Nigeria's Gas and Gas-liquid Reserves

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    RIVERS STATE UNIVERSITY OF SCIENCE AND

    TECHNOLOGY NKPOLU, OROWORUKWO

    P.M.B. 5080, PORT HARCOURT

    TERM PAPER

    TOPIC:

    NIGERIAS NATURAL GAS AND GAS-LIQUID RESERVES

    PRESENTED BY:

    (GROUP 1)

    NAMES:

    OHAZURUIKE LOTANNA VITUS DE. 2007/1049

    EZERIE ADINDU WILLIAMS DE.2005/0713

    OGBU KINGSLEY DE. 2007/1047

    OKPARA NELLY CHINASOM DE. 2007/1051

    GBERESUU CHRISTIAN DE. 2006/2810

    ALBERT-BRIGGS FITZALLEN DE. 2007/1012

    DEPARTMENT: PETROLEUM ENGINEERING

    COURSE TITLE: NATURAL GAS PROCESSING

    COURSE CODE: PTE 542

    COURSE LECTURER: ENGR. FIDELIS WOPARA

    MARCH, 2013

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    ABSTRACT

    A mention of the name Nigeria brings to mind, in terms of reserves, a major

    quality oil producer. What few do not know is that the country is just as

    much, or perhaps more of a gas than oil province. If oil has played a key role

    in developing the countrys economy, gas is yet to and may even make a

    much greater impact on the positive growth of the nations economy. With

    an estimated 180 Tcf (30 MMboepd) proven natural gas reserves as of the

    end of 2011, the country stands taller than all its African peers and is

    positioned at the ninth largest natural gas reserve holder in the world. This

    paper is designed to review the nations Natural gas reserves; how it has

    grown over time, its utilization and importance to the economy. It shall also

    employ projected production amidst exploration efforts, if any, to forecast

    the rate of decline/increase of these reserves up to a foreseeable future.

    Statistics are presented at every point to portray clearly and distinctively the

    nature of these reserves.

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    TABLE OF CONTENTS

    Contents Pages

    1. Abbreviations and Acronyms 3

    2. Introduction 4

    3. Current Reserves 7

    4. Depletion of Gas Reserves 11

    4.1.Growth of Reserves 11

    4.2.Gas Reserves Decline 12

    4.2.1. Gas Flaring 15

    4.2.2. Domestic Gas Market 17

    4.2.3. Export-Oriented Project 19

    5. Conclusions and Recommendations 21

    6. References 22

    7. Appendix 24

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    1.0 ABBREVIATIONS AND ACRONYMS

    WB NSGMP World Bank Nigeria Strategic Gas Master Plan

    US EIA United State Energy Information Administration

    IOCs International Oil Companies

    ALSCON Aluminium Smelter company of Nigeria

    UNDP United National Development Programme

    NLNG Nigeria Liquefied Natural Gas

    EGTL Escravos Gas To Liquids

    BOE Barrels Of Oil Equivalent

    MMCF Million Cubic Feet

    Tcf Trillion Cubic Feet

    Bcf Billion Cubic Feet

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    2.0 INTRODUCTION

    Nigeria and its natural gas

    It is a publicly held notion that Nigeria is richly blessed with abundant

    resources, but very few consider its Natural gas reserve potential when

    making this statement. The focus is and has always been on its oil, with

    majority of its natural gas discoveries being mishapsin the search for oil. In

    spite of the fact that there has never been a single exploratory effort designed

    solely to discover gas, the country has an estimated 180Tcf proven gas

    reserves, enough reserves which based on its productionto-reserves ratio is

    expected to last for 109 years (Ukpohor, 2009). Despite holding a top 10

    position for proven natural gas reserves, Nigeria produced just 1Tcf of

    natural gas in 2011 and ranked as the worlds 25 th largest natural gas

    producer (US EIA, 2012).

    Figure 1: Top 10 Proven Gas Reserve Holders, end 20115

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    Failure to harness its gas resources has had its share of contribution to the

    nations sluggish economic growth. This is particularly true in the power

    sector where unreliable or nonexistent gas supplies have contributed to a

    major ongoing crisis in power deliveries, crippling the economy for years,

    and seriously inhibiting new investment (WB NSGMP, 2004). A number of

    issues have plagued its efforts to harness these resources, the most profound

    of which are the instability issues of the Niger Delta, the nations natural

    resources base. For example, the US EIA 2012 Report on Nigeria stated that

    dry natural gas production grew for most of the last decade until Shell

    declared a force majeure on gas supplies to the Soku gas gathering and

    condensate plant in November 2008. Shell shut down the plant for repair

    damages to a pipeline connected to the Soku plant that was sabotaged by

    local groups siphoning condensate. This is only one of similar numerous

    incidents of oil theft plaguing production in the region.

