West Africa - Gaffney, Cline & Associates Monetisation-Challenge… · LNG & West Africa has ......
Transcript of West Africa - Gaffney, Cline & Associates Monetisation-Challenge… · LNG & West Africa has ......
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West Africa Gas Monetisation – Challenges and Opportunities
The Royal Institution 29th January, 2014
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Confidentiality and Disclaimer Statement
This document is confidential and has been prepared for the exclusive
use of the Client or parties named herein. It may not be distributed or
made available, in whole or in part, to any other company or person
without the prior knowledge and written consent of GCA. No person or
company other than those for whom it is intended may directly or
indirectly rely upon its contents. GCA is acting in an advisory capacity
only and, to the fullest extent permitted by law, disclaims all liability for
actions or losses derived from any actual or purported reliance on this
document (or any other statements or opinions of GCA) by the Client or
by any other person or entity.
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Agenda
▪ Overview of Gas Monetisation Issues in West Africa
▪ Consideration of specific issues in selected countries
▪ Potential game changers
▪ Conclusions
Size of circle is
proportional to
reported gas
reserves
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West Africa Gas Monetisation – The Challenges
▪ Superficially gas usage is full of contradictions – large gas flaring in close proximity to very low per capita commercial energy usage
▪ Is the biggest challenge in West Africa too much gas????????
▪ Or too little gas ?????????
▪ In fact it’s a far more
complex story……..
Source: Panos London
Source: Wikipedia
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Gas Monetisation Options
▪ We’ve all seen diagrams such as the following which compare distance to market versus reserves size to determine optimal monetisation routes
▪ West Africa has typically been an oil-oriented play with associated gas
▪ But such diagrams give no indication of costs ……..
Distance (km)
Qu
anti
ty (
MM
scfd
)
Pipeline LNG
LNG &
GTL Medium-scale LNG
Small/Med -scale GTL
GTL
Small scale LNG
Methanol/DME
Fertilizer or CNG
(Domestic Markets
Power
Source: GCA
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Illustration of Typical Gas Development Options ▪ Low volume, high cost
gas developments can be difficult to monetise
▪ West Africa characterised by numerous small fields and associated gas/gas caps. So some key options are: – Commercialise via
Fertilizer or GTL – if gas price is low
– Develop multiple fields and/or wait for further exploration (pre-salt?) success
– Monetise via power generation
– Small scale LNG?
– Micro GTL?
▪ Each have challenges
Feedstock Gas Price US$/Mscf
Qu
anti
ty, M
Msc
fd
LNG GTL
Methanol/DME
Power Ammonia/
Fertilizer Small scale LNG/GTL
4 2 6
100
200
300
Source:GCA
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West Africa Gas Monetisation – The Challenges
▪ Some of the issues facing gas
developments in West Africa are:
– Lack of gas infrastructure ▪ Lack of other infrastructure e.g. roads,
ports
– Disconnect between gas availability
(price and/or volume) and viable
development options
– Affordability of gas in domestic markets/payment issues
– Associated gas at low pressure therefore high cost to deliver via pipeline to users
– Exports versus domestic market seeding
– Investment climate/marketing
– Numerous stakeholders and need to co-ordinate with many companies and government entities
Source: telegraph.co.uk
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Production Costs and Supply Challenges
Prices that consumer can pay
Prices that producers
require
Price subsidies
Price subsidies (e.g. power subsidies) can have major distortion effects
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CAPEX
▪ CAPEX costs can be significant even for small gas volumes – and
usually will be accompanied by additional location specific costs e.g.
road/bridge improvements, dredging, etc
0
200
400
600
800
1000
1200
1400
GTL LNG Ammonia Power
US$
MM
CAPEX for 100 MMsfd plant
10,000 BPD 0.7 MMTep.a. 1 MMTe p.a. 400 MW
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Case Study – Mid Scale Gas Monetisation West
Africa
▪ Production is widespread across country and generally
flared or re-injected
▪ Is fertilizer production viable?
Gas P
rod
ucti
on
, b
cf
Vented & Flared Re-injected Marketed
▪ If fertilizer
production
needing
approximately
100
MMscf/day is
targeted what
needs to be
done…..
Source: EIA
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Mid Scale Gas Monetisation -Key Conclusions
▪ Flared gas provides sufficient quantities – but gathering all
is not viable (low pressure, location)
▪ Target of approx 100 MMscfd for commercialisation will
require multiple fields
▪ Regional gathering viable (not country-wide gathering)
– Current and planned field developments
▪ Coastal regions prioritised – exports viable
▪ Buy-in of government essential – to ensure adequate price
and to act as gas broker
– Will slow down and complicate the process of negotiation of a
gas sales agreement but will ultimately provide more certainty
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Case Study - Angola
▪ ALNG developed and now exporting LNG but the country
faces extreme power shortages
▪ Are export-oriented projects “easier” than domestic market
oriented ones? Large-scale gas finds may need a major
export project to
– Cover unit costs and justify upstream expenditure
– Attract an IOC to drive the project
– Avoid market flooding
▪ E.g. if gas to ALNG were used to make ammonia this alone would supply
nearly all of East African regional needs
▪ “Politics” of exports versus developing domestic markets
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Case Study Angola – Power Generation
▪ Power Generation can typically tolerate high gas prices (especially if alternative is diesel generation!)
