With the recent increase in gas demand fuelled by reforms in the power sector, gas producing companies have seen opportunities for making more money as they are poised to increase their supply to the domestic market.
Shell Petroleum Development Company (SPDC) has already put in place a $6 billion gas utilsation project, and it has spent about $3 billion of this money, while another $3 billion would be spent on other projects to improve gas supply to the domestic market.
Shell said joint venture funding challenges had resulted in delays to some gas-gathering projects, adding that two of these projects, which were expected to gather an additional 35 percent of associated gas by 2014-15, were likely to be delayed.
Similarly, Total Upstream Nigeria has spent about $900 million on a gas pipeline that would supply gas to Alaoji power plant come January 2015. Its multi-billion dollar Amenam project which is due for commissioning in December is also geared towards pushing more gas to the domestic market and improving the value of gas.
Elisabeth Proust, managing director of the company, said in an interview with BusinessDay that through the various gas utilisation projects, the company would also achieve zero gas flare by January 2015 as the Ofon phase 11 project, which would tie all gas from other installations, would have been completed.
“We have one major installation where we are flaring gas, and this is Ofon, but this would stop by January 2015. The shutdown was planned for December but I want to be careful because even though we meant December, it could be extended to the second week of January 2015. Other installations are connected to the gas system and so, we would have zero gas flare,” said Proust.
Also Eni, the Italian oil giant and one of 15 oil operators participating in the Global Gas Flaring Reduction Partnership, the World Bank’s public-private partnership, has embarked on some gas utilisation programme that would help boost power generation. The over $1.5 billion which the company has already consolidated in some gas projects within its operations is meant for improving gas utilisation and reducing the volume of flared gas between 2010 and 2012.
Eni has achieved consistent reduction in gas flaring in Nigeria (down 11 percent), where the “Ogbainbiri Flow Station Upgrading” and “Idu Phase 2 Works Completion & Flaring Down” projects are ongoing.
In 2009, the government developed a Gas Master Plan aimed at promoting investment in gas through pipeline infrastructure and gas utilisation. The government recently created a tariff framework that will incentivise the utilisation of the gas being flared to generate electricity.
“We are trying to create a tariff framework that will incentivise the utilisation of the gas being flared to generate electricity,” Abba Ibrahim, commissioner, government and consumer affairs, Nigerian Electricity Regulatory Commission (NERC), told BusinessDay on the sidelines of a recent conference.
“We will encourage the building of new infrastructure by giving good tariffs that will incentivise the use of the flared gas. This will complement what the Department of Petroleum Resources (DPR) is doing. They put the penalty and we put the incentives. So it is a carrot-and-stick approach and that is why institutions like ours work collaboratively,” Ibrahim said.
With the recent privatisation of the power sector and ongoing reforms designed to encourage investment in power generation capacity from the existing 6,000 megawatts (MW) to 40,000 MW by 2020, demand for gas is expected to grow from 1.8 billion cubic feet per day (bcfd) in 2012 to 7.2 bcfd in 2025, equivalent to 11.3 percent increase per annum.
Nigeria has over 180 trillion cubic feet (Tcf) of discovered reserves and up to 600 Tcf of undiscovered gas reserves, but requires massive investment to unlock the value in the resource. The country is second to Russia in global gas flaring, according to the World Bank, as it currently flares about 1.5bcf daily.
FEMI ASU
