All posts tagged GAS MONETISATION


Platform Breaks into the “Nigerian Gas Grid” System

Platform Petroleum has become a gas supplier of some reckoning in the Nigerian domestic gas market.

The marginal field operator currently supplies 22Million standard cubic feet of gas per day (22MMscf/d) to a pipeline operated by the Nigerian Gas Company (NGC).

“All of this is essentially lean gas that comes from the stripping process that is achieved by the PNG gas plant, located on the Egbeoma (marginal) field in the north-western Niger Delta, according to Osa Owieadolor, the company’s outgoing Chief Executive Officer. Platform Petroleum is the operator of that field.

That makes Platform the marginal field operator with the second highest volume of lean gas supplied to the local market. Savannah Petroleum, another marginal field operator, supplies about 100MMscf/d, processed from the Uquo marginal field to the domestic market, mainly to power plants in Calabar and Ikot Abasi, in the east of the country.

The Nigerian domestic gas market is relatively small, with the total volume (supplied to power plants, fertiliser plants and industries) coming to less than 1,500MMscf/d, so two marginal fields supplying 122MMscf/d is a big deal.

“Prior to this process, we were flaring significant volumes”, Owieadolor told Africa Oil+Gas Report. “Now we’re delivering about 1.2MM cf/d of gas to PowerGas for their CNG plant”, he explained. “We have significantly reduced our flaring by over 80%, and we should achieve a total flare-down in our field before the end of the year, because we have also commissioned a compression system that will enable us to do that”.

Platform achieved its first commercial lean gas delivery to the Nigerian Gas Marketing Company (NGMC) a subsidiary of the NGC, in November 2020, following the commissioning of a section of the OB3 gas pipeline.

“Prior to this time, we had executed a Gas Sales and Purchase Agreement with NGMC, that happened over two years ago”, Owieadolor told Africa Oil+Gas Report. “We did same with PowerGas and one or two other Third Party companies. The model has been willing buyer-willing seller”.

Oweiadolor clarified that Platform is not the current operator of the PNG Gas Processing Plant, “but we are an investor there and our involvement is more like an oversight function at the board level. But outside of that, because of the relationship on the board level, we also provide some bit of support based on our experience. That’s how it relates to the operatorship of the plant”.

 


Will Nigeria’s LPG Demand Buckle under the Weight of the Country’s Forex Problems?

By Bunmi Aduloju, NAREP Fellow

…Some say that growing in-country LPG production should mitigate these concerns, but..

When Vitalis Obinna, an LPG retailer and dealer in gas cylinders and accessories in Festac Town, a western suburb of Lagos, Nigeria, caught sight of a figure advancing towards his shop, he jumped to his feet with an anticipatory flash of excitement. Surrounded by other LPG retailers at the location, a new customer would mean more sales for the day. Soon, his interaction with this reporter took a turn of business reality.

“Since last year, business has been very dull,” he said. ‘But when the year began, it became really bad. There’s been no profit in cooking gas. We buy gas for about ₦4300 and sell it for about ₦4500. 

“Before now, we used to make profit of at least ₦600 on 12.5kg of cooking gas but now, our profit is ₦150 to about ₦200 for 12.5kg of gas.”

Asides a drop in profit, he also has to put up with reduced customer patronage. 

“Before the price increased, I used to refill at least 10 cylinders everyday but now, I hardly refill three cylinders. In fact, when I think some customers are going to refill their 12.5kg cylinders, you would be surprised that they will only buy ₦500 worth of cooking gas,” he added. 

Nike Kazeem and Christiana Sikiru, both petty traders (selling provisions and groceries) in makeshift stalls, express concern about the increased price of the product in the first quarter of 2021.

Whereas Mrs. Kazeem, who says she’s been using LPG for decades, has resorted to kerosene stove to cook for her family in the meantime, Mrs. Sikiru switched to cooking gas in January “because she found that “Kerosene dries up quickly.” She said that the increase was a normal trend with commodities. “There has been an increase in price but I understand that things are now expensive,” she explained.

