Nigeria targets N2.8trn revenue with new gas project

Jaiz Bank targets N6.15bn

Nigeria targets N2.8trn revenue with new gas project


  • Facility to provide 3.5m megawatts electricity in 25yrs

 

About N2.8 trillion-revenue is expected from a new 200 million cubic feet gas project being promoted by the Nigerian Petroleum Development Company (NPDC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC).

This revenue is expected to be made in about 25 years as the Integrated Gas Handling Facility (IGHF) and LPG Units project would contribute at least $300 million yearly, bringing revenue to about $7.5 billion (N2.8 trillion) at full output.

The project, which could be commissioned later this week, is coming shortly after a new pipeline project, the Ajaokuta-Kaduna-Kano pipeline, kicked off.

The NPDC IGHF according to the NNPC would yield 82mmscfd of lean gas or methane, which is equivalent to 366.5MW of electricity per day.

If operated at full capacity, the facility could provide gas resources that could generate as much as 3.2 million megawatts of electricity in about 25 years.

It was gathered that the 82mmscfd translates to $205,000 per day or approximately $75 million per year at $2.5 per mscf of gas while there would be additional 330 tonnes per day of LPG, translating to about 16-20 tonnes LPG trucks per day for the domestic gas market. This yields about N73.6 million per day or N26.8 billion per year.

There are also indications that 345 tonnes per day of propane with projected revenue of about $107 million per year while 2600 barrels (bbl) per day of condensate of which 800bbl is pentane and valued at $32.85 million per year are realisable from the facility.

The Federal Government had earlier in the year put the country’s total gas reserves at 203.16 trillion cubic feet (TCF), representing a marginal increase of 1.16tcf or 0.57 per cent from the 202tcf recorded in 2019.

Timipre Sylva, the minister of state for petroleum resources, had declared that aggressive effort would be to unlock revenue and economic potential of gas just as the government declared 2020 the year of gas.

Some stakeholders believed that while the government is on the right track, the sector could attract more investors with the right fiscal framework. They see gas as the necessary requirement for the energy transition. And the abundance of resources in Nigeria gives the country an edge.

The government had in 2005 directed the NPDC to supply 45 million standards cubic per day (mmscfd) of lean gas to the 500 megawatts (MW) Ihovbor power generation company (Genco) in Benin from its oil asset – oil mining lease (OML) 111 and another 55mmscfd of lean gas to the domestic market through the Escravos Lagos Pipeline System (ELPS).

The obligation led to a gas department at NPDC to meet the projected plan and contribute to the reduction of gas flaring. The contract for the construction of the IGHF was awarded in 2015 but stalled until 2016 due to budgetary delay.

While aiming at meeting domestic supply obligation (DSO), the agency will from its Oredo field process 100mmscfd flared gas to wealth for about 25 years.

Now completed in the fourth quarter of 2020, the IGHF is expected to benefit Nigeria economically by ensuring that liquified petroleum gas (LPG), propane and pentane are available for domestic consumption.

Built to process 200mmscfd of natural gas to the standard accepted by the West Africa Gas Pipeline (WAGP), the NPDC’s IGHF is able to deliver processed lean gas to the domestic market through a viable gas spur line to the Early Production Facility (EPF).

NNPC disclosed that nearly 350 skilled and unskilled personnel would benefit from the facility as over 100 persons have been engaged. Another 100 would be required for the daily operation and maintenance of the IGHF.

The Corporation disclosed that the project would supply 26, 400 cylinders of 12.5 kilograms (kg) of LPG daily to homes.

Habeeb Jaiyeola, associate director at PwC Nigeria, noted that the government gas development plan in the face of the uncertainty in the crude oil market should be supported and sustained.

With environmental challenges across the world, Jaiyeola noted that some of the gas projects being implemented by the Federal Government, including the NPDC plant should be seen as a strategic environmentally-friendly option towards industrial development and domestic power generation.

“Gas development is a good strategy for this country. Gas is a cleaner source of energy. Prices of crude oil keep fluctuating. So, Nigeria needs to have an alternative,” Jaiyeola said.

Jaiyeola noted that the country’s power deficit would also receive succour since gas remained a critical issue for power generation, adding that government investment in gas is timely and in the right direction.

He advised that the government should work on sustainable policies and ensure that lessons learnt from the mistakes in the oil sector are not repeated in gas development.

Dada Thomas, past president of Nigeria Gas Association, noted that gas development in the country was beginning to attract attention going by recent moves.

However, Thomas, who is the chief executive officer of Frontier Oil Limited, said there was a need to develop urgent solutions that would attract private investors to unlock the potential of the domestic gas market.