▪ But what if power prices in the country are desperately low? Or if massive infrastructure investment required?
Angola
Power Prices
Source: GCA
Source World Bank
Feedstock Gas Price US$/Mscf
Qu
anti
ty, M
Msc
fd
LNG GTL
Methanol/DME
Power Ammonia/
Fertilizer Small scale LNG/GTL
4 2 6
100
200
300
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Case Study - Angola
▪ However……
– Plans to ramp-up electricity generation capacity (to 5,000 MW by 2016) and update fragmented power grid.
– Allocation of US$17 billion from national budget – lessens the need for financing ▪ Economy is buoyant and growing, thanks largely to oil and gas export
revenues
▪ World Bank estimates of US$1.3 billion per year spending required on infrastructure….but as percentage of spend of GDP (approx 7%) this is manageable
▪ Gas availability for domestic power generation?
– Various associated gas blocks supply ALNG
– Blocks 1 and 2 – various concessions ring-fenced for ALNG future supply ▪ But other concessions available for domestic market projects
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Case Study - Jubilee and TEN gas monetisation
▪ Ghana “will not export a molecule of its gas”………
▪ So a major commitment to gas infrastructure development is required…
SHALLOW TANOSHALLOW TANOSHALLOW TANOSHALLOW TANOSHALLOW TANOSHALLOW TANOSHALLOW TANOSHALLOW TANOSHALLOW TANO
IMPALA TANO NORTH OIL
TANO NORTH GAS
IBEX
ELANDKUDU
CÔTE D'IVOIRECÔTE D'IVOIRECÔTE D'IVOIRECÔTE D'IVOIRECÔTE D'IVOIRECÔTE D'IVOIRECÔTE D'IVOIRECÔTE D'IVOIRECÔTE D'IVOIRE
FRANCEFRANCEFRANCEFRANCEFRANCEFRANCEFRANCEFRANCEFRANCE
GHANAGHANAGHANAGHANAGHANAGHANAGHANAGHANAGHANA
KIRIBATIKIRIBATIKIRIBATIKIRIBATIKIRIBATIKIRIBATIKIRIBATIKIRIBATIKIRIBATI
UNITED STATES MINOR OUTLYING ISLANDSUNITED STATES MINOR OUTLYING ISLANDSUNITED STATES MINOR OUTLYING ISLANDSUNITED STATES MINOR OUTLYING ISLANDSUNITED STATES MINOR OUTLYING ISLANDSUNITED STATES MINOR OUTLYING ISLANDSUNITED STATES MINOR OUTLYING ISLANDSUNITED STATES MINOR OUTLYING ISLANDSUNITED STATES MINOR OUTLYING ISLANDS
CI-520CI-520CI-520CI-520CI-520CI-520CI-520CI-520CI-520
CI-523CI-523CI-523CI-523CI-523CI-523CI-523CI-523CI-523
CI-401CI-401CI-401CI-401CI-401CI-401CI-401CI-401CI-401
CI-101CI-101CI-101CI-101CI-101CI-101CI-101CI-101CI-101
OFFSHORE CTPOFFSHORE CTPOFFSHORE CTPOFFSHORE CTPOFFSHORE CTPOFFSHORE CTPOFFSHORE CTPOFFSHORE CTPOFFSHORE CTP
JUBILEEJUBILEEJUBILEEJUBILEEJUBILEEJUBILEEJUBILEEJUBILEEJUBILEE
GAZELLE EEAGAZELLE EEAGAZELLE EEAGAZELLE EEAGAZELLE EEAGAZELLE EEAGAZELLE EEAGAZELLE EEAGAZELLE EEA
9-099-099-099-099-099-099-099-099-09
9-049-049-049-049-049-049-049-049-04
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CI-529CI-529CI-529CI-529CI-529CI-529CI-529CI-529CI-529
CI-527CI-527CI-527CI-527CI-527CI-527CI-527CI-527CI-527
CI-530CI-530CI-530CI-530CI-530CI-530CI-530CI-530CI-530
CI-100CI-100CI-100CI-100CI-100CI-100CI-100CI-100CI-100
CI-541CI-541CI-541CI-541CI-541CI-541CI-541CI-541CI-541
DP TANO-CTPDP TANO-CTPDP TANO-CTPDP TANO-CTPDP TANO-CTPDP TANO-CTPDP TANO-CTPDP TANO-CTPDP TANO-CTP
CTP WESTCTP WESTCTP WESTCTP WESTCTP WESTCTP WESTCTP WESTCTP WESTCTP WEST
CTP WEST2011CTP WEST2011CTP WEST2011CTP WEST2011CTP WEST2011CTP WEST2011CTP WEST2011CTP WEST2011CTP WEST2011DEEP TANODEEP TANODEEP TANODEEP TANODEEP TANODEEP TANODEEP TANODEEP TANODEEP TANO
CI-521CI-521CI-521CI-521CI-521CI-521CI-521CI-521CI-521
CI-524CI-524CI-524CI-524CI-524CI-524CI-524CI-524CI-524
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DP CTP RELDP CTP RELDP CTP RELDP CTP RELDP CTP RELDP CTP RELDP CTP RELDP CTP RELDP CTP REL SOUTH CTPSOUTH CTPSOUTH CTPSOUTH CTPSOUTH CTPSOUTH CTPSOUTH CTPSOUTH CTPSOUTH CTP
9-019-019-019-019-019-019-019-019-01
