Council chaired by the Commander in-Chief. It was unbelievable!

Over three decades later, I watch in disbelief as we struggle.

Excerpted from The Rise of Gas: From Gaslink to the Decade of Gas, by Charles. A. Osezua, founder of the pioneering Nigerian gas utility firm Gaslink and the gas processing company PNG. Published in Nigeria by RADI8 Limiited


Invictus Moves Closer to Launching the Zimbabwean Gas Market

Australian junior Invictus Energy, and One Gas Resources have executed an updated Gas Supply Memorandum of Understanding (MoU) with Mbuyu Energy, a Zimbabwean consortium led by IPP developer Tatanga Energy.

The consortium, which includes existing Invictus’ institutional shareholder Mangwana Opportunities Fund, is seeking to develop a 500MW Gas to Power project.

“Following the recent confirmation of the discovery of gas (in Mukuyu-2 Sidetrack) at the Cabora Bassa Project, the updated MoU builds on the previous MoU signed in December 2019 with Tatanga Energy”, Invictus declares in a statement.

If indeed an economically sizeable reserve base is proved up in that discovery, then this MoU on gas supply has effectively inaugurated Zimbabwe’s domestic gas market.

The MoU is a precursor to the negotiation of a full Long Term Gas Sale Agreement (GSA) to supply sufficient gas to power the proposed plant.

The plant can be expanded in future phases to up to 1,000MW (equating to a forecasted demand of approximately 1.4Trillion cubic feet of natural gas over 20 years).

“The updated MoU will see the parties work together to assess the feasibility of developing the project utilizing gas produced from the Mukuyu field or any other field developed in the Cabora Bassa project”, Invictus explains.

“The project will be designed to minimize its environmental footprint and will utilize an efficient Combined Cycle Gas Turbine configuration (CCGT) that will incorporate cutting-edge carbon”, Invictus explains. reduction technologies.

“The development of the Gas to Power Project will be synchronized with the broader development of the Mukuyu field and the Cabora Bassa project as a whole including gas production, transportation and the processing infrastructure required to provide natural gas feedstock to the power plant”, Invictus avers.

Preliminary feasibility studies have identified a number of suitable locations that provide the ability to supply electricity through the local grid as well as potentially export to customers through the Southern Africa Power Pool (SAPP).

The Mukuyu gas field is located within 100 kilometres of three (3) major interconnectors to the SAPP grid which provides the ability to export power to any country in the region. Mbuyu will enter into discussions with a number of existing high energy demand power offtakers including large scale miners, industrial and other large-scale users of energy – many of whom currently import their electricity from neighbouring countries. The project will supply much needed reliable and affordable baseload power to these companies.

The ability to source reliable baseload power from a new domestic supply will provide significant economic benefits to potential customers many of whom have had to curtail operations and expansion plans as a result of the power deficit the country is currently facing.

This is the second major Gas Sale MoU executed for the Cabora Bassa project following the MOU executed with Sable Chemicals to provide gas feedstock for the manufacture of ammonium nitrate fertiliser which is currently supplied by rail from South Africa.


German Firm to Import 1.2MMMTPA of Nigerian LNG, From Ogbelle

Riverside LNG of Nigeria and Johannes Schuetze Energy Import AG of Germany have signed an agreement on a gas export partnership,

It is part of the two agreements that involve a $500Million renewable energy pact and gas export deal between Nigerian and German entities.

President Bola Tinubu of Nigeria witnessed the signing of the two Memoranda of Understanding (MoU) in Berlin, Germany, at the 10th German-Nigerian Business Forum, according Ajuri Ngelale, Tinubu’s Special Adviser to the Nigerian President on Media and Publicity

The $500Million cooperation on Renewable Energy brings together Union Bank of Nigeria and Germany’s DWS Group.

David Ige, CEO of GasInvest, who signed the MoU on gas supply, said the Riverside LNG project aims to supply energy from Nigeria to Germany, extinguishing about 50Million cubic feet per day of flared gas in Nigeria.