Fluctuations in LPG Price Lead to Regional Distortions

According to the National Bureau of Statistics (NBS), the national repository for statistics in Nigeria, the average cost of refilling 12.5kg cylinder of cooking gas was ₦4,117.55 in January, and ₦4,363.51 in February but it fell to ₦4,359.23 in March. 

The average price for refilling 5kg LPG cylinder increased from ₦1,949.02 in January to ₦2,018.91 in February and inched up again, in March, to ₦2,057.71.

In 2021, the total average price for refilling 12.5kg in Q1, stood at ₦12,900.28. However, in 2020, the total average price for refilling LPG cylinder was ₦12,542.04.

Eyono Fatai-Williams, General Manager, NLNG responding to a Thisday enquiry about the increasing price of Liquefied Petroleum Gas (LPG) in January replied that the dependence on imported LPG had put undue pressure on the price of the commodity.

In the same vein, two LPG stakeholders gave a similar account for the increase.

“Gas price is highly seasonal. LPG is a global commodity and during the winter seasons, prices are usually high and then, they go down towards the end of the summer. Then again, by the end of 2020 and early 2021, because of forex changes in Nigeria, it took the prices higher than normal,” says Mr. Bashir Koledoye, Managing Director, Dharmattan Gas and Power Products Ltd, adding that the prices “will continue to drop until the summer”.

Fatai Ogungbenle, Head, Business Development and Sales (LPG), Kwale Hydrocarbon Nigeria Limited, an independent downstream gas company, agrees that the increased price of LPG is tied to the seasonal demand for LPG in Europe during the winter seasons.”

“Europe has more of sustained cold season this year because of global warming. It added to the issue of high demand in Europe and part of America, making us to price highly. But in few weeks to come, I think the price of LPG may likely decrease a bit. But the downside to it is the exchange rate. If nothing is done to it, we may experience this for a longer time more,” he explained. 

“I can remember vividly that a truck of gas in November 2020 was ₦4 Million to ₦4.2 Million. But now, it is around ₦5.5 Million to ₦5.6 Million for over a period of about 6 months,” he added.

Nor is the higher price restricted to the gas molecules alone. The cost of the equipment too is rising. Vitalis Obinna said that he sells a 6kg gas cylinder with an accompanying burner for ₦11,000, a 30% jump increase from ₦8,500 which he sold the two equipment just five months ago, in December 2020 

Koledoye explains that “demand dips with higher prices, but because Nigeria is rapidly adopting LPG, the effect is not significant”. He admits that there are challenges with the Forex situation, “but increase in in-country LPG production is expected to reduce this problem very soon”. In general, he feels comfortable with the way the market is now.

In Q1 2021, 55.7% of LPG consumed was imported. This contrasts with 58.4% of LPG consumption, which was imported in Q1 2020, according to the Petroleum Products Pricing Regulatory Agency (PPPRA), a monitoring and regulatory agency of petroleum products in Nigeria. In both quarters, importation took the lead. 

Apart from the price volatility of LPG in Nigeria and enormous dependence on imported products, the price in each State in the country is largely determined by the landing cost of the product. 

In March 2021, Cross River State paid the highest for cooking gas at ₦4762.65 and Zamfara State, ₦3,749.06, accounting for the lowest.

Similarly, Lagos paid ₦4,435.45 to refill 12.5kg cooking gas cylinder. 

Cross River state residents paid the highest price in the nation for 12.5kg LPG in Q1 2021, with a sum of ₦14,407.89 while Kaduna paid the lowest with ₦10,900.79 in total.

Different Retail Prices

An LPG retailer at New Site, Satellite Town, a sprawling housing estate in the west of Lagos, who pleaded anonymity, says that LPG price varies among retailers too.

“The price of cooking gas differs depending on who we buy from. If we buy at a high cost, we sell at a high cost. If we buy at a lower cost, we sell at a lower cost. The gas station sold 12.5kg of cooking gas to me at ₦4,500, I sell it at ₦4,600.”

“The business of LPG has always been a good business but it is just that now, it is not really yielding money like it used to. Last year, it was sold to us at ₦4,000 naira but since January, it increased”, he added. 

