Nigeria has an estimated 176 trillion cubic feet (Tcf) of proven natural gas reserves, giving the country one of the top ten natural gas endowments in the world and the largest endowment in Africa. In October 2004, Nigeria announced that its natural gas reserves could be as high as 660 Tcf. The government plans to raise earnings from natural gas exports to 50 percent of oil revenues by 2010 and to remove subsidies from natural gas by 2007. NNPC estimates that $15 billion in private sector investments is necessary to meet its natural gas development goals by 2010.
Nigeria's $3.8 billion Bonny Non-Associated Gas (BNAG) plant on Bonny Island, was completed in September 1999. The facility, which processes 397 billion cubic feet (Bcf) of LNG annually, has three trains in operation. Fourth and fifth trains are under construction and expected to start up by mid-2005. Plans have been approved for a sixth train, which is expected to add 194.8 Bcf to the plant's capacity, bringing the total to 1.1 Tcf per year. Nigeria Liquefied Natural Gas Corporation (NLNG) officials hope to have the sixth train operational by 2007.
In November 2004, SPDC began the $48 million expansion of the Bonny Non-Associated Gas (BNAG) plant from 300 million cubic feet per day (Mmcf/d) to 450 Mmcf/d to increase supplies to the NLNG plant's fourth train. In January 2005, ExxonMobil signed a memorandum of understanding (MOU) with NNPC to study the possibility of constructing a second LNG plant on Bonny Island to come online in 2010, producing 4.8 million tons per year of LNG.Plans for additional LNG facilities are also being developed. . ConocoPhillips, ChevronTexaco and Agip signed an agreement with the NNPC for the establishment of the $3 billion Brass River LNG plant. The project expects its two LNG trains to be operational by late 2008.
ChevronTexaco's $1.9 billion Escravos gas-to-liquids (GTL) project is scheduled to come online in 2006. Plans include linking the Escravos pipeline system with the West African Gas Pipeline (WAGP) for natural gas export to Benin, Togo, Ghana and beginning in 2006.
In February 2005, NNPC and Addax Petroleum Development Nigeria agreed to participate in Owel Holding's $58 million liquefied petroleum gas (LPG) project in Imo state. The plant is expected to produce 200 metric tons of LPG per day from 40 Mmcf/d of feed gas per day.
In March 2005 ExxonMobil signed a memorandum of agreement with the Nigerian oil firm NNPC to build a gas and power plant in Nigeria. The first phase of the project will include a plant producing 4.8 millions tons per annum of liquefied natural gas at the Bonny Island of southern Rivers State. The Nigerian government plans to invest US$70 billion in the next ten years on the project. The project is to be built in phases and will be one of the highest LNG investments in the world.
In April 2005 the Nigerian National Petroleum Corporation ("NNPC"), Chevron Nigeria Ltd ("Chevron"), BG International Ltd ("BG"), and Shell Gas & Power Developments BV ("Shell") signed a Memorandum of Understanding on the Olokola Liquefied Natural Gas project to be sited in Olokola Free Trade Zone. The project is the outcome of two separate studies conducted by Chevron and BG, and Shell, which proposed to NNPC the development of their respective greenfield LNG projects in the Olokola area, due to its natural deepwater berth and other technical reasons. The projects' target shipment dates are 2009 and 2010 respectively.
Around 3,000 million standard cubic feet of gas is produced annually. Due to a lack of gas utilization infrastructure, Nigeria flares 75% of the gas it produces and re-injects 12% to enhance oil recovery. Although high, this is significantly below the over 98% flared in 1971. Nigeria is the world's highest natural gas flaring country with 42.6 percent of its total annual natural gas production being flared. NNPC estimates that Nigerian flared natural gas accounts for approximately 20 percent of the world total. Official Nigerian policy is to end natural gas flaring completely by 2010 by collecting associated natural gas and processing it into liquefied natural gas (LNG). In December 2004, Nigeria announced that it had reduced its natural gas flaring by 30 percent.