    Other issues hindering its efficient reserves growth and utilization have all

    been found to revolve around the nations government and its regulation of

    the industry. This, we believe is the sole reason why this nation still flares

    majority of its produced gas in spite of the gas flaring deadline of 2008

    given by the government. The government has also failed in its obligation to

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    create the market necessary to encourage exploratory efforts in this sector.

    This is evident in the lack of sole exploratory efforts designed to discover

    gas. Also hampering the exploratory efforts are the instability involved with

    the governments proposed Petroleum Industry Bill, a reason for which

    international oil companies have deliberately delayed exploration and

    development of certain prospects.

    Also paramount is the rather slow domestic growth and utilization of its gas

    resources. Some experts believe that the countrys gas reserves could be as

    high as 600Tcf, which is three times more than the current conventional

    estimate of 187Tcf. This is enough to last as long as 500 years, fuelling our

    industries, homes, and international export, if efficiently harnessed.

    Nonetheless, amidst all these setbacks, the nation does have a bright future if

    its current drive and proposed gas utilization projects are seen to the end. Its

    commendable increase in gas related projects, most notably the NLNG and

    EGTL facilities, are giant strides in the direction of economic growth. It is

    hoped that a continuous stream of similar well-conceived projects and

    associated domestic power development projects, would bring the nation to

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    a much anticipated top economic spot in line with its vision statement for the

    year 2020.

    3.0 CURRENT RESERVES

    Nigeria is endowed with abundant natural resources, which in energy terms,

    is in excess of the nations proven crude oil reserve. However, the gas was

    discovered whilst exploring for crude oil, as there is virtually no exploration

    for gas in Nigeria. Therefore, high oil production implies that additional high

    volumes of associated gas will be produced (Ojide et al, 2012). This gas

    reserves is split appropriately on a 50/50 ratio between AG and NAG. Most

    of the proven gas reserves are found as AG in the Niger Delta basin while

    the majority of the NAG has been discovered in the offshore blocks

    (Economides et al, 2004).

    It is estimated that 90% of Hydrocarbon reservoirs in Nigeria contain

    potential commercial volume gas-cap (Economides et al, 2004). If properly

    harassed, this could bring the nation an unprecedented economic growth.

    The WB NSGMP 2004 stipulates that the Niger Delta Basin has a proven

    plus probable oil and condensate reserves found to date of 55 billion barrels.

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    This compares to gas reserves found to date of 32 billion BOE (194 Tcf)

    distributed among the 707 existing fields and discoveries in the basin (WB

    NSGMP, 2004). Currently, the US EIA 2012 report on Nigeria put this

    figure at 30MMM BOE (180Tcf). More important however, are the

    remaining and yet-to-find gas reserves. The first category is estimated to

    hold 158 Tcf of gas reserves with 142 Tcf estimated to be in the second (WB

    NSGMP, 2004). The YTF estimate is somewhat conservative, considering

    only plays or producing zones currently known.

    As previously stated, the reserve would be designated as either AG or NAG.

    Traditionally, most oil companies do not like to find gas together with their

    oil field associated gas (AG). Rather, they prefer to find gas without it

    being mixed up with oil- Non Associated Gas (NAG) (Ojide et al, 2012).

    The OPEC quota of 1.704MMBPD production for Nigeria imposes a limit to

    the AG production. Consequently, producing companies have to device

    means of disposing it in order to profit from the oil, the lucrative driver. The

    figure below shows the quantity of gas resources available to Nigeria and the

    split between NAG and AG. It should be noted that this designation has

    more to do with the way the field is or will be developed than actual oil or

    gas reserves. As such, a few fields that are technically gas or gas condensate

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    have been designated as AG because they are located with oil fields (WB

    NSGMP, 2004).

    From the figure, approximately two-thirds of the remaining AG reserves are

    in production and One-third are undeveloped or developing discoveries.

    However, for NAG, there are more non producing reserves than producing

    reserves (WB NSGMP, 2004). This is just another indication of the absence

    of the deliberate exploratory efforts for gas in Nigeria.

