(The
Gas Master plan, LNG and Distributed Generation)
Obi Akaraiwe
August 2015: 5 years ago I decided to spend a few weeks
studying the problem of power generation in Nigeria with a view to writing just
one article in order to stimulate discussions amongst my peers in oil and gas,
and moving on….
It simply made no sense that while Nigeria flared was
flaring 2.5 billion cubic ft. of gas each day, the reason we could not generate
electricity was, to put it simply, “No Gas”
Statistics at the time showed that Nigeria was
flaring 2.5 billion cubic feet of gas, and losing $10 million each day - NGN 1.6
billion at the time.
It was fascinating what could be accomplished
with an additional $10 million a day - but I seemed to be the only one
fascinated - no one seemed to care that the nation was losing 1.6 billion naira
a day or that we were destroying the environment with a noisy ferocity unmatched
in nature.
Sometimes I felt I was watching the titanic
sink all over again. Only this time, rather than panic, the passengers were
partying and laughing - confident about a future, which would not survive the
roaring gas flares in the Niger Delta incomparable in their single-minded
destructiveness and implacable fury.
Out of interest, I calculated fuel subsidy
payments from 2006 to 2010 and discovered the payments made as follows:
In 2006, N256 billion;
in 2007: N290 billion,
2008: N658 billion,
2009: N680 billion,
Total: NGN1, 884 billion
(That is: NGN 1.884 Trillion => US$11.775 billion at the time)
in 2007: N290 billion,
2008: N658 billion,
2009: N680 billion,
Total: NGN1, 884 billion
(That is: NGN 1.884 Trillion => US$11.775 billion at the time)
We thus spent billions of dollars importing
fuel – while each day, we destroyed tens of thousands of tons of condensate,
which could be refined into petroleum products (diesel, petrol, and kerosene), and
natural gas which could be compressed (CNG) or liquefied (LNG) and used
directly as fuel for cars, trucks, boats, tugs, earth moving machines, trains….
But even this was excusable.
What was inexcusable was the fact that no refineries were working (for well rumored reasons), and that the government imported petroleum products by choice!
What was inexcusable was the fact that no refineries were working (for well rumored reasons), and that the government imported petroleum products by choice!
I did feel I was watching the titanic sink – unfolding
around me was a tragedy in slow motion – like a slow moving waterfall of losses
which created more losses when they hit the losses at the bottom of the
waterfall.
Five decades of the uncontrolled combustion
of Associated Gases which released particulates and according to notable
environmentalists, (Friends Of the Earth© to mention one), released highly
toxic hazards such as Sulfur Dioxide, Benzo[a]pyrene (a group 1 Carcinogen), Nitrogen
Dioxides, H2S…. Destroying lives and the ecosystem.
Five decades of losses… with absolutely no
concern from the federal government….Leadership it seemed, started and ended
with the award of contracts or oil
blocs.
Not just the government could be blamed – we the
rest of us especially the doyens of our oil industry. Scholars who on account
of their early promise, some, indigenes of the Niger Delta, filed in young, and
exited greyed and spent after ‘sterling’ careers – but what did they achieve?
Yes some built mansions and earned tons of
money – but what did they achieve for their country? Every fuel shortage, every
electricity outage resulting from ‘no gas’ no matter how far removed we are
from the immediate causes, result from our lack of fealty to Nigeria. With
hindsight, the troubles in the Niger Delta and the non-establishment of
refineries should have been unthinkable!
Back to my fascination with gas flaring:
I had high hopes for the acting president who had a doctorate degree in zoology. He had been born and raised in the heart of the Niger Delta and knew first hand, the social and environmental problems associated with gas flaring. It was this hope that kept me plugging away – by now it was a virus in my veins.
I had high hopes for the acting president who had a doctorate degree in zoology. He had been born and raised in the heart of the Niger Delta and knew first hand, the social and environmental problems associated with gas flaring. It was this hope that kept me plugging away – by now it was a virus in my veins.
I abandoned everything else – dreamt and
spoke about gas only. If I could get 15 minutes with the acting president, I
would some of that fever to him (I thought).