Abundant Resources, Lack of Utilization

Nigeria has the largest gas reserve in Africa. As of June 2020, Nigeria’s proven gas reserve was 203.16 Trillion cubic feet (Tcf), according to a report by the Department of Petroleum Resources (DPR) 

In the report, Sarki Auwalu, the director of DPR, said that even with this huge proven gas reserve, gas utilisation was only about 5.5%. 

Mr. Ogungbenle of Kwale Hydrocarbons expressed dissatisfaction at the underutilisation of Nigeria’s gas potential.

“For domestic use of LPG, we are doing less than 25%, far below what we can do,” he said. 

Some of the challenges that the domestic LPG market is faced with include uneven terminal distribution, lack of adequate transport facilities and administrative charges on the domestic sales of LPG, although deregulated.

INTERVENTION PLANS

Nigeria’s federal government set up the LPG Penetration Framework to encourage the use of LPG in households, power generation, auto-gas and industrial applications in order to attain five million Metric Tonnes of local consumption of LPG in 2022, according to the Federal Ministry of Petroleum Resources (FMPR).

The government’s objective of attaining Five million MT of LPG consumption by 2022, puts the national consumption target of LPG at an estimated 83.33 thousand MT per month from 2018 to 2022. 

In 2021 Q1, only March’s LPG consumption met this monthly target at 87, 199.846 Metric Tonnes (MT). 

Even though the calorific content of Liquefied Petroleum Gas (LPG) is higher than kerosene and other cooking fuels, LPG is more capital intensive than most cooking fuels in Nigeria. 

This initial cost of switching to LPG is a contributing factor to the 43% population without access to clean cooking, as at 2018. 

The LPG Gas Expansion Plan was introduced to increase the consumption of LPG in the nation, as the domestic energy mix consist of 60% firewood, 30% kerosene, 5% LPG, 5% charcoal. 

With plans to increase usage of LPG, the federal government will be injecting 10Million cylinders in ten years to the market, according to Dayo Adeshina, Programme manager of the national LPG expansion plan, during a sensitisation workshop on LPG adoption and implementation for industry stakeholders, in Lagos. 

This story was produced under the NAREP Media Oil and Gas 2021 Fellowship of the Premium Times Centre for Investigative Journalism.

 


BP Starts Up 600MMscf/d Field for Egypt’s Domestic Gas Market

British supermajor BP has commissioned the Raven gas field in Egypt’s West Nile Delta, producing 600Million standard cubic feet per day (600MMscf/d) into the country’s natural gas grid for a start.

The field produces into a new onshore processing facility, alongside the existing West Nile Delta onshore processing plant.

At its peak, Raven has the potential to produce 900MMsscf/d and 30,000 barrels per day of condensate.

 

 

Raven is the third of three projects in BP’s West Nile Delta (WND) development off the Mediterranean coast of Egypt. It follows the Taurus/Libra and Giza/Fayoum projects, which started production in 2017 and 2019 respectively.

The approximately $9Billion WND development includes five gas fields across the North Alexandria and West Mediterranean Deepwater offshore concession blocks in the Mediterranean Sea. BP and its partners, working with the Ministry of Petroleum, have developed the WND in three stages.

 Egypt is Africa’s most absorptive market for natural gas, consuming over 6Billion standard cubic feet per day (6Bscf/d), most of it in its 55,000MW electricity generation market.

Bernard Looney, BP’s chief executive, says that the WNDprojects “will make an important contribution to meeting Egypt’s growing energy needs by providing a cost-competitive and resilient gas supply from the country’s own resources.” 


Accugas Agrees to Supply 2.5MMscf/d of Gas to Mansour Group

By Foluso Ogunsan

Nigerian natural gas supplier Accugas has entered into a new gas sales agreement (GSA) with Mulak Energy Limited.

Accugas is a subsidiary of Savannah Energy PLC, the British independent.

The GSA is initially for a seven-year term. It envisages the supply of gas produced by Savannah’s majority-owned Uquo field for an initial two-year period on an interruptible basis (the “Interruptible Gas Delivery Period”) and the subsequent five years on a firm contract basis (the “Firm Delivery Period”). During the Interruptible Gas Delivery Period, Mulak is able to nominate a maximum daily quantity of up to 2.5 MMscf/d (MMscf/d means Million standard cubic feet of gas per day).

