RIVERS STATE UNIVERSITY OF SCIENCE AND TECHNOLOGY NKPOLU, OROWORUKWO

P.M.B. 5080, PORT HARCOURT

TERM PAPER TOPIC:

NIGERIAS NATURAL GAS AND GAS-LIQUID RESERVES PRESENTED BY: (GROUP 1) NAMES: OHAZURUIKE LOTANNA VITUS DE. 2007/1049 EZERIE ADINDU WILLIAMS OGBU KINGSLEY OKPARA NELLY CHINASOM GBERESUU CHRISTIAN ALBERT-BRIGGS FITZALLEN DEPARTMENT: COURSE TITLE: COURSE CODE: COURSE LECTURER: DE.2005/0713 DE. 2007/1047 DE. 2007/1051 DE. 2006/2810 DE. 2007/1012

PETROLEUM ENGINEERING NATURAL GAS PROCESSING PTE 542 ENGR. FIDELIS WOPARA MARCH, 2013

ABSTRACT A mention of the name Nigeria brings to mind, in terms of reserves, a major quality oil producer. What few do not know is that the country is just as much, or perhaps more of a gas than oil province. If oil has played a key role in developing the countrys economy, gas is yet to and may even make a much greater impact on the positive growth of the nations economy. With an estimated 180 Tcf (30 MMboepd) proven natural gas reserves as of the end of 2011, the country stands taller than all its African peers and is positioned at the ninth largest natural gas reserve holder in the world. This paper is designed to review the nations Natural gas reserves; how it has grown over time, its utilization and importance to the economy. It shall also employ projected production amidst exploration efforts, if any, to forecast the rate of decline/increase of these reserves up to a foreseeable future. Statistics are presented at every point to portray clearly and distinctively the nature of these reserves.

TABLE OF CONTENTS

Contents 1. Abbreviations and Acronyms 2. Introduction 3. Current Reserves 4. Depletion of Gas Reserves 4.1.Growth of Reserves 4.2.Gas Reserves Decline 4.2.1. Gas Flaring 4.2.2. Domestic Gas Market 4.2.3. Export-Oriented Project 5. Conclusions and Recommendations 6. References 7. Appendix

Pages 3 4 7 11 11 12 15 17 19 21 22 24

1.0

ABBREVIATIONS AND ACRONYMS

WB NSGMP US EIA IOCs ALSCON UNDP NLNG EGTL BOE MMCF Tcf Bcf

World Bank Nigeria Strategic Gas Master Plan United State Energy Information Administration International Oil Companies Aluminium Smelter company of Nigeria United National Development Programme Nigeria Liquefied Natural Gas Escravos Gas To Liquids Barrels Of Oil Equivalent Million Cubic Feet Trillion Cubic Feet Billion Cubic Feet

2.0

INTRODUCTION

Nigeria and its natural gas It is a publicly held notion that Nigeria is richly blessed with abundant resources, but very few consider its Natural gas reserve potential when making this statement. The focus is and has always been on its oil, with majority of its natural gas discoveries being mishaps in the search for oil. In spite of the fact that there has never been a single exploratory effort designed solely to discover gas, the country has an estimated 180Tcf proven gas reserves, enough reserves which based on its productionto-reserves ratio is expected to last for 109 years (Ukpohor, 2009). Despite holding a top 10 position for proven natural gas reserves, Nigeria produced just 1Tcf of natural gas in 2011 and ranked as the worlds 25th largest natural gas producer (US EIA, 2012).

Figure 1: Top 10 Proven Gas Reserve Holders, end 2011

Failure to harness its gas resources has had its share of contribution to the nations sluggish economic growth. This is particularly true in the power sector where unreliable or nonexistent gas supplies have contributed to a major ongoing crisis in power deliveries, crippling the economy for years, and seriously inhibiting new investment (WB NSGMP, 2004). A number of issues have plagued its efforts to harness these resources, the most profound of which are the instability issues of the Niger Delta, the nations natural resources base. For example, the US EIA 2012 Report on Nigeria stated that dry natural gas production grew for most of the last decade until Shell declared a force majeure on gas supplies to the Soku gas gathering and condensate plant in November 2008. Shell shut down the plant for repair damages to a pipeline connected to the Soku plant that was sabotaged by local groups siphoning condensate. This is only one of similar numerous incidents of oil theft plaguing production in the region.