With the aim of increasing gas utilisation, the NNPC set up a company, the Nigerian Gas Company Ltd in 1988, with the specific task of developing, harnessing and marketing natural gas from the domestic market. A number of projects are being developed to increase the utilisation of gas and to reduce gas flaring. In 1999, the Nigerian government set in place incentives to make the utilisation of gas more attractive and to check the waste in the Nigerian gas sector through flaring. The incentives will include approval of alternative funding for gas projects, a comprehensive energy policy and tax concessions. Other incentives promised to investors in the gas sector were a higher capital allowance, investment tax credits and lower royalty in comparison with oil as well as effective monitoring of oil companies` pledge to eliminate gas flaring in the country by 2008.
As a result of these directives and incentives, together with mounting pressure by environmentalists, all the major oil producing companies are executing projects aimed at substantially reducing the amount of gas flared in the course of their operations. Several of the oil JVs have plans for using the gas currently flared and are committed towards utilising 100% of associated gas for commercial or productive purposes by 2010. In 1999, Mobil declared its intention of cutting gas flaring to 10% by 2004.
The Nigeria Gas Company (NGC) has in place more than 1,000 km of pipeline with seven gas systems and fourteen compressor stations. About 75% of NGC's sales are to four thermal power stations run by the Nigerian Electrical Power Authority. The major internationals have set up a number of gas projects.
The most ambitious of these is the Bonny Island LNG facility which is estimated to cost $3.8 billion. Nigeria Liquified Natural Gas Corporation (NLNG) comprised of the NNPC (49%), Shell (25.6%), Elf (15%) and Agip (10.4%) is developing the project. Initially the facility will be supplied from dedicated gasfields but NLNG intends to use at least 50% associated gas which is currently flared. The first two trains are complete and the third train was commissioned in 1999 for completion at the end of 2000. With three trains operational it will be possible to run the entire LNG facility on associated gas.
The first exports of gas from the facility began in October 1999, with the first shipments to Spain, Italy and Turkey, under long term purchase agreements.
The Escravos gas project (EGP) is a joint venture between NNPC (60%) and Chevron (40%). Phase I has been completed at a cost of $570 million and produces 165 Mmcf/d of associated gas from the Okan and Mefa fields.
In June 1999, Chevron and Sasol signed a JV to construct a gas-to-liquids (GTL) plant which is expected to use Sasol technology and be sited close to Chevron’s EGP facilities in the Niger Delta region. ChevronTexaco's $1.9 billion Escravos gas-to-liquids (GTL) project is scheduled to come online in 2006.
The West African Gas Pipeline (WAGP) will be used to supply Benin, Togo and Ghana. The project was first mooted in 1995. A feasibility study was completed in 1999 with the World Bank stating that the countries could save about $500 million in primary energy costs over 20 years.
In November 2004, the World Bank approved a $125 million in investment guarantee for construction of the West African Gas Pipeline (WAGP), which will deliver 140 MMcf/d of natural gas to power stations in Ghana beginning in December 2006. The Multilateral Investment Guarantee Agency (MIGA) will provide $75 million of the total, while the International Development Association (IDA) will provide the additional $50 million. The $590 million, 420-mile pipeline will carry natural gas from Nigeria to Ghana, Togo, and Benin. Its initial capacity, expected to come online in June 2005, will be 200 Mmcf/d. The pipeline is expected to function at a full capacity of 470 Mmcf/d within 15 years. In March 2005, the West African Pipeline Company (WAPCo) contracted Zurich Financial Services (Switzerland) to provide political risk insurance for the WAGP.
According to the EIA Nigeria and Algeria are in discussions over the possibility of constructing a Trans-Saharan Gas Pipeline (TSGP). The 2,500-mile pipeline would carry natural gas from oil fields in Nigeria's Delta region via Niger to Algeria's Beni Saf export terminal on the Mediterranean. It is estimated that construction of the $7 billion project would take six years.
