Investment Opportunities for Private Participation in Gas Supply and Infrastructure in Nigeria

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1 March 2014 Lagos Investment Opportunities for Private Participation in Gas Supply and Infrastructure in Nigeria Dr. David Ige Group Executive Director, Gas & Power NNPC

2 March 2014 Lagos Engr. Sam Ndukwe General Manager, Gas Pipelines Infrastructure NNPC, Abuja

3 Outline Introduction Our Aspiration Enabling Policy Status of Gas Master Plan Investment Opportunities 3

4 Overview of the Nigerian Gas Industry Gas Resource Base Nigeria has a huge economic potential trapped in this vast natural gas resource. Currently number 9 th largest Proven gas reserves in the world. SOURCE: BP Statistical Review of World Energy June TCF Undiscovered Potential 4

5 Current Gas Utilisation in Nigeria Source: NAPIMS, Daily Gas Production and Utilisation Report (August 16, 2011) 5

6 The Gas Master Plan : Evolving Domestic Market 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. 6

7 Unprecedented Growth Requirement in Gas Sector 868,000BOE 926,000BOE 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. 7

8 Outline Introduction Our Aspiration Enabling Policy Status of Gas Master Plan Investment Opportunities 8

9 9 Mr. President Theme for Gas STRATEGIC THEMES OF GAS MASTER PLAN GAS TO POWER Deliver Gas for at least threefold increase in generation capacity by 2015 GAS BASED INDUSTRIALISATION By 2014, we would have positioned Nigeria firmly as the undisputed regional hub for gas-based industries such as fertilizer, petrochemicals and methanol. 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 HIGH VALUE EXPORT LNG Regional Pipelines Consolidate Nigeria s position and market share in high value export markets Regional gas pipelines consolidate national footprint and influence 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

10 Outline Introduction Our Aspiration Enabling Policy Status of Gas Master Plan Investment Opportunities 10

11 The Nigerian Gas Master-Plan - 4 Step Plan to Full Market Driven Domestic Gas Sector Willing Buyer Willing Seller!! 11

12 Enabling Policy Thrust The aspiration is supported by a set of enabling policy interventions which are already being implemented 12

13 13 Domestic Supply Obligation The gas supply to underpin agenda is from the Domestic Gas supply Obligation (DSO)

14 Commercial Framework Bankable contractual framework for gas supply and appropriate revenue securitization for gas purchased 1 Realistic and Enforceable Domestic Supply Obligations (DSO) 2 Gas Pricing / Bankable Agreements (GSA/GTA) 3 Strategic Aggregator & Transitional Arrangements 4 World Bank Partial Risk Guarantee (PRG) Agreements 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 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 Finalizing the first ever Nigerian Gas Network Code to govern pipeline utilization etc. 14

15 Gas Pipeline Infrastructure Blueprint - Aggressive Expansion in Progress 15

16 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 mcf/d increasing to bcf/d Numerous Gathering and Spur Lines

17 Outline Introduction Our Aspiration Enabling Policy Status of Gas Master Plan Investment Opportunities 17

18 mmscfd Gas to Power 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 PHCN 818 mmscfd Egbin + AES Delta IV Sapele Olorunshogo Omotosho Geregu Afam I-V Power Sector Gas Demand PHCN NIPP JV IPP 3rd Party IPP NIPP 1,297 mmscfd Olorunshogo Sapele Alaoji Geregu Omotosho Ihovbor Egbema Gbaran Omoku Calabar JV IPP 322 mmscfd NAOC, Okpai Shell, Afam VI Chevron Agura Total, Obite ExxonMobil, QIT rd Party IPP 531 mmscfd 3 rd Party IPP Q

19 Domestic Gas Price Transition Pricing reform is taking hold, creating a more robust basis for investment in supply 19

20 Status Update on Gas Pipeline Infrastructure Development 1 Oben Geregu 5 ELPS 2 Oben-Lagos 36 x 196km; from Oben to Geregu Project completed in Nov 11 Addresses supply deliverability to Geregu power plant and future expansions 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 Itoki- Olorunshogo 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 4 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 ELPS A Escravos Warri Oben 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) 20

21 Gas Pipeline Infrastructure 21

22 Gas Based Industrialization Agenda - The Ogidigben Industrial Park REPUBLIC OF BENIN WAGP L A G O S Existing Pipelines East-West Interconnector Existing LNG Plant ELPS Ogidigben Benin City Ogidigben CPF & Gas-Based Industrial City NIGERIA Warri Port Harcourt NLNG CAMEROON 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) 22

23 Proposed Industrial Park Model of Africa s Largest Gas City 23

24 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

25 Work has commenced Government through NNPC spending about $1bn over the next 2-3 years Secured 2800 hectares of land from Delta State Government with all documentation Progressed critical site related preconstruction 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 25

26 We have completed key pre-construction data gathering on site 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 26

27 Julius Berger has commenced early works on site for Phase

28 Outline Introduction Our Aspiration Enabling Policy Status of Gas Master Plan Investment Opportunities 28

29 Investment Opportunities FINANCIAL SERVICES 7 1 GAS TRANSMISSION PIPELINES PIPE MILLING AND FABRICATION YARDS 6 $16 Billion Investment 2 UPSTREAM GAS DEVELOPMENT Opportunity OGIDIGBEN FTZ INFRASTRUCTURE, PORT INFRASTRUCTURE & REAL ESTATE DEVELOPMENT GAS PROCESSING FACILITY / GAS BASED MANUFACTURING INDUSTRIES LNG & LPG PLANTS 29

30 Gas Transmission Infrastructure 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) 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 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 30

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 31

32 LPG & LNG Plants 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 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 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 32

33 Gas Processing Facilities & Gas Conversion Industries Three CPFs will be constructed in the Western, Central and Eastern Areas Opportunity Description Develop and run gas processing facilities Develop gas conversion industries fertilizer, methanol, petrochemicals 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 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 33

34 Ogidigben FTZ Infrastructure Development Africa s largest gas industrial park to be located in Delta State, Nigeria. Ogidigben 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 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 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 34

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 35

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 3 rd party commercial loans Financial services 36

37 NNPC.Defining a holistic vision for the Nigerian gas industry 37