Realising the potential of Nigeria’s Gas Reserves
On the 6th August, The Oil & Gas Council will bring together industry leaders from across the Nigerian oil & gas market to discuss how to realise the potential of Nigeria’s vast gas reserves.
In May Nigeria LNG Limited (NLNG) secured a landmark US$3 billion backed hybrid corporate financing deal with Deutsche Bank. This news flow landed in close proximity to Final Investment Decision (FID) being given on a new LNG processing unit at NLNG. Once operational, the new unit, will add around 8 million tonnes per annum (mtpa) of capacity to the Bonny Island facility. As Osagie Okunbor, Country Chair, Shell Companies Nigeria said at the time “the EPC awards for Train 7 is good news for Nigeria with the potential to bring more export revenues, unlock new projects, and attract foreign direct investments, in addition to transforming the economy of the Niger Delta and Nigeria as a whole.”
Despite the prevailing macro-economic challenges, Nigerian gas exports through the world-class NLNG facility have remained resolute, down only 4% year-on-year. This export success offers one route for Nigeria to realise the potential of its vast 200trn ft3 of proven reserves. Domestic supply still doesn’t meet demand and the much publicised Seven Critical Gas Development Projects (7CGDP) is being fast-tracked to close this supply gap by bringing in 3.5bscfd of gas by 2021. For this to happen the development of non-associated gas and industry partnership is critical. SEPLAT’s ANOH Gas Processing Company (AGPC), the first incorporated JV between an indigenous oil company and NNPC is one such example, as is Savannah Energy’s subsidiary Accugas, the gas processing business. However, to achieve sustained success around domestic gas utilisation, more clarity is needed around pricing and fiscal policy issues that aid capital recovery.
Moving away from gas, the Nigeria government recently launched its first marginal fields licensing bid round in 17 years. There is a focus with this licensing round on local content and to further allow Nigerian companies to develop these oil and gas fields. It offers the country the opportunity to develop global leadership and local experience while providing significant upside on production. The previous round in 2003 saw 24 fields awarded to 31 companies, but only 9 are currently producing today contributing less than 3% of overall production in Nigeria.
One key question that needs to be asked of course is why now when no Nigerian marginal field historically has been profitable at sub $30 a barrel? How successful will the round be in terms of viable companies coming to raise capital and sign signature bonuses? Will the government do all that it needs to ensure it is a success? These are all major challenges against the backdrop of the PIB having not passed which was designed to facilitate future bid rounds.
In early June the possibility of downstream deregulation emerged though some are rightfully cautious as to why Minister of State for Petroleum Resources, Chief Timipre Sylva was claiming this has been the case since mid-March in the fuels market. This is potentially welcome news of course for private sector participants who have long championed for complete deregulation of the Nigeria downstream sector. This could act as one catalyst for the emergence of diversified downstream players in Nigeria. Currently, there are many complex forces impacting the domestic downstream market, and many players are considering how to tackle them. However, most market commentators agree that simply providing more competition will create a deeper value chain that can attract investment into the downstream sector and provide greater local capacity.
Over the course of the morning, senior leaders will have the time to discuss all of these key areas and more. Should you wish to participate in the discussion please contact [email protected]