At about this time, I got acquainted with the
Nigerian Gas Master Plan and to my further surprise, it barely mentioned or
acknowledged gas flaring. I performed a word search to find ‘gas flaring’ and found
it was mentioned just once or twice - we would have to look for oxygen and
momentum elsewhere.
Still troubled, (as part of the gathered
audience at the 2010 OTC in Houston), I decided to challenge the former
minister of petroleum - pretending to ask
a question when in actual fact I was telling her what I felt was the right
thing to do!
I remember that question almost verbatim: “Congratulations
madam, you have a very good gas master plan but please do not forget flared gas
– it may be more expensive to gather, but we will recover some of the $3.6
billion dollars lost annually, and be saving lives and the environment as well…”
The minister very graciously assured us - the
gathered audience, that flared gas would not be ignored – would be harnessed
and put back into the gas supply chain. She was an indigene of the Niger Delta,
and had worked in the greatest Oil company in Nigeria – After that session,
several politicians came to me with their cards – that was a brilliant
question…
The
Gas Master Plan
Has the Gas Master Plan (GMP) succeeded? For such an auspicious plan, one announced with such great fanfare, I throw my hands up in surrender – I don’t know the answer to that. What I do know is that there still exists a huge unmet demand for gas by power plants and sundry industrialists.
Has the Gas Master Plan (GMP) succeeded? For such an auspicious plan, one announced with such great fanfare, I throw my hands up in surrender – I don’t know the answer to that. What I do know is that there still exists a huge unmet demand for gas by power plants and sundry industrialists.
It is perplexing that the collective energy
requirement of all Nigerians has not been sufficient to jumpstart a ‘continuous
self-sustaining cycle’ – like the great cycles in nature – the oxygen,
hydrological or Nitrogen cycles or like the internal combustion engine – intake
and out take and intake and out take….
The desire of every Nigerian for uninterrupted
– (even 12 hours of uninterrupted) electricity should have created a cloud of
oxygen - enough to ignite a fire in the
belly of the engine of the gas master plan. What went wrong?
Thermal plants, which were commissioned
without fuel gas, still remained without fuel gas. Electricity was still
epileptic. Many Nigerians were not even aware there is or was a gas master plan!
If it were a military campaign, the gas
master plan has definitely failed – 5 years on (perhaps more), no battles
(short term goals) won (accomplished) and the war (power outages) was still
raging.
The gas master plan gives new insight to Dwight
Eisenhower’s controversial remark about planning: "In preparing for battle
I have always found that plans are useless, but planning is
indispensable."
With the reconstitution of the board of the
NNPC earlier this week, we can say that perhaps that gas master plan failed!
Do we need a new plan? Perhaps not an
entirely new one – we could build on the existing one - a post mortem will be
necessary to create a “Lessons Learned Register”. What I think was lacking was
the follow through – it wasn’t given the priority it deserved.
In addition, it should have been phased:
Phase 1: Monetization of our gas assets through the provision of natural gas to our power industry,
Phase 2: Monetization our gas assets through the provision of natural gas as an alternative to diesel/gasoline (with a focus on reducing fuel subsidies)
Phase 1: Monetization of our gas assets through the provision of natural gas to our power industry,
Phase 2: Monetization our gas assets through the provision of natural gas as an alternative to diesel/gasoline (with a focus on reducing fuel subsidies)
Phase 3: Monetization of our gas assets
through the provision of natural gas as feedstock for petrochemical industries
Our gas assets in my opinion are more
valuable than gold and diamond deposits – it is impossible to imagine a nation
with the 7th largest gold deposits on earth which imports each year,
billions of dollars worth of finished gold neck-chains, bracelets, earrings,
cups, bowls, and so on and so forth….and in order to make it affordable to it
citizens spends billions more subsidizing the price of gold earrings,
bracelets…
We have no business subsiding fuel imports –
let us run our vehicles on gas and spend all those billions building
infrastructure for our children and their own children.