Volumes in the Firm Delivery Period will be agreed by the parties before the end of the Interruptible Gas Delivery Period.

The GSA is priced to reflect Mulak’s status as an industrial customer; Accugas, therefore, expects to see its weighted average gas sales price realisation increase as a result of this contract, without the need for any incremental capital expenditure beyond our previously announced plans.

Sales under the GSA benefit from a bank guarantee arrangement from an investment grade credit rated international bank.

Mulak is a member of the Mansour Group, an Egyptian multinational conglomerate which claims operations in more than 100 countries and annual revenues exceeding $7.5Billion.

Mulak says it initially plans to distribute CNG to its industrial customers in Rivers State with the CNG to be substituted for diesel in generators supplied by the Mantrac Group, also a member of the Mansour Group and one of the world’s largest dealers in Caterpillar machinery, power systems and equipment.

“Mulak is in a unique position to exploit the synergies with Mantrac’s business in Nigeria through the conversion of Mantrac’s existing customer base of approximately 400MW of diesel-fuelled generators to CNG-fuelled generators”, Accugas says in a release. “Sales under the GSA are expected to commence in 2022 and, following the initial two-year period, Mulak has indicated that it is seeking to expand its CNG sales on a pan-Nigeria basis to Mantrac customers”.

 

 


New Debt Arrangement Completes the $680Million Financing of the ANOH Project

The ANOH Gas Processing Company (AGPC), has successfully raised $260Million in debt to fund completion of its ANOH Gas Processing Plant.

The 300 Million standard cubic feet per day (300MMscfd) capacity ANOH plant, located on OML 53 in Imo State, is being built by AGPC, which is an IJV owned equally between Seplat-the dual listed company on the London and Nigerian stock exchanges, and the Nigerian Gas Company (NGC), a wholly owned subsidiary of Nigerian National Petroleum Corporation (“NNPC”).

Seplat and NGC have previously provided a combined $420Million in equity funding and the project is now fully funded.

The $260Million funding was provided by a consortium of seven banks: Stanbic IBTC Bank Plc (advisor), United Bank for Africa Plc, Zenith Bank Plc, FirstRand Bank Limited (London Branch) / RMB Nigeria Limited, The Mauritius Commercial Bank Limited, Union Bank of Nigeria Plc and FCMB Capital Markets Limited. It allows for an additional $60Million accordion at the time of completion to fund an equity rebalancing payment at that time, if considered appropriate. Funding commitments of more than $450Million were received by the company, which is a significant oversubscription and a strong sign of confidence in the project.

Following a cost optimisation programme, the AGPC construction cost is now expected to be no more than $650Million, inclusive of financing costs and taxes, significantly lower than the original projected cost of $700Million.

ANOH is one of Nigeria’s most strategic gas projects. It will help Nigeria to accelerate its transition away from small-scale diesel generators to cleaner, less expensive fuels such as natural gas for power generation.

Seplat is a leading provider of natural gas to Nigeria’s power sector, supplying around 30% of gas used for electricity generation.

 

 

 


New York City Pension Funds Pull Out of Fossil Fuel Holdings

New York City’s largest pension funds have voted to initiate full fossil fuel divestment, selling off an estimated $4Billion of holdings in fossil fuel corporations, such as ExxonMobil.

The city’s announcement fulfills its commitment to divest from fossil fuels.

NYC’s pension funds, valued at $239Billion, are the largest municipal pension funds to divest globally.

The city’s divestment commitment, made in 2018, inspired further action worldwide. It was followed by commitments from many other large funds, including the City of London, the Norwegian Sovereign Fund, and the New York State Common Retirement Fund. Today’s announcement confirms the City’s commitment to divest from fossil fuels within five years.

Divestment has exploded over the past decade from a symbolic action by small college endowments into a worldwide movement that has led to over $14Trillion worth of investment funds divesting or committing to divest from the oil, gas or coal industries.

In order to fulfill the Paris climate agreement’s goals of staving off catastrophic climate change, all major finance of fossil fuels and deforestation must end by 2030.