‘Gbite Falade, (pictured above), CEO of Aradel Holdings, operator of the Ogbelle field and supplier of initial gas to Riverside LNG. “Now, [there has been] a whole lot of maturation in the gas business, that we now have options”, Falade told us in an interview in October 2023.

”The project will supply energy from Nigeria to Germany at 850,000 tonnes per annum, expanding to 1.2Million tonnes per annum.

”The first gas will leave Nigeria for Germany in 2026, and there will be further expansion”, Ige said.

1,2Million tonnes per annum translates to 192Million standard cubic feet per day of gas.

Riverside LNG facility “is strategically located at Ogbelle in Rivers State, Nigeria, connected to the Ogbelle Gas Plant and the Onne Port in the Oil & Gas Free Zone Area”, Riverside LNG says on its website.

The 100MMscf/d Ogbelle gas processing plant, operated by Aradel Holdings, currently supplies gas to the Nigerian Liquefied Natural Gas (NLNG) system in Bonny as well as a last mile supplier of Compressed Natural Gas (CNG), The plant will now add Riverside LNG to its offtakers.

Mr. Ige, a former reservoir engineer at the UK major Shell, manager at Accenture and latterly group executive director at NNPC, said the project will extinguish significant volumes of flared gas in Nigeria “and open alleyways of new and greater exports of gas to Germany.’’

The German partners, the statement said, expressed confidence in investing in Nigeria’s gas sector.

Frank Otto, Chief Operating Officer of Johannes Schuetze Energy Import AG, described the partnership as a “big deal” for the German market.

Farouk Gumel, Chairman of Union Bank, emphasized the importance of rural inclusion and bringing more people into the formal economy.

President Tinubu said that Nigeria was well primed to attract foreign direct investments as it runs a resilient democracy,

”Since 1999, we have witnessed changes in democratic governance, with peaceful transfers of power within and between parties. Democracy in Nigeria has proven to be flexible and resilient. Shake off any remnants of the military era syndrome; we have moved beyond that. Despite challenges faced by other African nations, Nigeria stands firm, and we are your partners.’

”For those who feared various obstacles; look at me—I come from the private sector, trained by Deloitte. I served as the treasurer in ExxonMobil. Define corporate governance in any way, and I am in it. I governed Lagos for eight consecutive years.

”Nigerians voted for me for reforms, and from day one of my inauguration, I implemented the reforms. My inaugural speech did not disclose what I would do. I removed the fuel subsidy that is a great burden to Nigerians from the moment I stepped into office.

”The arbitrage regime is gone forever. Now, you can bring your money in and out as you wish. If you encounter any problems, rest assured that I have built one of the most reliable teams Nigeria has seen to address them. I appeal to you to forget the past and focus on building a relationship that removes obstacles, fostering progress and prosperity in Nigerian-German relations.’’

 

 


In the Southern African Rush, Mozambique Is Ahead of the Pack

It is all coming together, finally, for Mozambique.

  • A second Floating liquefied Natural Gas LNG project is in planning stage to monetise the deepwater reserves in the twin Coral fields in Area 4 licence
  • An integrated oil and gas project to extract more volume from the onshore hydrocarbon fields in the Inhambane province is heavily under construction
  • Most crucially, is the return to work on a massive LNG project to drain a large swath of deepwater gas in Area 1.

Then there is the mammoth, LNG project in Area 4. The conversations around it are rather muted.  When it comes, it comes.

It has been a full year now (November 13, 2022), since the first cargo of the 3.4Million tonne per annum (3.4MMTPA) capacity Coral South (Coral Sul) FLNG, left Mozambican shores for the global market.

Mozambique has made more than a tiny penny from the rent.

The ENI operated facility had delivered $34Million into the Mozambican treasury by mid-May 2023, six months after that historic first cargo.

Read more…


THE TRAGEDY OFNIGERIA VS P&ID-AVURU

By Austin Avuru

Thank Goodness, the Hon. Justice Robin Knowles, CBE has finally brought relief to all Nigerians by his judgement in the appeal by Nigeria against an arbitration tribunal judgement in 2017 awarding some Six Billion dollars ($6Billion) against her. That judgment debt, accruing compound interest at 7%, would have ballooned to $11Billion by now. You will appreciate the full impact of an $11Billion judgment debt against Nigeria when you consider that, for the past five months, we have been struggling unsuccessfully to secure a $3Billion credit line to stabilise our exchange rate. That sum is more than twice our annual capital expenditures! So, how did we get into this sorry bind?

