investment opportunities for private participation in...

Investment Opportunities for Private Participation in Gas Supply and

Infrastructure in Nigeria

March 2014 Lagos

Dr. David Ige Group Executive Director, Gas & Power NNPC

samuel.ndukwe@nnpcgroup.com

March 2014 Lagos

Engr. Sam Ndukwe General Manager, Gas Pipelines Infrastructure

NNPC, Abuja

Outline

Introduction

Our Aspiration

Enabling Policy

Status of Gas Master Plan

Investment Opportunities

3

Overview of the Nigerian Gas Industry

Gas Resource Base

Nigeria has a huge economic potential trapped in this vast natural gas resource. Currently

number 9th largest Proven gas reserves in the world.

4

SOURCE: BP Statistical Review of World Energy June 2011 600TCF Undiscovered Potential

Current Gas Utilisation in Nigeria

5

Source: NAPIMS, Daily Gas Production and

Utilisation Report (August 16, 2011)

The Gas Master Plan : Evolving Domestic Market

6

NNPC has played the most pivotal role in developing the Gas Master Plan in line with the President theme.

There is now an unprecedented domestic gas market opportunity.

Unprecedented Growth Requirement in Gas Sector

Delivering the aspiration translates to an aggressive growth which position Nigeria’s gas sector as number 5 in

Africa in terms of BOE. In reality, a brand new industry is being created from scratch.

868,000BOE

926,000BOE

7

Outline

Introduction

Our Aspiration

Enabling Policy

Status of Gas Master Plan

Investment Opportunities

8

Mr. President Theme for Gas

9

GAS TO POWER “… By 2014, we would have

positioned Nigeria firmly as

the undisputed regional hub

for gas-based industries such

as fertilizer, petrochemicals

and methanol.”

GAS BASED INDUSTRIALISATION HIGH VALUE EXPORT

STRATEGIC THEMES OF GAS

MASTER PLAN

Consolidate Nigeria’s position and

market share in high value export

markets

• Regional gas pipelines – consolidate

national footprint and influence

Deliver on President’s Gas

Revolution Agenda to:

• Create regional hub for gas-based

industries – fertilizer, petrochemical and

methanol

• Transform gas sector to value adding

sector

• Deliver Gas for at least threefold

increase in generation capacity by

2015

LNG Regional Pipelines

The gas sector aspiration, though anchored around gas to power in the immediate term, is essentially much

broader. It is aimed at delivering Mr. President’s wider economic agenda of power and industrialization

Outline

Introduction

Our Aspiration

Enabling Policy

Status of Gas Master Plan

Investment Opportunities

10

The Nigerian Gas Master-Plan - 4 Step Plan to Full Market Driven Domestic Gas Sector

Willing

Buyer

Willing

Seller!!

11

Enabling Policy Thrust

12

The aspiration is supported by a set of enabling policy interventions which are already being

implemented

Domestic Supply Obligation

13

The gas supply to underpin agenda is from the Domestic Gas supply Obligation (DSO)

Bankable contractual framework for gas supply and appropriate revenue securitization for gas

purchased

14

Realistic and Enforceable

Domestic Supply Obligations

(DSO)

1 Gas Pricing / Bankable

Agreements (GSA/GTA)

2 Strategic Aggregator &

Transitional Arrangements

3 World Bank Partial

Risk Guarantee (PRG)

Agreements

4

A domestic supply

obligation framework

now in place

Suppliers now

developing supply

plans to meet

obligation

New and more

sustainable domestic

gas pricing to Power

and other sectors now

in place

Bankable Gas Sales &

Purchase Agreement /

Gas Transmission

Agreement now in place

Finalizing the first ever

Nigerian Gas Network

Code to govern pipeline

utilization etc.

Gas Aggregation

Company of Nigeria

established to manage

DSO and price

aggregation

World Bank revenue

securitization scheme in

place to mitigate risk of

payment failures for gas

supplied

Commercial Framework

15

Gas Pipeline Infrastructure Blueprint

- Aggressive Expansion in Progress

Positioning for Sustained Growth

– Gas Infrastructure Blueprint

3 Backbone Gas Transmission

Networks Over 2000km of pipelines with

about 2bcf/d flow capacity

3 World Scale Gas Processing

Hubs Scope to extract over 1mtpa of

LPG each

To be developed on a Private

sector Build, Own and operate

basis

Initial capacity to process

about 250-300mcf/d increasing

to 1.5 – 2.5bcf/d

Numerous Gathering and Spur

Lines

Outline

Introduction

Our Aspiration

Enabling Policy

Status of Gas Master Plan

Investment Opportunities

17

Our efforts in Power are focused on meeting a projected 3 bcf/d of gas demand by about 37

existing and proposed power plants which have a collective potential to generate about 12GW by