    Figure 2: Associated and Non-Associated Gas Resources

    Source: World Bank Strategic Gas master Plan 2004

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    Across the Niger Delta, exploration success, at fifty percent, is above global

    averages. Hence, Nigerian upstream potential is likely to remain extremely

    positive, and the potential YTF resources may almost equal the remaining

    discovered reserves in the basin (WB NSGMP, 2004). Based on this, the

    following table was prepared.

    Table 1: Yet-To-Find Hydrocarbons in Nigeria by Hydrocarbon type

    and Geographic Area

    Oil (Bnbbl) Gas (BCF)Associated Non Associated

    Onshore

    East 8522 37364 2812

    West 6761 17971 2926Offshore

    East 15264 29878 21636

    West 8830 17284 12516Total 39737 102497 39382

    4.0 DEPLETION OF GAS RESERVES

    4.1 GROWTH OF RESERVES

    The rate of increase in gas reserves in Nigeria is to a large extent difficult to

    estimate owing to the wobbly premise and blurry future of associated

    exploratory efforts required to acquire the estimate. This is evident in the

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    estimate presented by various sources. As of 2000, IHS Energys database

    estimated a proven gas reserve of about 150 Tcf (WB NSGMP, 2004). In

    2004, a total of about 187 Tcf was estimated by the WB NSGMP. This

    represents an increase of about 6.2 % per annum. According to the BP

    Statistical Energy Survey, Nigeria had as at 2009, proved natural gas

    reserves of 185 Tcf, representing a 0.32% decrease per annum from the 2004

    estimate. At the end of 2011, OGJ put the figure at 180 Tcf, representing a

    1.35% decrease per annum (US EIA, 2012). This decrease could be

    attributed to the introduction of the LNG trains 4, 5 and 6 which came up in

    November 2005, February 2006 and 2007 respectively, and reduced

    exploratory efforts due to rumors of the proposed Petroleum Industry Bill,

    amongst others.

    Some barriers to the exploitation of the nations huge natural gas reserves

    are:

    Resources are in a remote location

    The major potential market of power is in a state of stagnation

    Limited infrastructure to transport the gas beyond the current

    locations of Lagos and Port Harcourt

    High levels of initial investment required

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    Poor investment climate due to lack of a proper consistent legal, fiscal

    and approval framework.

    Summarily, an increase in the nations reserves base would be spurred by

    favorable fiscal policies by the government. This is certain to attract

    investors.

    4.2 GAS RESERVES DECLINE

    The nations oil & gas reserves are declining by as much as 12% per annum,

    with production from onshore and shallow waters oil fields having reached

    their peaks said Petroleum Minister Diezani Alison Madueke (Gbogbo-Bala,

    2011). The decline is attributed to production, amidst zero gas exploration.

    The gas produced is either re-injected, flared or utilized in the nations

    domestic gas market or export-oriented projects. In 2000, Nigerian gas

    production amounted to some 4.6Bcfd with some 55% being flared and the

    balance split between re-injection, NLNG feedstock, internal fuel usage and

    a small percentage marketed as LPG (WB NSGMP, 2004). The figure below

    indicate the dry natural gas production and consumption in Nigeria 2000-

    2011(Fig 3), the projected gas production (Fig 4) and the same projected

    volume split between AG and NAG (Fig 5). What becomes immediately

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    noticeable is that if the overall utilization issue of gas is not addressed now

    the flaring will get worse as more AG is expected.

    Figure 3: Dry Natural Gas Production and Consumption in Nigeria 2000-2011

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    Figure 4: Gas Production ProjectionsSource: World Bank Strategic Gas Master Plan 2004

    Figure 5: Gas Production Projections for AG and NAGSource: World Bank Strategic Gas Master Plan 2004

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    4.2.1 Gas Flaring

    The issue of gas flaring is one whose persistence in Nigeria is disturbing. In

    2004, the Nigerian Government contracted the World Bank to design a

    strategic gas plan for the nation. This was due to seven (7) project proposals

    presented to it by IOCs in line with a well publicized stipulated deadline for

    gas flaring, 2008. Five years past the deadline and flaring still persists. IOCs

    like SPDC still flare a greater percentage of produced AG when their nation

    UK, has a zero flaring policy. The WBNSGP states that Nigerian flares 2.5

    BCFD resulting to an annual revenue loss of US$2.5 billion, amounting to

    US$50 billion over 20 years. This figure is enough to settle the nations

    foreign debts of about 31 billion US Dollars.

