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    Nigeria‘s PIB nears journey’s end [NGW Magazine]


The Nigerian Petroleum Investment Bill is nearing enactment, but there are still differences between the states and the government over sharing the upstream bounty. [NGW Magazine Volume 6, Issue 4]

by: Omono Okonkwo

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Natural Gas & LNG News, Africa, Top Stories, Insights, Premium, NGW Magazine Articles, Volume 6, Issue 4, Nigeria

Nigeria‘s PIB nears journey’s end [NGW Magazine]

Over a decade after first mooted, the Petroleum Industry Bill (PIB) is set to become law this spring. The speaker of the lower chamber of Nigeria’s national assembly, Femi Gbajamiamila, said in January that “we intend to pass this bill by April. That is the commitment we have made. Some may call it a tall order, but we will do it and we will do it with every sense of responsibility without compromising the thoroughness of the work that will be done.”

Nigeria’s National Assembly held public hearings in the last week of January for responses from  industry players, and relevant stakeholders. Representatives of host communities as well as members of the Oil Producers Trade Section have disagreed with some aspects of the PIB.

Host communities want 10% equity participation as opposed to the 2.5% as stipulated in the current PIB draft. This puts them at odds with the minister of state for petroleum resources, Timipre Sylva, who has called the lower share “reasonable.”

Although host communities are yet to accept that, the chair of the Ad-hoc Committee on PIB, Mohammed Monguno, said the panel would visit various communities in the coastal region where much of the oil and gas is produced, in pursuit of a compromise.

Although the PIB 2020 draft has been touted as progressive, it still does not address important issues affecting gas. Off-grid gas-to-power operations have no policies to effectively guide potential investors. Other weaknesses include: no market-based gas pricing; inadequate midstream infrastructure; and outstanding debt.

During a December 2020 virtual conference organised by the Nigerian Gas Association, the COO of gas and power at state Nigerian National Petroleum Company Yusuf Usman said these issues had to be addressed before Nigeria’s gas sector can transform itself into a free market.

“For the transition period, there are many things to look at in determining how many years it will take to get the market on to a ‘willing buyer, willing seller’ basis. Do we have a robust infrastructure? I can confirm to you today that we have made progress in infrastructure.

“But there are other challenges. If you look at our projection based on demand for gas, power continues to play a significant role in determining the market-based pricing model for gas. Therefore, the key consideration is, how long will it take us to resolve the issues in the power value chain? Once we are able to do that, then I think we can go into a ‘willing buyer, willing seller’ basis,” Usman said. 

Some of the issues across the generation, transmission and distribution sectors in the gas-to-power value chain include: non-cost reflective tariffs; a liquidity crunch, which has resulted in huge debts owed to gas producers; and inefficient regulatory decisions based on poor data and research.

However, these problems can be solved if they are caused by the NNPC feet-dragging over allowing competition into the power value chain.

According to the National Petroleum Investment Management Services, under the NNPC, central processing facilities, independent power plants, natural gas liquids recovery plants, methanol plants, fertiliser plants, and domestic gas supply to local industries are all good investment opportunities.

As Nigeria focuses on further increasing its supply of gas for power generation, industrial, transport, petrochemical, agricultural and other purposes, Sylva, has said that potential gas investors could rest assured that the PIB will include low tax provisions to sustain stable investments.

“We are not unmindful that the industry players are of the view that the current level of taxation on onshore and shallow water operations is excessive and therefore the proposed PIB should include a significant lowering of these taxes for new investments and for existing operations,” he said.

Focus on the southeast

A Total Nigeria staffer told NGW in December that potential investors should look into investing in Nigeria’s southeast gas business because of its rich source of natural gas and shale resources.

Aside from Orient Petroleum, other gas investors in Nigeria’s southeast region include Anglo-Dutch Shell, French Total, private Seplat and many others.

In October 2020, Shell embarked on the Aba City Gate gas plant project, which is a 10mn ft³/day facility that can be expanded to 30mn ft³/d, with 40 MW of gas-to-power electricity generation capacity which can also be trebled.

The gas plant will complement Shell’s recently completed 20-km domestic gas pipeline expansion project in southeastern Abia State, connecting Agbor Hill, Osisioma and Ariaria industrial zones, and providing power to a market that is home to an estimated 1mn traders.

Nigeria’s southeast region, which comprises the states of Anambra, Ebonyi, Enugu, Imo and Abia, have significant natural gas reserves and the Buhari administration is committed to harnessing those resources for national development.

Shell is 30% shareholder in Shell Petroleum Development Company (SPDC) but is considering reducing its exposure to onshore Nigerian oil, CEO Ben van Beurden told a press briefing following an adverse ruling earlier in February.

However the company’s commitment to Nigerian gas seems unaffected. Following a gas marketing deal in January, it said increased gas distribution would bring about "tremendous benefits to the economy” and it “intended to “develop enough gas to meet our current commitments and future growth plans."