The first wrong step was a result of the arrogance of power, a characteristic quite common with many Nigerians occupying very high and influential Government positions. They make pronouncements and give directives, resulting in commitments way beyond their remit. In this instance, the Ministry of Petroleum Resources initiates a large volume gas supply agreement with a purported gas processing company when they do not produce a single molecule of gas! They did not even have the presence of mind to refer the proposal to their parastatal NNPC for consideration. The Honourable Minister of Petroleum Resources went ahead to execute an agreement forwarded to him by the Director of Legal Services, committing to supply 400Million standard cubic feet per day of gas over a twenty year period when both of them were well aware that the Ministry does not produce gas. How do you commit to give what you do not have? The absurdity of this agreement did not end there. The processing company was being offered 15% of this gas volume (amounting to the shrinkage upon extraction of condensate, gas liquids and LPG from the gas volume supplied) for free! For those conversant with this kind of transaction (I have, in my previous jobs executed a few of them) this shrinkage is priced in the range of $3.5 to $4.25 per thousand cubic feet. This means that, at $3.50 per thousand cubic feet, the gas supplier should earn about $73.5Million per annum on a 15% shrinkage for 400MMscf/d supplied. This amounts to $1.47Billion over the 20-year contract period. This was given out free to the gas processor. You will now understand why the P.&ID party described the agreement as “a very sweet deal”. If the gas supply obligation was met, they begin business with a whopping discount of almost $1.5Billion, and if the obligation is breached, they resort to arbitration for even higher damages. Head or tail, they were big winners and we were losers from day one.

After executing the agreement, the Honourable Minister directed his staff to instruct Addax and ExxonMobil to supply the gas. They were not parties to the agreement, and could not have entered into an agreement so schewed against them. Out of courtesy to their “big brother” Joint Venture partner, NNPC they initially pretended to go along until they eventually refused to commit to any gas supply arrangements. Then P. & ID declared a breach and initiated arbitration proceedings against Nigeria. Our legal team was faced with two major hurdles. The Ministry had no budget for, and therefore, no funds to pay their legal fees. They also could not pay for badly needed expert opinion on legal, commercial and technical aspects of the transaction. Worse still, not being in the business of gas production and supply the Ministry could not provide their legal team with data and information with which to prepare their case. Faced with these hurdles, they kept asking for adjournments while their counterparty was assembling an iron-clad representation before the arbitration tribunal, albeit with perjured information and the support of bribed officials and Nigerian partners. In this circumstance, the Nigerian legal representation was shallow, half-hearted and unconvincing. They found more comfort in pursuing a negotiated settlement, having in the face of their handicaps, internally accepted defeat at the arbitration tribunal.

A negotiated compensation of $1.1Billion was first arrived at, which looked attractive in the face of a $6Billion arbitral award. When they could not secure government approval for this sum, they negotiated it further down to $850Million and forwarded it to the President for approval. With only three days left to hand over, on May 26, 2015, President Jonathan refused to approve, minuting on it “Please pass this on to the incoming President”.

When President Buhari inherited this complicated mess, he ordered a full-scale investigation into the circumstances and actions that brought us here. In January 2017, the tribunal issued the final award of $6Billion to P. & ID which at 7% interest had ballooned to $9.6Billion. At this point, the Federal Government assembled a crack team of English lawyers to appeal against the ward and seek to set it aside. By this time, the Nigerian Attorney General, and the EFCC were scrambling to prove a case of fraud, bribery and corruption by practically labelling all members of the Government Team that had been involved in this case as “compromised”. They even got one top Ministry official to confess that he had been bribed by P. & ID officials ten years earlier. Justice Robin Knowles was not swayed by these “findings” and infact specifically exonerated the Nigerian Lead Counsel of any corrupt practices.

