REDUCING GREENHOUSE GAS

EMMISSION - The Nigerian Approach

by
Abiodun Ibikunle
Office of the Honourable Minister of State,
Petroleum Resources, Abuja, Nigeria

OPEC- EU CDM CONFERENCE,

RIYADH, KSA
SEPTEMBER, 2006
 Presentation Outline
 Preamble
 Legislation aimed at Reducing Gas Flaring
 Incentives provided to Promote Gas Utilisation
 Natural Gas Study
 Gas Utilisation Projects
ÂExport
ÂDomestic
ÂFuel Switching
 Reducing Pressure on Fossil Fuel
 Carbon Storage
 Potential CDM projects
 Approach to Emission Reduction
 Conclusion
 Nigeria

NIGERIA

Nigeria is located in one of the most prolific

hydrocarbon provinces of the world
 PREAMBLE

™ Reserves:
™ Oil+Condensate (B- Bbls) 35.88
™ Total Gas (Tcf) 184.00
™ AG 98.00
™ NAG 86.00
™ Crude Oil Prod. Cap. (mmb/d) 3.35
™ Actual Oil Production ( ,, ) 2.80
¾ Gas Prod. (mainly associated) Bcf/d 5.78
 NATURAL GAS RESOURCE

O Nigeria ranks seventh in the world in gas reserves and

no.1 in Africa
O All Natural Gas discoveries are incidental to exploration
for crude oil
O High proportion of Natural Gas accumulation is
concentrated in the Niger Delta
O Substantial volumes of Natural Gas discoveries made in
the deep offshore area ( 27 Tcf about 15%)
O There are a few more basins that are gas bearing but
remained largely unexplored.
O Scope for discovery is much higher if gas becomes the
focus of exploration
O Nigeria has been described as more of a Gas Province
than Oil
 NATURAL GAS RESOURCE (Cont’d)

O Nigeria, Algeria, Egypt and Libya have more than 90% of

the continents natural gas reserves and also produce
more than 95% of the continents total production

O These countries have a developed (Algeria) and a rapidly

developing (Nigeria, Egypt and Libya) Natural Gas Industry

O Many of the gas projects are export oriented supplying

LNG to Europe, US and SE Asia

O These regions contribute substantially to GHG emission

 NATURAL GAS SNAPSHOT
Gas Reserves

Yr 2005 (TCF) AG NAG TOTAL

Ult. Recovery 144 89 234
Produced 46 4 50
Rem. Reserves 98 85 184

Gas Re s e r ve s (Tcf)

200

150

100

50

0
96

99

00

01

02
97

98

03

04

05
19

19

19

19

20

20

20
20

20
20

AG NAG
 NATURAL GAS PRODUCTION

O Crude Oil Production started in Nigeria in 1958 at a very

low rate of about 5,000 b/d
O Produced along with it, was associated gas but the
quantity was considered insignificant
O Apart from a small proportion used to run some
equipment and facilities , majority of the gas produced
was flared.
O By the end of the 60’s when crude oil production
increased rapidly, natural gas was also produced in
quantities sufficient to create concern to the Govt.
O In reaction, Govt. put in place legislation to regulate the
handling of produced gas
 LEGISLATION AIMED AT REDUCING
GAS FLARING

™1969 - Petroleum (Drilling and Production) Regulation

™ Licensee was expected to submit feasibility study,
programme or proposal for gas utilisation not later
than five years of the commencement of production
™ No adequate penalty for violation
™ Reason for non-compliance by operators
™1973 – Petroleum (Amendment) Act
™ Government may take the gas at the flare at no cost
™ Absence of infrastructure to develop and utilise the
produced gas
 LEGISLATION AIMED AT REDUCING
GAS FLARING
™ 1979 – Associated Gas Re-injection Act
™Requires producing companies to submit proposals
for utilising produced associated gas
™Companies were expected to stop routine flaring of gas by
January, 1984
™The acreage may be forfeited for violation
™Empowers the Hon. Minister of Petroleum Resources to
grant permission to flare
™Implementation not possible due to inadequate financing as
gas gathering is capital intensive
™ 1983 – Associated Gas Re-injection Amendment Act
™Specific penalty introduced for the first time
™Though penalty exists, it was not sufficient to serve as
a deterrent
 INCENTIVES TO PROMOTE
GAS UTILISATION
™ In realisation of the fact that the “stick” was not a sufficient deterrent,
Government decided to dangle the carrot. Thus a number of incentives were
introduced
™ The current Gas Incentives are covered under the following Agreement and
Acts:
™ Associated Gas Framework Agreement (AGFA) 1992
™ Financial (Miscellaneous Taxation Provision) Act 1998
™ Financial (Miscellaneous Taxation Provision) Act 1999
™ Nigerian Liquefied Natural Gas (NLNG) Act 1990
™ Essentially the incentives provide for:
™ Tax free period of 3-5 years and for NLNG 10 years
™ Reduced tax rate (CITA to apply)
™ Investment tax credit/allowance
™ Allowing for the quick recovery of investment
The incentives cover projects such as LNG, G-T-L, IPPs etc,
 Aspirations for the Gas Sector