    The persistence of the IOCs to flare gas has further bolstered the question,

    is the Nigeria Oil Industry controlled by the FG on by the IOCs? Nigerian

    government enacted a law Associated Gas Reinjection Act in 1979 which

    allowed some conditions for specific exemption of the payment of a fee of

    US $0.003 per MMCF with effect from 1984 which increased to US $0.07

    per MMCF in 1988 and in January 2008 to US$3.5 per MCF of gas flared

    (Ojide et al, 2012). Still, approximately 75% (by 1998), 63% (by 2000) and

    24.30% (by 2010) of the total gas output were flared (Ojide et al, 2012). It is

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    reported that Nigeria flares enough gas to double the power produced in sub-

    saharan Africa excluding South Africa (Ojide et al, 2012).

    However, noteworthy is the decline in flaring over the years even though the

    zero flaring deadline of 2008 is long gone. This decline could be attributed

    to improved gas distribution networks across the nation and the

    commissioning of more gas utilization projects.

    Figure 5: Top 5 Gas Flaring Countries 2010

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    4.2.2 Domestic Gas Market

    The Nigeria Gas Company (NGC), a subsidiary of NNPC is in charge of

    national gas supplies for power generation, either as source of fuel or as

    feedstock to cement and fertilizer plants, glass, food and beverages,

    aluminum smelting, petrochemical industries, among others. The most

    prominent and promising member of this family is the power industry. The

    figures below indicate projections of consumption for some of these

    sections.

    Figure 6: Gas Consumption Projections for Future Gas Power Plants

    Source: World Bank Strategic Gas Master Plan 2004

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    Figure 7: ALSCON Gas Consumption

    Source: World Bank Strategic Gas Master Plan 2004

    Figure 8: Power Demand Projection for Nigeria

    Source: World Bank Strategic Gas Master Plan 200419

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    Other proposed projects are the GTL projects

    - Chevron producing Nigeria (CPN) 35000 bpd GTL Plant at

    Escravos (Consuming 0.35 BCfd)

    - ExxonMobil (MPN) 87,000bpd GTL Plant on Bonny Island

    (Consuming 0.82Bcfd)

    4.2.3 Export Oriented Projects

    For the International market, NNPC and its Joint Venture partners are

    currently embarking on several gas utilization projects, some of which are

    given in the table below:

    Table 2 Export-oriented projects in Nigeria

    Project Location Product Year Active Gas/Condensate

    consumptionNLNG (6trains) Bonny LNG, LPG,

    Condensate

    1999 3.5Bcfd

    Brass (2 trains) LNG, LPG,

    NGL

    2011

    Ok LNG (4 trains) Olokola LNG, LPG 2012/2013 4.5MMcfd

    Oso NGL Oso NGL 1998 110,000bpd

    West Africa Gas

    Pipeline

    Nigeria, Togo,

    Benin and

    Ghana

    Gas 2011 0.17Bcf/d

    Trans-Sahara Gas

    Pipeline

    Nigeria-

    Algeria

    Gas - 2Bcf/d

    Escravos Gas project LPG 2006

    Belema Gas Injection 80MMcf/d

    Odigbo Node Gas

    Project (Supply

    113MMMcf/d

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    ALSCON)

    Others are Ekpe Gas compression projects, Oso 2Y2 Project, Odidi AGG

    Project Cawthorne Channel Gas Injection Project.

    5.0 CONCLUSION AND RECOMMENDATIONS

    Nigerias previous foremost customer, US, has decreased their import of

    Nigerias LNG to less than 5%. Japan has tripled her demand owing to the

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    Fukushima incident. It is only a matter of time before these problems are

    resolved, or other customers decrease their demand in search of more

    economic energy sources. As such, Nigeria, as a nation, needs to take

    advantage of the present economic condition fast. Just because we have

    enough gas reserves to last for 109 years does not necessarily mean we sit

    back, fold our arms and watch the clock tick.

    Also, the domestic gas utilization projects should be pursued aggressively.

    Many do not realize that power generation is the pillar of tremendous

    economic growth. These projects, alongside their export-oriented projects

    are expected to help put an end to gas flaring, our wealth in flames.

    There exists a strategic Gas Plan for this country. The authors have reviewed

    and strongly recommend that it be re-adopted as a tool/guideline to

    improving the nations exploitation of its natural gas reserves.

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    7.0 APPENDIX

    Nigeria Reserves and Production Summary

    Table 5.1 Nigeria Reserves

    (Source World Bank Strategic Gas Master plan For Nigeria 2004)

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    30/31

    30

  • 7/30/2019 Nigeria's Gas and Gas-liquid Reserves

    31/31