Other issues hindering its efficient reserves growth and utilization have all been found to revolve around the nations government and its regulation of the industry. This, we believe is the sole reason why this nation still flares majority of its produced gas in spite of the gas flaring deadline of 2008 given by the government. The government has also failed in its obligation to
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create the market necessary to encourage exploratory efforts in this sector. This is evident in the lack of sole exploratory efforts designed to discover gas. Also hampering the exploratory efforts are the instability involved with the governments proposed Petroleum Industry Bill, a reason for which international oil companies have deliberately delayed exploration and development of certain prospects.

Also paramount is the rather slow domestic growth and utilization of its gas resources. Some experts believe that the countrys gas reserves could be as high as 600Tcf, which is three times more than the current conventional estimate of 187Tcf. This is enough to last as long as 500 years, fuelling our industries, homes, and international export, if efficiently harnessed.

Nonetheless, amidst all these setbacks, the nation does have a bright future if its current drive and proposed gas utilization projects are seen to the end. Its commendable increase in gas related projects, most notably the NLNG and EGTL facilities, are giant strides in the direction of economic growth. It is hoped that a continuous stream of similar well-conceived projects and associated domestic power development projects, would bring the nation to

a much anticipated top economic spot in line with its vision statement for the year 2020.

3.0

CURRENT RESERVES

Nigeria is endowed with abundant natural resources, which in energy terms, is in excess of the nations proven crude oil reserve. However, the gas was discovered whilst exploring for crude oil, as there is virtually no exploration for gas in Nigeria. Therefore, high oil production implies that additional high volumes of associated gas will be produced (Ojide et al, 2012). This gas reserves is split appropriately on a 50/50 ratio between AG and NAG. Most of the proven gas reserves are found as AG in the Niger Delta basin while the majority of the NAG has been discovered in the offshore blocks (Economides et al, 2004).

It is estimated that 90% of Hydrocarbon reservoirs in Nigeria contain potential commercial volume gas-cap (Economides et al, 2004). If properly harassed, this could bring the nation an unprecedented economic growth.

The WB NSGMP 2004 stipulates that the Niger Delta Basin has a proven plus probable oil and condensate reserves found to date of 55 billion barrels.
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This compares to gas reserves found to date of 32 billion BOE (194 Tcf) distributed among the 707 existing fields and discoveries in the basin (WB NSGMP, 2004). Currently, the US EIA 2012 report on Nigeria put this figure at 30MMM BOE (180Tcf). More important however, are the remaining and yet-to-find gas reserves. The first category is estimated to hold 158 Tcf of gas reserves with 142 Tcf estimated to be in the second (WB NSGMP, 2004). The YTF estimate is somewhat conservative, considering only plays or producing zones currently known.

As previously stated, the reserve would be designated as either AG or NAG. Traditionally, most oil companies do not like to find gas together with their oil field associated gas (AG). Rather, they prefer to find gas without it being mixed up with oil- Non Associated Gas (NAG) (Ojide et al, 2012). The OPEC quota of 1.704MMBPD production for Nigeria imposes a limit to the AG production. Consequently, producing companies have to device means of disposing it in order to profit from the oil, the lucrative driver. The figure below shows the quantity of gas resources available to Nigeria and the split between NAG and AG. It should be noted that this designation has more to do with the way the field is or will be developed than actual oil or gas reserves. As such, a few fields that are technically gas or gas condensate
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have been designated as AG because they are located with oil fields (WB NSGMP, 2004). Figure 2: Associated and Non-Associated Gas Resources Source: World Bank Strategic Gas master Plan 2004

From the figure, approximately two-thirds of the remaining AG reserves are in production and One-third are undeveloped or developing discoveries. However, for NAG, there are more non producing reserves than producing reserves (WB NSGMP, 2004). This is just another indication of the absence of the deliberate exploratory efforts for gas in Nigeria.

