Gas & Power Sector in Nigeria Issues and Challenges Engr. Kunle Allen (MD/CEO) Gas Aggregation Company Nigeria Limited (GACN)

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1 The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again. Gas & Power Sector in Nigeria Issues and Challenges Engr. Kunle Allen (MD/CEO) Gas Aggregation Company Nigeria Limited (GACN)

2 Outline Background Reforms Current Status Issues & Challenges 2

3 THE GAS MASTER-PLAN:4 Challenges Facing Nigerian Gas Sector 1. Gas Availability - Unprecedented pace of growth in demand domestic, regional and export. 2. Gas Affordability - Unprecedented rise in global gas price vis-à-vis the varying capacity of gas buyers to pay. 3. Gas Deliverability - Inadequate gas transportation and processing infrastructure 4. Commerciality of Supply - History of commercial poor performance of the domestic gas sector low price, unpaid bills, weak and unenforceable GSPAs 4 Factors have combined to create a near impossible gas supply situation in Nigeria. This is most evident in the number of power plants idle for lack of gas. GMP was initiated to address these 3

4 The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again. Historical Pricing Domestic Power - $0.10/mscf (Commodity & Transportation) Domestic Industry - <$5/mcsf (Commodity & Transportation) 4

5 Outline Background Reforms Current Status Issues & Challenges 5

6 THE GAS MASTER-PLAN: 4 Step Plan Introduced the concept of Domestic Gas Supply Obligations Redefined the commercial framework for domestic gas New gas prices Bankable Agreements (GSPA, GTA) World Bank Securitization Established the Gas Aggregator Company to Manage the intervention processes Developed and commenced implementation of gas infrastructure blueprint 6

7 Gas Aggregation Company Nigeria Limited The Strategic Aggregator Suppliers GACN Demand Management Escrow Management System Administration Trading Platform Buyers Power Sector Gas Based Industry Wholesale Gas Marketers Legend Information Flows Physical Flow (Gas) CPF Transmission Company The domestic gas supply Policy and Regulations of February 2008 set out the concept and roles/governance of the Domestic Gas Aggregator (DGA). Subsequently, GACN as the DGA was incorporated under CAMA in January 2010.

8 GACN Quick Facts Company Name: Gas Aggregation Company Nigeria Limited (GACN) Incorporation Status: Was incorporated on the 5 th January, 2010 Registered office: 1b, Malcolm Fraser Street, Asokoro, Abuja. Domain name: Ownership: NOT A GOVERNMENT COMPANY Shareholders: NNPC, SPDC, CNL, POOC,TEPNG and EOM. Governance: Shareholders Agreement (SHA) Board of Directors Management led by a Managing Director Funding: Gas Supplier funded through Service Agreements No cash call on buyers for services provided No NASS Budget 8

9 The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again. Sources of Gas in Domestic Market 3 sources of gas have been identified for potential investors in the Power sector. Most dominant source in the short/medium term is the DSO 9

10 The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again. Gas Infrastructure Blueprint three (3) Infrastructure network, expanding the western network system (ELPS) and reinforcing the Northern Network and Eastern Network Systems Western Network System Northern Network System Eastern Network System 10

11 Commercial Framework Segmentation of the market Gas Producer Buyer Transporter Buyer contracts directly with Seller for its gas Buyer contracts with Transporter for gas transportation Power GENCO Gas Based Industry Commercial/Local Distribution Company Commercial Transaction Documents 1. Gas Sales Agreement 2. Gas Transportation Agreement 11

12 Revised Gas Price to Power Proposed price Trend or Export parity - whichever is lower. EPP based or NLNG and WAGP of prior year

13 Outline Background Reforms Current Status Issues & Challenges 13

14 Current Status: Gas Supply 1. Current Supply increased to ~1.5bcf/d 2. New Projects a. Oredo Gas Plant b. Pan Ocean Supply c. CNL Escravos By-Pass d. Odidi Re-entry e. Utorogu NAG 2 f. Forcados Yokri / Southern Swamps g. Alakiri AG & NAG h. Ebocha 3. Big Bang Projects a. Assa North/Ohaji South b. Okan (Western Niger Delta CPF) c. Erha d. Odidi e. Oso Supply f. Obite Supply 14

15 Current Status: Commercials Power Plant Afam Egbin Geregu Olorunsogo Omotoso Sapele Ughelli NDPHC Sapele NDPHC Olorunshogo NDPHC Omotosho NDPHC Omoku NDPHC Alaoji NDPHC Gbaran NDPHC Egbema NDPHC Calabar NDPHC Ihovbor NDPHC Geregu Status Finalised Executed Executed Executed Executed Executed Executed Negotiations Ongoing Negotiations finalised Negotiations Ongoing Negotiations Ongoing Negotiations Ongoing Negotiations Ongoing Negotiations Ongoing Executed Yet to Commence Yet to Commence 15

16 Current Status: Infrastructure 1. ELPS 2 Looping - Ongoing 2. OB3 - Ongoing 3. Olorunsogo Pipelines - Completed 4. Geregu Pipeline - Completed 5. Other Pipelines ~ 300km - Completed 16

17 Outline Background Reforms Current Status Issues & Challenges 17

18 Issues & Challenges 1. Regulatory Framework 2. Capital 3. Infrastructure 4. Security 5. Commercials 6. Gas Supply 7. Local Community crisis 8. Local Content 18

19 Regulatory Framework 1. Laws 2. Regulations 19

20 The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again. Capital 1. Funding a. Gas Development b. Infrastructure Development 2. Payment / Debt a. Market effectiveness 20

21 The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again. Security Vandalism Attacks on Escravos Lagos Pipeline System Blasted point KP 4.30 coordinates: E , N Blasted point KP coordinates: : E , N Blasted point KP 39 E , N Blasted point KP 5.00 coordinates: E , N Blasted point KP coordinates: E , N Blasted point KP 37 E , N

22 The image cannot be displayed. Your computer may not have enough memory to open the image, or the image may have been corrupted. Restart your computer, and then open the file again. If the red x still appears, you may have to delete the image and then insert it again. Security Vandalism Recent Attack in the East Recent attack on Alakiri-Onne Platform

23 Commercialisation 1. Contracts 2. Credibility / Securitisation 23

24 Local Content 1. Local Capabilities 2. Project Delivery 24

25 Recommendations 1. Execute Contracts 2. Make Contracts effective to drive Performance 3. Improve Security 4. Develop good working relationships with Local Communities 5. Improve Project Delivery & Management 6. Increase Gas Development Funding 25

26 THANK YOU 26