ƒ Enhance the development of the domestic gas market

and facilitate the growth of the power and industrial
sectors
ƒ Provide an enabling environment for the entry of new
investors and increased private sector participation in
the gas sector
ƒ Address environmental issues and end gas flaring
ƒ Capture economic value of gas through domestic and
export projects
ƒ Generate as much revenue from gas as oil within the
decade
ƒ Diversify from an oil industry to an integrated oil and
gas industry
 Natural Gas Study
JUMP STARTING NATURAL GAS DEVELOPMENT

™ 1999/2000:
Government initiated a study which identified
the following options to fast track gas development:
™Concentrate on gas export drive mainly LNG in view of
its growing International demand
™Stimulate Domestic demand through the development of
the Power sector
™Revive Dormant Gas Utilisation Centres
™ 2002:
Another Study – Natural Gas Strategy Study - was carried out in
collaboration with the World Bank as another step towards
promoting gas utilisation
 NATURAL GAS STRATEGY STUDY
™The study was carried out in two phases:
ƒDiagnostic which identified the problems
ƒOptions for reforms
ƒ Consultations held with all stakeholders and identified
impediments to gas development to include:
ƒ Financing – large investment required
ƒ Pricing - Prices inadequate to ensure cost recovery
Q Absence of Institutional Framework: no clearly defined roles for
the different Government Agencies
Q Legal and Regulatory Framework – No specific legislation on
gas
Q Fiscal Regime - Fiscal regime favourable to Upstream
companies but a reduced Govt. Take
Q Deliverables:
Q Draft National Policy for Gas
Q Draft Downstream Gas Act
Q Draft Fiscal Regime for Gas
 GAS PROJECTS

DOMESTIC EXPORT
17 POWER PROJECTS NLNG Trains 1-5
CEMENT
NLNG Trains 6 and 7
FERTILISER
ALSCON Brass LNG
IRON AND STEEL OK LNG
INDUSTRIAL XOM LNG
LPG
WAGP
TSGP
EGP 2
EGP3 -GTL
 Gas Utilisation Projects - Domestic

5000
Existing Power Plants:
Afam, Egbin, Sapele, Ughelli and Okpai
Industrial: 4000
CO, Agbara, Greater Lagos Area,
ALSCON, NAFCON and Steel Plants

M M S C F /D
3000
Proposed Power Plants – 17 in all and
are categorised as:
JV Power Projects –5 2000
Govt. Power Expansion
Programmes -5
Niger Delta Power Plants – 7 1000
Total Capacity of Proposed Power Plants
– Over 8,000 MW
0
Daily Gas Requirement – Over 2.7 Bcf
2002 2005 2008 2010

Meeting this level of gas supply 17 new IPPs 70 2619 2999

requirements present a great deal
of challenge: Power Plants 363 531 569 834
- Financial and Infrastructural
Industries 98 360 430 455
 DOMESTIC GAS UTILISATION - INDUSTRIAL

™ Current effort being made to expand existing gas infrastructure to

enable it cope with anticipated increase in domestic gas
requirements:
™ Another pipeline extension from Ajaokuta to Obajana Cement
Factory
™ New set of pipelines to be constructed for the new power plants
™ Dormant gas utilisation projects are being revived:
™ Steel Plants
™ Aluminum plant
™ Fertilizer plant
™ Revival of the LPG market and make them available and affordable
as a step towards discouraging the use of firewood thus slowing
down the process of desertification
™ A number of LPG plants are at different stages of project execution
 DOMESTIC GAS UTILISATION - INDUSTRIAL

™ Existing and Proposed Gas Distribution Zones under franchise with

Nigerian Gas Company
™ Agbara Industrial Area – Shell Nigeria Gas (SNG)

™ Greater Lagos Area – Gaslink Nigeria Limited (Gaslink)

™ Ikorodu Industrial Area – Falcon Nigeria Limited

™ Epe – Lekki Area – Gasland Nigeria Limited

™ Apart from the promotion of gas utilisation, encouraged manufacturing

outfits to switch over from less efficient fuels such as LPFO and diesel to
cleaner, more efficient and cheaper natural gas