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Across the Niger Delta, exploration success, at fifty percent, is above global averages. Hence, Nigerian upstream potential is likely to remain extremely positive, and the potential YTF resources may almost equal the remaining discovered reserves in the basin (WB NSGMP, 2004). Based on this, the following table was prepared. Table 1: Yet-To-Find Hydrocarbons in Nigeria by Hydrocarbon type and Geographic Area Oil (Bnbbl) Associated Onshore East West Offshore East West Total 8522 6761 15264 8830 39737 37364 17971 29878 17284 102497 Gas (BCF) Non Associated 2812 2926 21636 12516 39382

4.0 4.1

DEPLETION OF GAS RESERVES

GROWTH OF RESERVES

The rate of increase in gas reserves in Nigeria is to a large extent difficult to estimate owing to the wobbly premise and blurry future of associated exploratory efforts required to acquire the estimate. This is evident in the
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estimate presented by various sources. As of 2000, IHS Energys database estimated a proven gas reserve of about 150 Tcf (WB NSGMP, 2004). In 2004, a total of about 187 Tcf was estimated by the WB NSGMP. This represents an increase of about 6.2 % per annum. According to the BP Statistical Energy Survey, Nigeria had as at 2009, proved natural gas reserves of 185 Tcf, representing a 0.32% decrease per annum from the 2004 estimate. At the end of 2011, OGJ put the figure at 180 Tcf, representing a 1.35% decrease per annum (US EIA, 2012). This decrease could be attributed to the introduction of the LNG trains 4, 5 and 6 which came up in November 2005, February 2006 and 2007 respectively, and reduced exploratory efforts due to rumors of the proposed Petroleum Industry Bill, amongst others. Some barriers to the exploitation of the nations huge natural gas reserves are: Resources are in a remote location The major potential market of power is in a state of stagnation Limited infrastructure to transport the gas beyond the current locations of Lagos and Port Harcourt High levels of initial investment required

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 Poor investment climate due to lack of a proper consistent legal, fiscal and approval framework.

Summarily, an increase in the nations reserves base would be spurred by favorable fiscal policies by the government. This is certain to attract investors.

4.2

GAS RESERVES DECLINE

The nations oil & gas reserves are declining by as much as 12% per annum, with production from onshore and shallow waters oil fields having reached their peaks said Petroleum Minister Diezani Alison Madueke (Gbogbo-Bala, 2011). The decline is attributed to production, amidst zero gas exploration. The gas produced is either re-injected, flared or utilized in the nations domestic gas market or export-oriented projects. In 2000, Nigerian gas production amounted to some 4.6Bcfd with some 55% being flared and the balance split between re-injection, NLNG feedstock, internal fuel usage and a small percentage marketed as LPG (WB NSGMP, 2004). The figure below indicate the dry natural gas production and consumption in Nigeria 20002011(Fig 3), the projected gas production (Fig 4) and the same projected volume split between AG and NAG (Fig 5). What becomes immediately
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noticeable is that if the overall utilization issue of gas is not addressed now the flaring will get worse as more AG is expected.

Figure 3: Dry Natural Gas Production and Consumption in Nigeria 2000-2011

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Figure 4: Gas Production Projections Source: World Bank Strategic Gas Master Plan 2004

Figure 5: Gas Production Projections for AG and NAG Source: World Bank Strategic Gas Master Plan 2004
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4.2.1 Gas Flaring The issue of gas flaring is one whose persistence in Nigeria is disturbing. In 2004, the Nigerian Government contracted the World Bank to design a strategic gas plan for the nation. This was due to seven (7) project proposals presented to it by IOCs in line with a well publicized stipulated deadline for gas flaring, 2008. Five years past the deadline and flaring still persists. IOCs like SPDC still flare a greater percentage of produced AG when their nation UK, has a zero flaring policy. The WBNSGP states that Nigerian flares 2.5 BCFD resulting to an annual revenue loss of US$2.5 billion, amounting to US$50 billion over 20 years. This figure is enough to settle the nations foreign debts of about 31 billion US Dollars. The persistence of the IOCs to flare gas has further bolstered the question, is the Nigeria Oil Industry controlled by the FG on by the IOCs? Nigerian government enacted a law Associated Gas Reinjection Act in 1979 which allowed some conditions for specific exemption of the payment of a fee of US $0.003 per MMCF with effect from 1984 which increased to US $0.07 per MMCF in 1988 and in January 2008 to US$3.5 per MCF of gas flared (Ojide et al, 2012). Still, approximately 75% (by 1998), 63% (by 2000) and 24.30% (by 2010) of the total gas output were flared (Ojide et al, 2012). It is