SPDC produced 514,000 b/d in 2019, but since then it and its European partners Total and Eni have sold down licence stakes most recently in OML 17. NNPC owns 55% of SPDC.

GEC Petroleum, which has a 41% stake in OPL 907 in the Anambra Basin, says the basin holds an estimated 10 trillion ft³ of gas. Within the Anambra basin lie the Ugwuoba and Igbariam gas fields, which were previously ignored as the operators were then interested only in oil. These include Igbariam-1, Ajire-1, Akukwa-1 and Akukwa-2.

In 2016, Seven Energy told the Nigerian Gas Association (NGA) to advocate for the further exploration of the basin’s gas resources. The then COO at Seven Energy, Jeff Corey, complained that the policies and regulations in place did little to encourage development of the Anambra basin. “The basin will open a whole new area to gas supply for power and industrial use,” he said.

The state government has to work with the federal government if it wants to increase the use of these resources owing to the legal division of rights between the two administrative levels.

A field engineer at gas investor, Orient Petroleum, active in the southeast, told NGW in December 2020, that untapped reserves in Nigeria’s southeast could end Nigeria’s energy poverty.

According to him, the Anambra Basin has significant gas reserves and should be a focal point of efforts especially as Nigeria has declared January 2021 to December 2030 as the decade of natural gas.

The Muhammadu Buhari administration has made the southeast a region to focus efforts on gas production and use, in order to improve the economy, a view voiced by Sylva, saying it had a “pivotal role to play in Nigeria’s journey towards gas availability.”

Through the Nigerian National Petroleum Corporation and the Gas Aggregation Company of Nigeria, market-based and government-backed frameworks will be used. 

OB3 Gas Pipeline Project

The 127-km Obiafu-Obrikom-Oben (OB3) gas pipeline now being built is an important, grid-length evacuation infrastructure, intended to deliver gas from the southeast to the established markets in the west of Nigeria. When complete later this year, it will enable the first major outline of a national gas grid. It will be the largest gas transmission pipeline in Nigeria by volume.

Nigeria’s national grid, with a transmission capacity of 5 GW, runs on both hydro and natural gas. Nigeria is in dire need of more natural gas-fired plants for power supply as its current supply is too low for its fast-growing population.

The Lot A section of the OB3 pipeline (64.5 km x 48-inch) was assigned to Nestoil initially, but the company’s inability to work effectively, caused by unprecedented floods in the southeast, led to a replacement by the China Petroleum Pipeline Construction Company (CPPCC) and Brentex Petroleum Services.

The CPPCC started work June 30, 2020. The Lot B section of the OB3 pipeline (67 km x 48 in) constructed by Oilserv, is at its commissioning phase. It is expected to deliver over 2bn ft³/d of natural gas.

ANOH Gas Project

The 719.84-km Assa North-Ohaji South gas project, in Imo State, is an inshore gas field with a production capacity of 600mn ft³/d, the energy equivalent of about 2.4 GW.

The project involves the development of the Ohaji South gas and condensate field located within Oil Mining Licence (OML) 53 and the Assa North field in OML 21.

The ANOH Gas Processing Company (AGPC), incorporated in 2017, is responsible for the project development and operation and maintenance. It is owned equally by Seplat and Nigerian National Petroleum Corporation.

The ANOH project will be connected to large-scale gas reserves to Nigeria’s main demand centres through the Oben hub owned by Seplat. The produced gas will be treated at the processing facility owned by Shell Petroleum Development Company and then forwarded through the Obiafu-Obrikom-Oben pipeline network.

During a November 2020 visit to the facility in Imo State, Seplat chairman, ABC Orjiakor, said the company expects ANOH’s first gas in the fourth quarter of 2021.

In January 2021, Seplat announced that it had raised $260mn in debt, through its joint venture, the ANOH Gas Processing Company to fund completion of its ANOH gas processing plant.

The $260mn funding was provided by a consortium of seven banks: Stanbic IBTC Bank Plc (advisor), United Bank for Africa Plc, Zenith Bank Plc, FirstRand Bank (London Branch) / RMB Nigeria, The Mauritius Commercial Bank, Union Bank of Nigeria and FCMB Capital Markets.

Gas demand creation

Even as the world faced the first wave of the Covid-19 pandemic, Nigeria’s petroleum industry was able to launch the Nigerian Gas Transportation Network Code to open opportunities for investors in gas transportation infrastructure as shippers, agents, and suppliers.

The opportunities include gas anchor programmes, with huge potentials for job creation and poverty alleviation for Nigerians.

Also, last August the government launched the National Gas Expansion Program, which will stimulate growth in the liquid petroleum gas and compressed natural gas sub-sectors, develop a gas-to-people structure, which means expanding gas use in households and as vehicle fuel, as well as ensuring policy guidelines implementation, and the necessary regulations.

The NGEP is not a substitute for the PIB but a policy directed at expanding local use of gas resources.