™ The SNG and Gaslink projects were conceived to achieve this purpose

™ Govt. is also looking at the use of Compressed Natural Gas (CNG) for
automobiles as an alternative to the use of gasoline and diesel
 Gas Utilisation Projects - Export

Summary of Gas Usage in Export Projects (mmcfd) Export Gas Volume

PROJECT 2002 2005 2008 2010 2015 2020
Current
NLNG (T1-3) 845 1,329 1,329 845 845 845 8,000

NGL's/LPG's 105 105 105 105 105 105

6,000
Subtotal 950 1,434 1,434 950 950 950

M MCFD
Ongoing Projects
4,000
NLNG (T4&5) 484 1,052 1,202 1,202 1,202
EGP2/WAGP 450 450 450 450
2,000
EGP3/GTL 350 350 350 350
EAGP NGL 630 630 630 630 0
Subtotal 484 2,482 2,632 2,632 2,632 2000 2005 2010 2015 2020
New Potential
Brass LNG Plant 450 1,500 1,500 1,500 NLNG(T1&2)
NLNG T1-3 NGL's/LPG's (East/West) EGP2/WAGP
OK LNG 300 1,500 1,500 1,500
XOM-LNG
S-E LNG 300 830 830 830 EGP3/GTL EAGP NGL S-E NGL
Yoho LNG

Subtotal 1,050 3,830 3,830 3,830 NLNG (T4&5) Nnwa/Doro

OK LNG FLNG
OOOOOOOOOOOOOO Brass River LNG Plant

TOTAL 950 1,918 4,966 7,412 7,412 7,412

Pictorial View of the NLNG Plant at Bonny Island
 GAS PRODUCED, UTILISED AND % FLARED

Gas Produced: Utilised and Flared

2,500 80%

2,000 70%

% Gas Flared
BScf

1,500 60%

1,000 50%

500 40%

- 30%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
GAS FLARED INJECT./LIFT FUEL NGL
GAS SOLD LNG % FLARED
 GAS UTILISATION SNAPSHOT

2005 Gas Utilisation (%)

2001 Gas Utilisation (%)
Gas Flared
Lift LNG LNG
Injection Flared 19% 34%
1% 16%
17% 52%
Injection
19%

NGL
3% NGL
2%

Fuel Sold
Fuel
Gas Sold
4%
4% 7%
22%
 GAS DEMAND SCENARIO

™ Many export oriented projects are going on

simultaneously while others are under serious Gas Demand (Bcf/d)
consideration
™ Consequently, demand for gas expected to rise
sharply 30
™

G a s D e m a n d (B c f)
Driven mainly by Government’s desire to 25
monetise gas and attain self sufficiency in
Power Generation for which a target of 20
additional 10,000 MW by 2007 has been set
15
™ Current Daily Production = 5.78 Bcf
™ As many other gas utilisation projects are 10
currently under consideration, peak demand 3
could be well above 10 Bcf/d in 2008
5
™ As crude oil production increases to 4.00 Mmb/d 0
as planned, AG production could rise to over 8
Bcf/d
2005 2010 2025
™ This would be inadequate to meet anticipated
gas demand and the Incidence of gas flaring in Year Domestic Export
Nigeria would have disappeared
This is likely to be the situation from Year 2009
as more gas projects come on stream
 SUB REGIONAL COOPERATION
¾Working assiduously to ensure the realisation
of some key regional gas utilisation projects :
¾ WAGP – Expected to come on stream in 2007
conveying gas from Nigeria to neighbouring
countries of Benin , Togo and Ghana
¾ Gas requirement is about 350 – 400 mmscf/d
¾ Apart from creating avenue for effective gas
utilisation also allows for use cleaner fuel - natural
gas for power generation in these countries
¾ Thus reducing pressure on other less efficient
sources.
 WEST AFRICAN GAS PROJECT

Pipeline originates from ELPS near Lagos and traverses land as well as offshore
from Lagos Beach to Takoradi
Pipeline capacity is 580 MMCFD

New West African Gas Pipeline

B
T E Existing Escravos-to-
O N Lagos Pipeline System
G I
O N NIGERIA

GHANA
o s
ou
Lag
os
é
to n

rav
Lom

Co
a
i

Esc
rad

Te m
ko
Ta
SUB REGIONAL COOPERATION (Cont’d)

¾ TRANS SAHARAN GAS PIPELINE:

¾Another effort at regional cooperation between
Algeria and Nigeria
¾Currently at the feasibility study stage
¾Being conceived to convey natural gas from
Nigeria to Europe through Algeria
¾ EQUATORIAL GUINEA:
¾ Plan to supply 600 mmscf/day of gas to Train 2
of the Bioko LNG plant by 2009
PROPOSED TRANS NIGERIA ALGERIA
GAS PIPELINE
Proposed Gas Supply to Equatorial Guinea