The English legal team, on the other hand, subpoenaed different banks, communication networks and other institutions to assemble unassailable evidence that:

  1. The Director of Legal Services in the Petroleum, Ministry, while serving and in retirement was continuously being paid monies by P. & ID officials before, during and after the entire litigation process and was anticipating sharing in the award proceeds.
  2. All confidential correspondences (legal privileged data) between the different parties working for Nigeria and top officials of government were intercepted by and circulated among P.&ID Officials.
  • The P.&ID principal witness statement was perjured as verifiable lies were told under oath.

With their detailed preparations and a very strong, persuasive argument in court, Justice Robin Knowles was swayed that a corrupt process, unknown to the arbitration tribunal had led to the award of a quantum of costs that was almost embarrassing to the English justice system. In fact, he alluded to the fact that if the award was allowed to stand, it would cast a pall on the credibility of the arbitration principle, especially as it is usually not open to the media and public scrutiny that make open courts more circumspect in their judgements. Here again, the performance of the English legal team made ours a laughing stock, a tragedy. It would appear that the endemic corruption in our judicial system, where justice is obtained more by corrupt means than the quality and depth of legal representation is rubbing off on our learned attorneys as evidenced from their shallow preparations and poor representation in this case. Their representation was so poor that the tribunal judges simply treated Nigeria with disdain and proceeded to award P.&ID all that they asked for even when it was glaringly unreasonable. P.&ID would have smiled home to share $9.6Billion with their cohorts from a transaction where their total expenditure was less than $3Million!

In reflecting on the tragedy of this case, I can only wonder when we are going to produce a generation of Nigerians who will truly love this Country, stand by her and sacrifice for her.

Austin Avuru,fnape

November 3, 2023

 


Moza’s Gas Exports Fetched Over $300Million in 2Q 2023

Mozambique’s natural gas exports increased in volume by 80.9% in the second quarter of 2023, compared with the same period in 2022, delivering a revenue of  $336Million  to the national treasury, according to data from the Bank of Mozambique (BdM),

This is an inflow of $238.1Million more than in the same period in 2022, explained essentially by the increase in the volume exported. The bank said that the inflow was r significant despite the fact that international price of natural gas fell by 64.1% in the period.

Mozambique commenced export of Liquefied Natural Gas (LNG) in November 2022, but the country has been exporting natural gas by pipeline to South Africa since 2004. The vast difference in revenue is explained by the volume as well as the government’s take.

Overall, however, Mozambique earned $2Billion from exports in the second quarter, $179Million less than in the same period in 2022. India purchased the most from Mozambique, with a 15.3 per cent share of the total, mainly coal, followed by South Africa, with 13.3 per cent, leading among natural gas, and China, with 10.3 per cent, essentially in heavy sands.

 

 


A 15,000 Tonne Per Year LPG Plant Coming to Gabon

Perenco is concluding the construction of a 15,000 tonne Liquefied Petroleum Gas (LPG) production plant in Batanga, in the southwest of Gabon.

The project is expected to start up sometime in November 2023.

The facility is one of several gas monetization projects that Perenco, the privately owned, Anglo French junior, is embarking on in the central African country. Others include a gas to power project in Mayumba and an LNG project in Cap Lopez.

The proposed LNG project in Cap Lopez has, embedded in it, a proposed 25,000Tonnes a year LPG project, but this will not be ready until 2026.

Gabon presently imports 30,000 tonnes per year of LPG  and the price  is subsidized by the state.

The Batanga plant will extract Propane and Butane from the gas which currently feeds the power plants in Libreville and Port Gentil.

“100% of the LPG is dedicated to the local market”, Perenco says.


LPG Production to Commence in Mozambique in 2024

Sasol says it will start the first, in-country production of Liquefied Petroleum Gas (cooking gas) in Mozambique by March  2024.

The product is part of the deliverables of the field development plan for the Production Sharing Agreement (PSA) in the northern region of Mozambique’s province of Inhambane.

That FDP aims to optimally develop the light oil and gas resources contained in the Inhassoro, Temane and Pande fields.