The
development and monetization of our gas resources should be our most important goal
– the first and last item on our government’s agenda.
It will not be easy but we can look to JFK's
eternal speech at Rice University on September 12th, 1962 for guidance. He
lay down the gauntlet and in so doing, won the race to the moon. This feat
achieved 46 years ago is probably Mankind’s greatest achievement – it also has
been America’s defining glory – the one single act that set her apart from all
the nations on earth. He had declared that day in 1962: “We choose to go to the moon in this decade
and do the other things, not because they are easy, but because they are hard,
because that goal will serve to organize and measure the best of our energies
and skills….”
Given Nigeria’s huge proven reserves - 5.1 Trillion
cubic meters at the last count, we have a unique opportunity to focus the best
of our energies and skills on the problem of power generation - which stripped
to its core is a problem of inadequate gas supply which stripped further will reveal
a failure to engage in meaningful national development.
Keep our word:
We also should learn to keep our word – I recall a former president saying: ”We cannot provide gas to neighboring countries when we do not have enough gas”… well… we still do not have any gas!
We also should learn to keep our word – I recall a former president saying: ”We cannot provide gas to neighboring countries when we do not have enough gas”… well… we still do not have any gas!
Perhaps
if we had gone the extra length to gasify the West African Gas Pipeline, we
would not only be earning revenue from that, however little, but that effort to
keeping our commitment would invariably have provided us with quite a bit of gas - not all we need but more than we currently
have!
National
Development:
National development is an honor bestowed on
every generation. It isn’t one activity but a series of activities executed with
great faith in furtherance of the greater good. It is the responsibility of the
government to set the goals and the duty of the bureaucrats to create the
blueprint and the rest of us to orchestrate it. Back to JFKs rallying cry to a
nation standing on the brink of defeat in the space race:
”We choose to go to the moon. We choose to go
to the moon in this decade and do the other things, not because they are easy,
but because they are hard, because that goal will serve to organize and measure
the best of our energies and skills, because that challenge is one that we are
willing to accept, one we are unwilling to postpone, and one which we intend to
win, and the others, too.”
A National Development Plan forces us to allocate
resources efficiently. Each success reinforces self-belief in the ruling class
as well as in the citizenry. Through mistakes they all learn. In addition, it
will progressively destroy Corruption.
Corruption in Africa, takes on a life of its
own when leaders pursue fatuous, trifling agendas – it germinates at the spot where all pretensions to National
Development cease. It is plain to see that when we do not efficiently allocate
our resources, there will be an illusion of wealth.
Even in the poorest of nations, government
officials will have the half a dozen of the most exotic automobiles on the
planet as their official cars, and private jest as their preferred mode of
transportation…. They will be seen living in despicable affluence – even as millions
of their compatriots go to bed hungry! And that is only Step 1! Step 2 will be prioritizing
only those projects by which they may receive the largest kickbacks as they
seek to make permanent lifestyles built on filthy lucre!
In such nations, the government’s only plan
for national development is the purchase of foreign technology and foreign
advisers with aid received through beggary. A vicious cycle of poverty ensues… leading
to brain drain, wars, disease, kidnapping, terrorism – all of which underline
the status of Africa as a continent without hope!
Window
of opportunity:
The window of opportunity shrinks… Advances
in technology and drilling in the artic will reduce our importance as a global energy
player.
Given the daunting task of building infrastructure
for gas production, gas distribution and power generation, we need to start today
– to do this, we need to suck in talented Nigerians from everywhere on the
planet – it is our fight! (We also need to minimize the involvement of certain
nationals whose economic activities egged on by our largely unregulated
business environment could only be described as predatory).
Corporations,
which employ large numbers of talented Nigerians, should loan talent from their
skill pool. New goals and a new direction should be established. For example: Increase
the power generated and distributed by 2000MW by Q2 2016, using available/associated
gas (gas for which we do not need to drill wells for).