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reported that Nigeria flares enough gas to double the power produced in subsaharan Africa excluding South Africa (Ojide et al, 2012).

Figure 5: Top 5 Gas Flaring Countries 2010

However, noteworthy is the decline in flaring over the years even though the zero flaring deadline of 2008 is long gone. This decline could be attributed to improved gas distribution networks across the nation and the commissioning of more gas utilization projects.

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4.2.2 Domestic Gas Market The Nigeria Gas Company (NGC), a subsidiary of NNPC is in charge of national gas supplies for power generation, either as source of fuel or as feedstock to cement and fertilizer plants, glass, food and beverages, aluminum smelting, petrochemical industries, among others. The most prominent and promising member of this family is the power industry. The figures below indicate projections of consumption for some of these sections.

Figure 6: Gas Consumption Projections for Future Gas Power Plants Source: World Bank Strategic Gas Master Plan 2004

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Figure 7: ALSCON Gas Consumption Source: World Bank Strategic Gas Master Plan 2004

Figure 8: Power Demand Projection for Nigeria Source: World Bank Strategic Gas Master Plan 2004
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Other proposed projects are the GTL projects Chevron producing Nigeria (CPN) 35000 bpd GTL Plant at Escravos (Consuming 0.35 BCfd) ExxonMobil (MPN) 87,000bpd GTL Plant on Bonny Island (Consuming 0.82Bcfd)

4.2.3 Export Oriented Projects For the International market, NNPC and its Joint Venture partners are currently embarking on several gas utilization projects, some of which are given in the table below: Table 2 Export-oriented projects in Nigeria
Project
NLNG (6trains) Brass (2 trains) Ok LNG (4 trains) Oso NGL West Africa Gas Pipeline Trans-Sahara Gas Pipeline Escravos Gas project Belema Gas Injection Odigbo Node Gas Project (Supply 20 Olokola Oso Nigeria, Togo, Benin and Ghana NigeriaAlgeria LPG 2006 80MMcf/d 113MMMcf/d Gas 2Bcf/d

Location
Bonny

Product
LNG, LPG, Condensate LNG, LPG, NGL LNG, LPG NGL Gas

Year Active
1999 2011 2012/2013 1998 2011

Gas/Condensate consumption
3.5Bcfd

4.5MMcfd 110,000bpd 0.17Bcf/d

ALSCON)

Others are Ekpe Gas compression projects, Oso 2Y2 Project, Odidi AGG Project Cawthorne Channel Gas Injection Project.

5.0

CONCLUSION AND RECOMMENDATIONS

Nigerias previous foremost customer, US, has decreased their import of Nigerias LNG to less than 5%. Japan has tripled her demand owing to the
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Fukushima incident. It is only a matter of time before these problems are resolved, or other customers decrease their demand in search of more economic energy sources. As such, Nigeria, as a nation, needs to take advantage of the present economic condition fast. Just because we have enough gas reserves to last for 109 years does not necessarily mean we sit back, fold our arms and watch the clock tick.

Also, the domestic gas utilization projects should be pursued aggressively. Many do not realize that power generation is the pillar of tremendous economic growth. These projects, alongside their export-oriented projects are expected to help put an end to gas flaring, our wealth in flames.

There exists a strategic Gas Plan for this country. The authors have reviewed and strongly recommend that it be re-adopted as a tool/guideline to improving the nations exploitation of its natural gas reserves.