9-029-029-029-029-029-029-029-029-02
CI-302CI-302CI-302CI-302CI-302CI-302CI-302CI-302CI-302
CI-542CI-542CI-542CI-542CI-542CI-542CI-542CI-542CI-542
CI-24CI-24CI-24CI-24CI-24CI-24CI-24CI-24CI-24
CI-202CI-202CI-202CI-202CI-202CI-202CI-202CI-202CI-202
9-039-039-039-039-039-039-039-039-03
CTP DEEPCTP DEEPCTP DEEPCTP DEEPCTP DEEPCTP DEEPCTP DEEPCTP DEEPCTP DEEP
CI-522CI-522CI-522CI-522CI-522CI-522CI-522CI-522CI-522
EBONYEBONYEBONYEBONYEBONYEBONYEBONYEBONYEBONY
HICKORY NORTH
BELIER
TANO SOUTH GAS
BANDA
BUBALE
MAHOGANY EAST
EBONY
PECAN
B-3
AKASA
ADDAX
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WAWA TANO SOUTH OIL
SANKOFA
TWENEBOA
ODUM
PARADISE
ALMOND
COB
BEECH
25.000
kilometres
Ghana
Cote
D’Ivoire
Source: Petroview
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Ghana – Targeting the Domestic Market
▪ Gas Processing Plant and pipeline to supply gas from
Jubilee (and later TEN development) to Ghanaian market
– Funding from China Development Bank – not likely for non-
associated gas targeting domestic market
– Delays to project from, amongst other things, payment issues
▪ Projected gas production from Jubilee and TEN is at
levels that the domestic market can likely absorb (but will
still need major investment)
– What will be position on exports if more gas found? At what
size gas discovery (if any) are exports inevitable?
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Other West African Gas Monetisation Issues
▪ Nigeria
– Largest reserves, LNG projects and export pipeline
– But security concerns, legislative uncertainty and exit of major
players
▪ Brass LNG – impact of ConocoPhillips country exit?
▪ OK LNG – BG, Shell and Chevron left project
– Future focus on smaller scale projects driven by indigenous
companies?
▪ Cameroon
– Efforts to increase gas consumption – conversion of HFO and
LFO based power generation in Douala region, plus cement
manufacture and glass manufacture conversion to gas
– Only viable due to onshore field location and low cost of gas?
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Game Changers (?) – Small Scale LNG and GTL
▪ Small scale LNG , targeting new markets e.g. transport
– Trucking fleets being converted to LNG in USA
– NG Buses in China
▪ Some areas of west Africa have limited infrastructure – so could any new infrastructure for e.g. transport, bunkering be gas-oriented instead of traditional fuels?
▪ GTL – potentially convert gas to transport fuels (mainly diesel) or to syncrude and export with oil
– Particularly applicable to associated gas fields
▪ May not be robust to very high gas prices (but few technologies are) – but a good match for small - mid size gas fields??
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Conclusions
▪ Gas monetisation in West Africa is challenging but by no means impossible!
▪ Nothing is static – investment is occurring all the time – “necessity is the mother of invention” (and investment?)
▪ Look beyond high level data and country-wide trends – There doesn’t have to be a national gas strategy in order to develop
one ammonia plant
– Degree of access to electricity and length of power transmission lines installed in a country are interesting facts – but look at the specifics
▪ Look at whole value chain – does gas monetization plant alone need to make money or is the whole value chain more important?
▪ Get a good handle on regional gas balances – gas gathering schemes may not be cost effective at the moment but is anyone finding reinjection no longer viable?
▪ Patience is a virtue, good things come to those who wait etc. etc…..
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Thank you!