2015

18

PHCN

818 mmscfd

1

NIPP

1,297 mmscfd

2

JV IPP

322 mmscfd

3

3rd Party IPP

531 mmscfd

4

• Egbin + AES • Delta IV • Sapele • Olorunshogo • Omotosho

• Geregu • Afam I-V

• Olorunshogo • Sapele • Alaoji • Geregu • Omotosho

• Ihovbor • Egbema • Gbaran • Omoku • Calabar

• NAOC, Okpai • Shell, Afam VI • Chevron Agura • Total, Obite • ExxonMobil, QIT

• 3rd Party IPP

0

500

1000

1500

2000

2500

3000

3500

Q4 2011 2012 2013 2014 2015

mm

scfd

Power Sector Gas Demand PHCN NIPP JV IPP 3rd Party IPP

Gas to Power

Domestic Gas Price Transition

19

Pricing reform is taking hold, creating a more robust basis for investment in supply

Status Update on Gas Pipeline Infrastructure

Development

20

24” x 31km;

Project has been completed

and currently supplying gas

to Olorunshogo power plant

Addresses permanently the

challenge of supply delivery

to Olorunshogo PHCN/NIPP

Plants

36” x 196km; from Oben to Geregu

Project completed in Nov ‘11

Addresses supply deliverability to Geregu

power plant and future expansions

ELPS 2 – Oben-Lagos

Itoki- Olorunshogo

ELPS A Escravos – Warri – Oben

Oben – Geregu

24”/30” x 104km;

Project has been completed

Addresses stranded gas in Escravos – additional

80mmcf/d (300MW) is currently available to the

domestic market and a further 70mmcf/d(250MW)

36” x 324km;

Ongoing project will double

pipeline capacity from

1bcf/d to 2bcf/d by end 2015

Project is ongoing

Enable expanded supply to

support all future power and

industry expansion

1

2

3 4

1 2

3

5

Obiafu/Obrikom - Oben (OB3)

48” x 127km; Contract was awarded in April

2012 Detailed engineering has been

completed and procurement of line pipes is ongoing

Construction has commenced Completion Date – Early 2016

5

Gas Pipeline Infrastructure

21

Gas Based Industrialization Agenda

- The Ogidigben Industrial Park

22

▪ 2800 Hectares ▪ Desirable location by the

ocean and the Escravos River, for inland access

▪ Dedicated gas based industrial park with FTZ & Port Status

▪ Proximity to existing ELPS gas infrastructure enables relatively easy gas access with less pipeline infrastructure development cost

▪ Dedicated Power Plant, CPF, Petrochemical, Fertilizer and Methanol Plants

▪ Centralized utilities provision, world class Integrated fibre optic network (broadband and telecoms)

NLNG

Ogidigben

East-West Interconnector

Existing LNG Plant

Ogidigben CPF & Gas-Based Industrial City

Existing Pipelines

L A G O S Benin

City

Port

Harcourt

Warri

ELPS

WAGP

REPUBLIC

OF BENIN

CAMEROON

NIGERIA

Proposed Industrial Park –

Model of Africa’s Largest Gas City

23

The Park will be developed in Phases – Phase 1

comprises of……..

---- but more importantly, the Park will be developed for rapid expansion to attract in subsequent phases, many gas based primary and secondary industries such as Aluminium Smelters, Methanol, Plastics Conversion and other related industries. It will be a major regional industrial hub

Work has commenced – Government through NNPC

spending about $1bn over the next 2-3 years

25

▪ Secured 2800 hectares of land from Delta State Government with all documentation

▪ Progressed critical site related pre-construction data gathering (EIA, Geotechnical Study, Hydrology, Bathymetry, Marine Study, Sand Search, etc.)

▪ Finalized gas supply agreement (GSAA) for Nagarjuna Fertilizer plant. Investor about to award EPC contract for plant

▪ Commenced pre-FEED for the Gas Central Processing Facility by KBR in Houston

▪ Julius Berger construction company has commenced site preparation activities i.e. site clearing

We have completed key pre-construction data

gathering on site

26

Fugro activities in Ogidigben – Study Reports Available Shortly

Conducted the following surveys / investigations at site

▪ Soil Investigation

▪ Hydrology Study

▪ Hydrogeology Study

▪ Sand Search

▪ Bathymetry Survey

▪ Environmental Impact Assessment EIA (Onshore & Offshore)

Investors can access at no cost, significant technical data in respect of the site in order to fast track technical evaluation and design of their projects

Julius Berger has commenced early works on site for

Phase 1…..