Synergy:
Synergy between gas producing Exploration and Production (E&P) companies, the Nigerian LNG Company and equipment manufacturers such as General Electric, will be mandated – given the stated desire of all those entities to have skin in the fight to develop Nigeria (Africa)
Synergy between gas producing Exploration and Production (E&P) companies, the Nigerian LNG Company and equipment manufacturers such as General Electric, will be mandated – given the stated desire of all those entities to have skin in the fight to develop Nigeria (Africa)
It will be a great first step to solving the
problem of power generation in the shortest possible time. With constant electricity,
we could rival and surpass the Asian tigers and in all likelihood end up supplying
goods and services to the rest of Africa - a point echoed by President Obama in
Kenya a few days ago when he said: “If we can get Africa electrified as much as
Asia, that will drive economic growth”
Investments:
To achieve constant electricity, we will need money. After
LEADERSHIP, investments are the next critical success factor. Consider the
following:
· Nigeria’s
proven reserves stand at 5.1 Trillion cubic meters while its annual gas
production stands at about 32.8 billion cubic meters. This represents 0.64% of
its proven reserves.
·
The United Kingdom on the other hand has proven reserves
stand 292 billion cubic meters and it produces 58.5 billion cubic meters
annually – 20% of its gas reserves.
From the forgoing, a nation’s gas reserves
are of no value if it isn’t tapped. We need capital to drill the number of
wells required to produce the amount of gas we need… build gas-processing
facilities, transport the gas produced to the customer.
Generating
20,000MW by 2020 (how realistic?)
According to a 54-page report entitled
"The Energy Blueprint" obtained by Reuters, reaching 20,000 MW by
2020 is "not even remotely realistic" and "setting unrealistic
targets dilutes discipline
Let us look at what it would take is to
generate an additional 20,000MW of electricity continuously.
First, you need gas: To generate 20,000MW, we
will need about 5bscf per day.
Given the size of our reserves, this translates to about 1% of our reserves.
Given the size of our reserves, this translates to about 1% of our reserves.
20,000MW will supply 32 million homes, with
450kWh monthly.
Assuming an average of 5 persons per home, this translates to 160 million people - enough to herald the end of power outages in Nigeria.
Assuming an average of 5 persons per home, this translates to 160 million people - enough to herald the end of power outages in Nigeria.
Producing 5 billion cubic feet of gas daily
will require a prodigious level of drilling activity – creating thousands of direct
jobs and tens of thousands of indirect jobs through the supply of goods and
services.
We will need scores of wells to produce this
volume of gas – possibly 100 or more. I am not an expert here but let us assume
we need 200 wells.
Building several Distributed Generation plants,
which will utilize this gas, will create yet more jobs. The investments will be
huge – but so will the potential returns be. Abundant electricity will be huge
in attracting companies from neighboring nations – even from Europe and the
Americas.
At key coastal towns from Calabar to Badagry,
LNG receiving jetties could be built. Why? If we are to generate 20,000MW in
the next 4 years we may need to import LNG, vaporize and generate power.
A list of possible locations for LNG
receiving terminals is shown below:
Shall we generate 500MW or 1,000MW in each of
these locations? These and similar directives will be answered by the
bureaucrats (mentioned previously) who create the blueprint.
Assuming we wish to generate 500MW in 8
locations and 2,000 in Lagos-Lekki and another 2000MW in Lagos Apapa, we are
talking about 8,000 MW.
Location
|
Power (MW)
|
Gas (Mmscf/Day)
|
LNG Tons/Day
|
Calabar,
|
500
|
125
|
2500
|
Forcados
|
500
|
125
|
2500
|
Koko
|
500
|
125
|
2500
|
Apapa
|
2000
|
500
|
10000
|
Lekki Ftz
|
2000
|
500
|
10000
|
Oghara,
|
500
|
125
|
2500
|
Ologbo,
|
500
|
125
|
2500
|
Port Harcourt
|
500
|
125
|
2500
|
Sapele
|
500
|
125
|
2500
|
Warri,
|
500
|
125
|
2500
|
Total
|
8,000
MW
|
2,000
Mmscfd
|
40,000
TPD
|
Constructing
these LNG receiving terminals will create yet more jobs – but in the short
term, we will be well advised to use FSRUs (Floating Storage and Regasification
Units).