REFERENCES
Bala-Gbogbo,E. (2011) Nigeria Oil,Gas Reserves Declining at About 12% a year [Online], Available at http://www.bloomberg.com/news/2011-0822

01/nigeria-s-oil-gas-reserves-declining-at-about-12-a-year-1-.html (Accessed 18 March 2013) Bello,O. (2013) Maximising the nations gas resources for economic growth, Businessdayonline, 21 February [online], Available at http://www.businessdayonline.com/NG/index.php/gas/51988-maximisingthe-nations-gas-resources-for-economic-growth (Accessed 18 March 2013) CGES (2002) Nigeria Gas- An Unwelcome Bounty, 2 April, Global Oil Insight [online], available at http://www.cges.co.uk/resources/articles/2002/04/02/nigerian-gas%E2%8093-an-unwelcome-bounty (Accessed 18 March 2013) CIA (2011) Nigeria gas Production Economy, CIA World Factbook [online], Available at http://www.index.mundi.com/g/g.aspx?v=137? c=ni&l=en (Accessed 18 March 2013) Economides, M., Fasina,A., and Oloyede,B. (2004) Nigeria Natural Gas: A Transition from Waste to Resource,World Energy, Vol. 7, no. 1 [Online], Available at http://www.worldenergysource.com/articles/pdf/economides_WE_v7n1.pdf (Accessed 18 March 2013) Igwe, G. J. (2011) Nigeria:Natural Gas Transmission And Distribution In the Country [Online], Available at http://allafrica.com/stories/201107250976.html?viewall=1 (Accessed 18 March 2013) Joint UNDP/World Bank Energy Sector Management Assistance Programme (2004) Strategic Gas Plan For Nigeria [online], available at http://www.esmap.org/sites/esmap.org/files/FR58200861713_Nigeria_strate gicgasplanfornigeria.pdf (Accessed 18 March 2013) Mbendi (2013) Oil and Gas in Nigeria- Overview [ online], available at http://mbendi.com/indy/oilg/ng/p000.htm (Accessed 18 March 2013) Mbendi (n.d) Natural Gas Liquid Extraction in Nigeria-Natural Gas [Online], available at http://www.mbendi.com/indy/oilg/gas_/af/ng/p0005.htm (Accessed 18 March 2013)
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NAPIMS (2013) Gas Development [online], available at http://www.napims.com/gasdev.html (Accessed 18 March 2013) NNPC (n.d) Nigeria Gas [online], available at http://www.nnpcgroup.com/NNPCBUsiness/BusinessInformation/Investmen tOpportunities/NigeriaGas.aspx (Accessed 18 March 2013) Ojide, M., Salami,D., Gazi,M., and Oke,D. (2012) Impact of Gas Industry on Sustainable Economy in Nigeria: Further Estimations through Eview, Journal of Applied Sciences , vol. 12, no. 21 [Online], Available at http://docsdrive.com/pdfs/ansinet/jas/2012/2244-2251.pdfr (Accessed 18 March 2013) The Guardian (2012) Nigerias penalty for gas flaring will not curb emission, say campaigners, 31 May [Online] Available at http://www.guardian.co.uk/environment/2012/may/31/nigeria-penalty-gasflaring.html (Accessed 18 March 2013) The Modern Language Association of America (2009) MLA Handbook for Writers of Research Papers, 7th Edn., New York, MLA. Ukpohor, E. T. (2009) Nigerian Gas Master Plan: Strengthening the Nigeria Gas Infrastructure Blueprint as a Base for Expanding Regional Gas Market, World Gas Conference Paper 2009 [Online], Available at http://www.igu.org/html/wgc2009/papers/docs/wgcfinal00764.pdf (Accessed 18 March 2013) US Energy Information Administration (2012) Nigeria [online], available at http://www.eia.gov/countries/analysisbriefs/Nigeria/nigeria.pdf (Accessed 18 March 2013)

7.0 APPENDIX
Nigeria Reserves and Production Summary Table 5.1 Nigeria Reserves (Source World Bank Strategic Gas Master plan For Nigeria 2004)
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