27

Outline

Introduction

Our Aspiration

Enabling Policy

Status of Gas Master Plan

Investment Opportunities

28

Investment Opportunities

29

GAS PROCESSING FACILITY / GAS BASED MANUFACTURING INDUSTRIES

FINANCIAL SERVICES

UPSTREAM GAS DEVELOPMENT

GAS TRANSMISSION PIPELINES

LNG & LPG PLANTS

PIPE MILLING AND FABRICATION YARDS

$16 Billion

Investment

Opportunity

1

2

3

4

6

OGIDIGBEN FTZ INFRASTRUCTURE, PORT INFRASTRUCTURE & REAL ESTATE DEVELOPMENT

5

7

Gas Transmission Infrastructure

30

Opportunity Description

• Over 2000km of gas pipelines will be installed over

the next 5 years

• Construction and operation of 3 backbone gas

pipelines − Obiafu-Obrikom-Oben pipeline (OB3) (48” x 127km)

− Calabar to Ajaokuta pipeline (CAP) (48” x 490km)

− Ajaokuta to Kano pipeline (AKK) (48” x 853km)

Investment Scope

• Investment in the Trans- Nigeria Gas pipeline

system made up of the following pipeline

segments;

• OB3 - 48” x 127km pipeline investment,

with related compressor stations

• CAP - 48” x 490km pipeline investment

• AKK - 48” x 853km pipeline

• Scope exists for Engineering, Procurement and

Construction of pipelines; Pipe surveillance

systems, Pipeline Operations and Maintenance

Rationale

• Gas utilization growth from less than 1bcf/d

currently to at least 5bcf/d by 2016, underpinned

by growth in Power sector as well as gas based

industries

• Significant deficit in gas pipeline infrastructure

31

Upstream Gas Development

Description:

Growth in gas sector will result in

significant upstream development

activity to support production decline

and growth

Opportunities exist for

Drilling services

Engineering services and

operations

Petroleum Engineering Services

Procurement services

Logistics support

Equipment leasing

LPG & LNG Plants

32

Opportunity Description

• Full LPG value chain investment comprising LPG receiving

terminal at Ogidigbe (and/or Ob/Ob), storage, bulk transportation,

bottling and distribution)

• Portable LNG plants for small scale liquefaction

Investment Scope

• LPG Storage Facilities

• Jetties and Loading Bays

• Bottling and Distribution Networks (Filling Plants, LPG Trucks, LPG

Bottles, etc)

• Domestic/Industrial Burners and other accessories

• LNG plant

Rationale

• Forecast significant boost in LPG production from the Western

CPF estimated at about 500KTPA additional supply capacity by

2015

• Underserved domestic LPG market and underpenetrated market

• Current usage of LPG in Nigeria is 96,000 MT with potential

to grow – lowest per capita consumption in region

Gas Processing Facilities & Gas Conversion

Industries

Three CPFs will be constructed in the Western, Central and Eastern Areas

33

Opportunity Description

• Develop and run gas processing facilities

• Develop gas conversion industries – fertilizer, methanol,

petrochemicals

Investment Scope

• Development and operatorship of at least 2.4bcf/d gas processing

facility with full NGL extraction capacity

• About 150km of associated gas gathering pipelines

• NGL primary storage facility

Rationale

• Attractive and competitive feedstock pricing for gas conversion

industries

• Investments underpinned by GSPAs

• Scope to Co-investment with key stakeholders such as NNPC, and

key gas supply IOCs’ in the area

Ogidigben FTZ Infrastructure Development

34

Opportunity Description

• Exclusive right to develop the Ogidigben FTZ infrastructure

and provide utilities to all tenants of the FTZ on a long term

concession basis. Revenue from Tariffs and service fees

Investment Scope

• FTZ base Infrastructure – access roads, jetties, drainage

• Utilities − Over 300 MW IPP to serve the FTZ and residential complex

− De-mineralised, potable and process water

− Integrated fibre optic network (broadband and telecoms)

• Waste water treatment

• Development of Port

• Real estate development

Rationale

• Highly strategic FTZ location, Coastal location, proximity to

existing gas infrastructure and gas sources

• Portfolio of planned highly credible anchor tenants namely; − 1.3MTPA Polyethylene and 400 KTPA Polypropylene plants

− 2 x 1.3 MTPA Urea Fertilizer plant

− 2.4 bcf/d Central Processing Facility

− LPG terminal

• Potentially Nigeria’s largest gas based industrial park, with

scope for growth

Ogidigben

Africa’s largest gas industrial park to be located in Delta State, Nigeria.

35

Development of Pipe Mills & Fabrication Yards

Description:

Over 2000km of gas pipelines and

about 1000km of oil related pipelines

will be required over the next 3-6 years

in Nigeria

National Content law supports the

fabrication of the pipes locally

Opportunity:

Co-invest in the development of local

pipe mills and related pipe services

e.g. pipe coating

Preferential market access for local

pipe mill capacity

36

Financial & Related Services

Opportunity Description

•Over $16bn of investments anticipated

over next 10yrs

•Scope exists for syndication of

competitive finance

•Concessionary Government to

Government loans

•3rd party commercial loans

•Financial services

37

NNPC…….Defining a holistic vision

for the Nigerian gas industry