The LPG processing facility has capacity for 30,000 tons of LPG per annum. “The equipment is being installed in the factory under construction for the production of the field”, according to Radio Mozambique. Mateus Mosse, director of Cooperative Relations at Sasol. says that the pace of the work is satisfactory and believes that the deadlines established for the completion of the works will be met.

“What Sasol will produce in terms of cooking gas corresponds to around 60 to 70% of the country’s demand. It is true that the economy is growing, this could perhaps reduce demand to 50%, but it is already significant in terms of contribution to the country”, Mosse told the country’s government owned radio  “Let’s stop importing 50% of the cooking gas that the country needs, as there is a lot to gain. First, we will stop importing a significant amount of cooking gas; second, we will have a Mozambican company buying gas from Sasol and reselling it; we will have other distribution companies and cooking gas resellers purchasing in the country”, he said.


Mozambique Sees Decline in FDI as TOTAL Holds Up Massive Gas Project

Mozambique experienced a 32% reduction in the flow of Foreign Direct Investment (FDI), totalling $350.4Million in the second quarter of 2023, compared with $460.1Million in the previous quarter.

The raft of investment in the construction phase of gas development projects: by Sasol in its Production Sharing Agreement (PSA) licence onshore inhambane province; by ENI on the Coral South FLNG and TOTAL in the large 13Million Metric tonnes LNG project, have cooled. Sasol has nearly completed the integrated oil and gas projects in inhambane; ENI is now producing from Coral South FLNG and so is no longer in the spending mode and TOTAL hasn’t entirely returned to work in the troubled Cabo Delgado province.

Data contained in the most recent Bank of Mozambique (BdM)’s monthly Statistical Information (SI) report, recently indicates that the decline is largely attributed to almost 50% drop in investments in the extractive industry, especially in Major Projects (GP).

The SI report said: “In the period under review, the flow of FDI in Major Projects totalled $278.8Million dollars, compared to $414.6Million in the previous quarter.”

South Africa remains the largest contributor of FDI inflows into Mozambique (39.1%).


Indorama Inks Agreement for More Nigerian Gas Offtake

By Fasilat Oluwuyi & Abdulwaheed Sofiullahi

The Indorama Group has signed a memorandum of Understanding (MoU) with the Nigerian state hydrocarbon company NNPCLtd to bolster its gas offtake in the Nigerian market.

Indorama Eleme Petrochemicals (IEP), the Nigerian subsidiary of the Singapore based, Indonesian founded conglomerate, already receives over 100Million standard cubic feet per day of gas from the Nigerian Agip operated assets in Rivers and Bayelsa States in eastern Nigeria, to produce fertilizer and other petrochemicals.  IEP also takes up Propane from the NNPC operated Oredo gas plant in Edo State, (in the country’s Midwest), but this MoU indicates that it will expand.

The NNPC statement on the MoU is vague on details about the volume per day of natural gas that the expansion will entail, but it notes that “the opportunities include the monetization of over 1.7 TCF of gas and 100Million barrels of oil reserves, generation of upstream Gas Supply”.

While the 1.7Trillion cubic feet is not an indication of a yearly offtake or the offtake for the entire period of the agreement, there is a hint from the part of the statement that says that the Indorama transaction looks toward “downstream production of about 4.8 MillionTonnes Per Annum (MMTPA) of products, including methanol, urea, and fertilizer to boost national food security”. Now 4.8MMTPA of petrochemicals will easily utilize over 200Million standard cubic feet of gas per day (200MMscf/d), but the details are still to be released.

The statement by Garba Deen Muhammad NNPCL’s Chief Corporate Communications Officer, adds that the MoU by NNPCL and Indorama “follows Nigeria’s President Bola Ahmed Tinubu’s commitment in India a few weeks ago to strengthen business relations between both countries”.

But Indorama is not an Indian owned group.

In the statement Mele Kyari, the Group CEO of NNPCL, is quoted as saying that the ”project aims to bring an annual contribution of $3Billion to the nation’s GDP and a lifetime contribution of $18Billion to government revenue”.

Kyari also reportedly said the project indicated in the MoU,  will generate “upstream lifecycle revenue of over $18Billion”.

 

© 2024 Festac News Press Ltd..