Tlou Looks for Money to Fund Botswana Power Project

By Bunmi Christiana Aduloju

Tlou Energy is currently seeking funding for development of the Lesedi Power Project in Botswana, with plans to develop gas and solar power generation assets with the sale of electricity into the regional power grid.

The London listed company claims it has completed formalities for a 2MW Power Purchase Agreement (PPA) with Botswana Power Corporation (BPC) and has received the signed PPA and Grid Connection Agreement.

The project covers an area of approximately 3,800 Km2 and consists of four Coal and Coal Bed Methane (CBM) Prospecting Licences (PL) and a Mining Licence (ML).  The Mining Licence area is currently the focal point for Tlou’s operations and includes the Lesedi production wells or ‘pods’.

“Tlou has the only independently certified CBM gas reserves in Botswana, with 252 Billion Cubic Feet (Bcf) of 3P gas reserves certified in the Lesedi project area”, the company claims.  “In addition, the 3C Contingent Gas Resources are approximately 3 Trillion Cubic Feet (Tcf)”.

Phase one involves transmission line construction, transformers, grid connection, electricity generators and potentially the drilling of additional gas wells. The ~100 Km transmission line will run from the Lesedi project to the town of Serowe where it will connect to the existing power grid. Initial generation is proposed to be up to 2MW of electricity. Funding required for phase one is ~ $10Million which can be staged if necessary or prudent to do so. “

Phase two funding is for the expansion of electricity generation up to 10MW. This will involve drilling more gas wells and the purchase of additional electricity generation assets. Funding required for phase two is ~ $20Million. Upon successful completion of phase one and two, the Company plans to expand the project beyond 10MW.

Funding discussions are progressing well, in particular with Botswana based institutions with which the Company is in ongoing discussions. Should technical and risk assessments on Tlou’s operations be successful, the relevant parties would then seek internal approval to proceed, followed by legal and other due diligence. If such approval is granted, which is currently expected towards the later end of Q1 2021, Tlou would then be in a position to announce further details of the proposed deal.

Tlou is also considering what further progress can be made at Lesedi prior to conclusion of any Botswana based finance. Activities could include the purchase of land for gas and solar development, preparatory work on transmission line infrastructure, and drilling operations. Undertaking this work in the near term and in advance of the conclusion of the ongoing discussions in Botswana could facilitate a more rapid development of the project – all subject to funding as well as any pandemic related restrictions that may be in place.

 


Energean to Top Up Egypt’s Gas Output with 90MMscf/d

By Toyin Akinosho

Energean’s Final Investment Decision on the NEA/NI project in Egypt, calls for a $235Million spend to deliver natural gas at 90Million standard cubic feet per day at peak.

TechnipFMC has been awarded the EPIC contract to deliver the project.

Energean Plc is a London listed firm with focus on the Mediterranean.

NEA/NI refers to North El Amriya and North Idku concessions, which are, though not contiguous, being jointly developed.  The project is a shallow offshore subsea tieback.

The NEA concession contains two discovered and appraised gas fields (Yazzi and Python) while the NI concession contains four discovered gas fields, one of which is readied for development.

NEA/NI, with 49Million Barrels of Oil Equivalent (BOE) of 2P reserves, 87% of which is gas, is due to deliver first gas in the second half of 2022. Some 1,000Barrels per day of condensate will also be produced.

“When Brent prices are above $40/bbl, gas will be sold at $4.6/MMBTU, which is the highest achieved to date for shallow water gas production, offshore Egypt”, Energean says in a statement.

 


Africa’s Electricity Unlikely to Go Green This Decade

PARTNER CONTENT

New research from the University of Oxford predicts that total electricity generation across the African continent will double by 2030, with fossil fuels continuing to dominate the energy mix – posing potential risk to global climate change commitments.

The study, published by Nature Energy, uses a state-of-the art machine-learning technique to analyse the pipeline of more than 2,500 currently-planned power plants and their chances of being successfully commissioned. It shows the share of non-hydro renewables in African electricity generation is likely to remain below 10% in 2030, although this varies by region.