New West African Gas Pipeline

NIGERIA

GHANA
nou
é
Lom

to
Co
i
rad
ko
Ta
 RENEWABLE ENERGY DRIVE

™ Reducing pressure on fossil fuel

™ Mambilla Hydroelectric Project with capacity of over 2,000MW
™ Gasohol “Green Petrol” or “Green Gasoline” – a programme
being driven by Govt. to blend alcohol (10%) with Petrol

™ Other options under consideration by Govt. include

™ Nuclear Power
™ Solar and
™ Wind
Environmentally Friendly Fuel
™ Govt.’s initiative on development of renewable energy
through the introduction of biomass ethanol
programme by producing fuel grade ethanol which
would be blended with gasoline
™ Transportation sector globally is responsible for
about 25% of CO2 emissions. A situation which could
worsen with exploding urban population
™ Imperatives for a more environmentally friendly fuel
for automobiles and other forms of transportation
™ Gasohol has a higher octane value
™ The product of the combustion of this fuel is
expected to reduce the volume of CO2 released to
the atmosphere
Environmentally Friendly Fuel (Cont’d)

™ Ethanol will be produced from sugar cane and cassava

which are widely grown in Nigeria
™ This has the advantage of bringing more land under
cultivation
™ It creates employment for a wide variety of people
™ Puts more disposable income into the hands of the
farming community
™ Puts less demand on gasoline
™EGP3 –G-T-L:
™To produce about 40,000 barrels per day of synthetic crude;
capacity could be increased to about 120,000 b/d for export
™Other products are Diesel, Naphta and LPG
™Commitment not only to Gas Flaring reduction, but promoting
the use of cleaner and more environmentally friendly fuel.
 CARBON STORAGE – GAS INJECTION

™ Since the late 1970’s Nigeria has been engaged in gas

injection:
™To maintain reservoir pressure - the 1st being in Akri-Oguta
field
™ In response to Government legislation, a number of gas
injection and recycling projects were instituted:
™ Obiafu – Obrikom
™ Kwale - Okpai
™ Asabo - Ekpe etc.
™ About 1.5 bcf/d of gas are currently being re-injected
 Potential CDM projects
™ Of all the 6 projects under consideration by GGFR to
benefit from CDM. Two are from Nigeria (Other
countries are Russia, Indonesia, Angola and Cameroon)
™ KWALE-OKPAI IPP: Utilises associated gas from five
fields for power generation. Capacity --- 480MW
using 140 mmscf/d
™ AFAM IPP - 650 MW also using 190 mmscf/day
™ Other Projects that may be considered include:
™ Obiafu-Obrikom Gas Injection Project: Involving the
reinjection of between 270 – 350 mmscf/d. Has the potential
to delay the release of the equivalence of 2.46 million tonnes
of CO2/year to the atmosphere
™ Renewable Energy Program of Govt. in which alcohol is
blended with gasoline
 APPROACH TO EMISSIONS REDUCTION

In taking up the challenge on GHG reduction, Nigeria

has adopted the following approach:
¾ Put in place appropriate legislation to discourage gas flaring
¾ Introduced incentives to promote gas utilisation
¾ Govt. is directly involved in numerous gas projects

¾ Increased plants efficiency by promoting switching from a less

efficient to a more efficient energy source e.g. LPFO and
diesel to natural gas
¾ Promote the use of renewable energy sources in the long
term
¾ Reforestation and control of desert encroachment
 CONCLUSION

™ Nigeria is endowed with Natural Gas

™ Nigeria produces a lot of Natural Gas (in association
with crude oil) an appreciable amount of which is flared
™ The country has been proactively involved in controlling
GHG emission through the provision of appropriate
legislation and incentives long before the Rio Summit
of 1992
™ Since 1999, there has been a sharp reduction in gas
flaring from about 70% to 35% in 2005 mostly through
a policy shift from imposing penalty to providing
incentives
 CONCLUSION (Cont’d)

™ Government is vigorously pursuing its aspiration

of eliminating routine gas flaring by Year 2008
and this to a large extent is achievable
™ Promoting the use of natural gas for power
generation
™ Set target for the elimination of gas
™ Diversification of energy source as an alternative
to dependence on fossil fuel
™ Though not a developed country and not directly
targeted as a consequence of the Rio Summit,
Nigeria is fully committed to sustainable
development and has demonstrated that it would not
shift her responsibility to the coming generation
THANK
THANK YOU
YOU FOR
FOR YOUR
YOUR
KIND
KIND ATTENTION
ATTENTION