Developing Domestic Gas Infrastructure '''a private sector approach The Nigerian Infrastructure Summ

1
Developing Domestic Gas Infrastructure...a
private sector approachThe Nigerian
Infrastructure SummitTranscorp Hilton, Abuja
6th -8th August 2008 Wale Tinubu
Oando PLC
2
Outline

• 1.0 Background
• Nigerian Gas Industry
• 2.0 Current Realities / Challenges
• Funding and Infrastructural Issues
• Government Intervention
• 3.0 Practical Way Forward
• A suggested revised path
• 4.0 Role of private enterprise such as Oando

3
Background

• Nigeria, has the worlds 7th largest proven
  reserves of gas with 182 TCF already discovered
• The gas is rich in natural gas liquids and have
  little or no sulphur
• Over the years, there has been a steady growth in
  reserves with recent discoveries coming from the
  deepwater basin
• To date, all gas discoveries in Nigeria have been
  incidental resulting from the search for oil
• There is a significant potential for reserves
  growth with focused gas exploration
• The reserve potential has been put at up to
  600TCF which will make Nigeria the 4th largest
  gas reservoir after Russia, Iran and Qatar
• Nigeria currently flares 35 - 39 of total gas
  exports
• Put another way, the gas flared in Nigeria is
  sufficient to generate 15GW of electricity this
  in a country with 6GW of installed and only 3GW
  of available power generation.

4
Nigerias Gas Sector is predominantly
government-controlled

• Government is the dominant gas resource owner but
  has limited operatorship
• Most of the production is by Major Oil Companies
  which although are about 60 owned by NNPC are
  commercially driven
• The export market is growing
• With train 6 now operational, NLNGs capacity has
  reached 22MTPA
• Other LNG plants (Olokola and Brass) are under
  evaluation
• The West African Gas Pipeline Project is
  continuing apace and there is evidence of
  increasing demand
• The domestic demand is also growing
• The power sector reform and the attendant
  government funded Gas Power Plant developments of
  over 10GW is driving domestic demand
• Oil prices are driving up the cost of alternative
  fuels and industries are turning to gas where
  available

5
The government-led investment in domestic gas
infrastructure is no longer adequate

• The Escravos to Lagos Pipeline System (ELPS),
  completed in the nineties is the main
  transmission pipeline system dedicated to
  domestic consumption in the country
• This pipeline system is the only source of supply
  to the industrial and utility sectors of the
  domestic market
• ELPS also serves as the source of gas supply for
  the West African Gas Pipeline System
• As with many other oil and gas facilities,
  repeated sabotage of this and feeder systems has
  led to frequent supply disruptions of recent
• The other major downstream pipeline systems are
  dedicated to single projects leading to sub
  optimal pipeline configurations
• These pipelines are mainly to export oriented
  projects and cover areas already served by other
  single project pipelines.

6
The private sector will feel the brunt of any
long term gas unavailability

• The dearth of investment in major domestic
  pipeline infrastructure has lead to a short fall
  in the pipeline capacities required to sustain
  the growing economy
• In addition, there is no pipeline connection
  between the gas supply fields of the East and the
  growing markets of the West and North.
• This has led to led to a shortage of gas
  availability for the newly commissioned power
  plants in the Western parts of the country
• Significant and Urgent pipeline Infrastructure
  has now become imperative if the country is to
  benefit from the gas resource

7
Power heavy (cheap) mix in domestic gas market
limits the ability to recover capital leading to
limited private investment
Sources Nexant, Oando
This might explain the current inadequacy in gas
infrastructure
8
facilitating gas export rather than local
consumption which has the maximum net benefit
LNG VALUE CHAIN Maximising Gas Net Benefit
Maximum Benefit via this Route to Domestic Power
Source Nexant
9
and also sub-optimizing potential for local job
creation
EMPLOYMENT CREATION vs. CAPITAL COST (Bubble size
indicates volume of gas consumed)

• LNG is a growing and robust international market
• BUT it costs 20million / job created (compared
  with. 10-20,000 / job in plastics processing or
  construction)

Hi
LNG
Petrochemicals
Plastics Processing
Power
Hi
Lo
Sources Nexant, Oando
10
The government policy has now approved policy
instruments that seeks to

• Exploit the Nigerian gas reserve potential for
  accelerated economic development
• In support of the 10 GDP growth aspiration
• Concurrent focus on domestic and export market
• Develop an integrated infrastructure strategy
  that will support domestic, regional and export
  (LNG) markets
• The adoption of an infrastructure investment blue
  print
• Implement a gas pricing regime that favors local
  value added projects (Methanol, Urea and Gas to
  Liquids)
• Ensure commerciality for all investments
• Set aggressive goals with buffers to offset
  potential delays and possible problems
• Encourage the private sector to drive the
  developments

and recognises the need to incentivise viable
domestic gas companies to execute the
infrastructure investment required
11
(No Transcript)
12
The Gas Infrastructure Blueprint identifies the
critical infrastructure required to develop the
domestic market
Source IHS Gas Master Plan
These gas pipeline and Gas Central Processing
Facilities (CPF) represent investment
opportunities for the private sector
2
13
Gas Infrastructure Blueprint
2
14
Oando intends to play in four specific
opportunities
B
2 ob/ob to Oben interconnector pipeline3
Calabar to Ajaokuta pipelineB OB/OB CPFC
Calabar CPF
2
15
Specific Opportunities
Source IHS Gas Master Plan
2
16
Oando Gas and Power a local gas company

• Oando has had an 8 year history of supplying gas
  to industries in the Greater Lagos Area, the
  success of which is demonstrated by the following
  achievements
• Phased completion of a 99 km distribution network
  in Lagos
• The development of a 124km gas supply pipeline to
  the Cement Plant in Calabar
• Plans include a city gate to supply gas to the
  Calabar Industrial Area
• 156m (NGN18.7bn) of investment mobilized by
  Oando to construct pipeline infrastructure
• The connection of over 90 industrial customers to
  the gas network

Oando is gearing up to play a major role in the
development of the national gas grid
17
Oando an Integrated Energy Company
Oando Plc

• Marketing
• No. 1 marketer of Petroleum Products

• Power
• A Significant option play for Oando

• Energy
• Services
• Offering Product service lines through strategic
  alliances (e.g. Baroid, Halliburton)

• Exploration and
• Production
• Assets Acquisition and Monetization

• Refining
• New Build

• Supply and
• Trading
• Dominant local player
• Expansion into other West African Markets

• Gas (Pipeline
• Transmission of
• Natural Gas)
• 20-year BOT Franchise Agreement with NGC
• New Industrial customer connects
• Further pipeline expansion into un-served markets

6
18
Oando is positioned to capture maximum value
along the entire energy chain and harvest
synergies between subsidiaries
Marketing
Refinery Division
Production Dev. Co.
Supply Trading
Energy Services
Power
Gaslink / East Horizon
19
Thank you http//www.oandoplc.com
6