Economics:
How does the economics work out?
8,000MW sold at N10/kWh (5¢/kWh) could generate up to NGN 57 billion (US$288 million) monthly (that is: NGN 691 billion (US$3.456 billion annually). Ending energy poverty in Nigeria will be simpler than all the long-windedness about it suggests.
8,000MW sold at N10/kWh (5¢/kWh) could generate up to NGN 57 billion (US$288 million) monthly (that is: NGN 691 billion (US$3.456 billion annually). Ending energy poverty in Nigeria will be simpler than all the long-windedness about it suggests.
The good news about this model is that it can
be modified such that in addition to FSRUs we have LNG tank farms built - from
which LNG could be transported inland via virtual gas pipelines, to embedded
power plant sites.
Traditional underground gas pipelines, as we know require
very huge amounts of investments – and have a long lead-time. 75% of all known
pipelines are laid is in just three countries: The United States, the Soviet
Union, and China. For 3rd world countries, the prospect of investing
US$1 million per kilometer for hundreds of kilometers of underground pipelines,
will make the most well meaning of leaders balk –many are the simpler needs of
the citizenry with much lower price tags.
Transporting natural gas in compressed or liquefied form
to power plants constructed exactly fit for purpose is thus a happy middle ground.
Asides the high price tag for Underground
pipelines, the specter of corruption, poor planning or both, attested to by
several uncompleted or abandoned white elephant projects across the African
landscape could make even the most committed of leaders hesitate. Luckily,
there is an alternative to expensive underground gas pipelines. We call them Virtual
Gas Pipelines.
Virtual Gas pipelines deliver gas by simply
transporting the gas (compressed or liquefied) by road or rail, using
specialized vessels mounted on trucks or railway cars. In Nigeria today, dozens
of factories have switched from diesel as their primary fuel to Natural Gas
(compressed) - saving as much as 40 to 50% in fuel costs as a result.
I strongly believe that power generation
should devolve y the Federal Government to the states first, and then devolve
to the local government level if further efficiencies will be had. Some states
may decide to aggregate their power requirements and solve them together and
should be allowed to. Some may decide to form alliances with gas producing
states and jointly build power plants – some may decide to import LNG (or LPG).
These scenarios are explored in another article: (NLNG, LPG and the quest to generate 20,000MW)
Whichever route is taken, The Federal
Government can help by becoming a credible gas/power off-taker and provide the
guarantees required to build:
1. Natural
Gas Compression plants for smaller volumes over shorter distances (up 5MW, less
than 100 kilometers from the gas sources) and
2.
For huge volumes such as might be required for 25MW or
50MW power plant, either import LNG (or LPG), or build Natural Gas liquefaction
plants.
With Distributed Generation we may not generate
exactly 20,000MW by 2020, but we will increase power generation in leaps and
bounds. Quite possibly (and easily) we could surpass 20,000MW if an economic
case for generating 20,000MW exists.
Distributed Generation (Advantages)
•
Single Authority: for power generation and distribution
•
Lower
Losses: Convenient location avoids transmission &
distribution losses.
•
Higher
Efficiency: Convenient location allows Combined Heat &
Power
•
Higher Power Reliability & stability
•
Higher Power Security (less susceptible to
sabotage)
•
Pollution Benefits: None of
the environmental effects caused by the concentrated co2 emissions associated large-scale
public utility plants
•
Eliminates high cost of
large-scale public utility plants (built with excess capacity in order to meet
future requirements).
•
Eliminates high cost of
constructing high-tension electricity transmission lines.
Conclusion:
We need a new approach: the same old, same old approach of:
(a) Planning for and building large-scale public
utility plants and then (b) Build, (or forget to build) the
billion-dollar gas pipelines required to provide fuel gas and then (c) Remembering
at the last minute that our high tension power transmission lines are
notoriously unreliable.