“Africa’s electricity demand is set to increase significantly as the continent strives to industrialise and improve the wellbeing of its people, which offers an opportunity to power this economic development through renewables” says Galina Alova, study lead author and researcher at the Oxford Smith School of Enterprise and the Environment

“There is a prominent narrative in the energy planning community that the continent will be able to take advantage of its vast renewable energy resources and rapidly decreasing clean technology prices to leapfrog to renewables by 2030 – but our analysis shows that overall, it is not currently positioned to do so.”

The study predicts that in 2030, fossil fuels will account for two-thirds of all generated electricity across Africa. While an additional 18% of generation is set to come from hydro-energy projects. These have their own challenges, such as being vulnerable to an increasing number of droughts caused by climate change.

The research also highlights regional differences in the pace of the transition to renewables, with southern Africa leading the way. South Africa alone is forecast to add almost 40% of Africa’s total predicted new solar capacity by 2030.

“Namibia is committed to generate 70% of its electricity needs from renewable sources, including all the major alternative sources such as hydropower, wind and solar generation, by 2030, as specified in the National Energy Policy and in Intended Nationally Determined Contributions under Paris Climate Change Accord,’ says Calle Schlettwein, Namibia Minister of Water (former Minister of Finance and Minister of Industrialisation). “We welcome this study and believe that it will support the refinement of strategies for increasing generation capacity from renewable sources in Africa and facilitate both successful and more effective public and private sector investments in the renewable energy sector.”

“The more data-driven and advanced analytics-based research is available for understanding the risks associated with power generation projects, the better”, Mr. Schlettwein argues. “Some of the risks that could be useful to explore in the future are the uncertainties in hydrological conditions and wind regimes linked to climate change, and economic downturns such as that caused by the COVID-19 pandemic.”

The study suggests that a decisive move towards renewable energy in Africa would require a significant shock to the current system. This includes large-scale cancellation of fossil fuel plants currently being planned. The study also identifies ways in which planned renewable energy projects can be designed to improve their success chances – for example, smaller size, fitting ownership structure, and availability of development finance.

“The development community and African decision makers need to act quickly if the continent wants to avoid being locked into a carbon-intense energy future’ says Philipp Trotter, study author and researcher at the Smith School. ‘Immediate re-directions of development finance from fossil fuels to renewables are an important lever to increase experience with solar and wind energy projects across the continent in the short term, creating critical learning curve effects.”

 

 

 


Savannah Inks Revised Gas Sales Agreement with Lafarge

New deal comes with a price of $7.5 per thousand cubic feet of gas

Savannah’s Accugas subsidiary has entered into a revised Gas Sales Agreement GSA with Lafarge Africa for the supply of gas to its Mfamosing cement plant in Cross River State, Nigeria.

The company says the new deal “establishes a more sustainable long-term contractual position for the benefit of both parties”.

The revised GSA sees the contract term with Lafarge extended for a further five years to January 2037, giving a remaining contract life of 17 years.  The new agreement also allows for an increase in the gas sales price from 2027, with additional US-Consumer Price Index indexation from 1 January 2029.

The revised GSA has a reduction in the daily contracted quantity (DCQ) of gas from 38.7 MMscf/d to 24.2 MMscf/d. This reduction in the DCQ will allow Accugas to release approximately 12 MMscf/d of currently reserved gas processing capacity at its Central Processing Facility (CPF), enabling Accugas to enter into additional long-term GSAs for these volumes, which will increase the business’ future revenues and cashflow potential.

To compensate Accugas for this reduction in DCQ, the revised GSA includes an advance payment of $20Million and a prepayment structure over the period to 2027, which effectively results in a gas price of $7.50/Mscf on take-or-pay volumes during this period.  “This revised structure also allows Lafarge to utilise its accumulated make-up gas balance of approximately $58Million, whilst we have preserved the capacity to supply higher volumes when these are required by Lafarge”, Savannah says in a statement. “Lafarge’s commitments under the revised GSA will continue to be guaranteed by an international investment grade bank guarantee.

“Overall, the revised terms are expected to have a cumulative positive impact on Accugas’ cash flows over the short and medium term. Following the agreement, Accugas’ aggregate maintenance-adjusted take or pay volume will reduce from 141.4 MMscf/d to 131.8 MMscf/d.

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