Transmission lines:
A study by Onohaebi
O. Sunday titled: Power Outages in the Nigeria Transmission Grid
completely reinforces my belief that Distributed Generation is the way to go. The
study observed, “planned outages on the 132 kV recorded the
highest value of only 7% while, the remaining 93% were due to either forced
outages or emergency/urgent outages. This suggested that the reliability of the
network is very low resulting in very low efficiency and disruption in the
lives of the citizenry”
Large-scale public utility plants are simply
not the solution.
It hasn’t worked. Distributed Generation cuts out transmission line issues, as
we know it. We generate, 20, 25, 30 or 50 MW, we distribute.
Imported LNG
Nigerians are tired of excuses they need the problem solved…
only a new approach will solve the problem. For a quick short-term win, we have
to figure out how to ramp up LNG production at Bonny, or import from Trinidad
and Tobago, or from the USA (as part of power Africa we might get Mr. Obama to
support favorable long term prices for us!).
The mathematics is quite simple: 2,000 TPD
(tons per day) of LNG per day will generate 400MW, 5,000 TPD of LNG will
generate 2,000MW…10,000 TPD will generate 4,000MW 50,000TPD of LNG will
generate 20,000MW. (Are we ready to beat the naysayers?)
The economics is similarly simple:
20, 000MW generated continuously and sold at N10 per kilowatt-hr.
will yield NGN144, 000,000,000.00 (One hundred & forty-four billion naira) monthly.
At today’s exchange rate that will be US$720,000,000
(Seven hundred and twenty million dollars monthly) and in 12 months, we will
realize (gross):
NGN1.728 trillion (US$8.64 billion). Truth is – this is a
modest forecast. The cost of self-generating electricity for most
industrialists, it is around N50/kWh.
LNG
satellite stations
Some of the LNG imported into Lagos from the Nigerian LNG
company or other sources could be transported inland by rail to Ibadan through
Abeokuta and onward to Ilorin via Ede, Oshogbo and Offa; and through Base-Sadu,
Jebba, Lafiagi and Zungeru to Minna and from there to Kaduna.
We thus will have the possibility of
establishing power plants in any of those locations and distributing generated
electricity to communities and towns. More jobs, more electricity…the possibilities
are endless.
Railway lines and LNG distribution:
Railway lines could be key to taking LNG inland – we have
another rail line going from Port Harcourt to Enugu and all the way to
Kafanchan via Aba, Umuahia, Afikpo, Agbani, Otukpo, Makurdi, and Lafia. We also
have a standard gauge railway line running from Aladja to Ajaokuta.
The Nigerian Guardian sums it up succinctly in
its editorial of July the 5th:
The issue of epileptic electricity has become
Nigeria’s albatross, almost defying all possible solutions, indicating that
such solutions were hardly well thought out, let alone diligently implemented.
It continues:
The solution to Nigeria’s power problem is
not as far-fetched and complex as it has been made to seem. A committed and
sincere administration can make a dramatic change in no time but the situation
remains dire because there has been no political will, honesty of purpose and
sincerity in all the plans or so-called road maps.
The
Nigerian people are tired of power outages and are ready to move forward - is
government ready? We are tired of excuses. Only a new approach will solve the
problem. Efforts of the last government proved inadequate – This Government
must tie its loincloth firmly and put its shoulders to the wheel. It can be
done – yes it can! It will not be easy – but we choose to do it nonetheless
because, to quote John F Kennedy….”because
that goal will serve to organize and measure the best of our energies and
skills, because that challenge is one that we are willing to accept, one we are
unwilling to postpone, and one which we intend to win”
To be continued: (Next: Power in Nigeria: LNG, LPG and
the quest to generate 20,000MW)
Twitter: @Virtualgas
Email: Obi@gasafrique.com
Email: Obi@gasafrique.com
Obi Akaraiwe
has been a leading advocate for Distributed Generation, Small Scale LNG plants
and Virtual Gas Pipelines in Nigeria. He has 25 years experience in Oil &
Gas working in some of the global leaders in Drilling, Wireline Services and
Exploration &Production in Nigeria as well as in the United States
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