Study on Possible Reductions of Gas Flaring in Cameroon
Final Report on O&G Sector in Cameroon and Potential Flare Reduction Projects
Commissioned by BGR
24 October 2017
Table of Contents
1. EXECUTIVE SUMMARY ...... 1
2. OVERVIEW OF THE CAMEROON O&G SECTOR AND AG FLARING ...... 3
2.1 LEGAL AND REGULATORY FRAMEWORK FOR GAS DEVELOPMENT AND VALORIZATION ...... 3
2.2 STRUCTURE OF THE OIL AND GAS SECTOR ...... 4
2.3 DOMESTIC POWER SECTOR ...... 7
2.4 STATUS OF OIL AND GAS PROJECTS, INCLUDING LNG ...... 8
3. A POTENTIAL GAS FLARE REDUCTION PROJECT: “LIMBE-AG IPP” ...... 9
3.1 PROJECT CONCEPT ...... 9
3.2 GHG IMPACTS ...... 9
3.3 FRAMEWORK FOR LIMBE -AG -- THE PHYSICAL PROJECT ...... 11
3.4 PROJECT STAKEHOLDERS ...... 12
4.0 AREAS OF POTENTIAL TECHNICAL ASSISTANCE ...... 14
ANNEX 1: NOTES AND ILLUSTRATIONS: ...... 16
ANNEX 2: MAJOR SOURCES ...... 17
1. Executive Summary
The present study examines the potentials for German Development Cooperation in the area of gas flaring reduction and associated gas utilization in Cameroon. The aim of the study is to analyze the legislative and regulative framework of gas flaring, as well as the geological and climate aspects in order to demonstrate possible approaches that can support Cameroon in closing potential gaps.
Associated gas (AG) is a by-product of crude oil production and often treated as a waste product. Particularly in developing countries, AG is flared (‘gas flaring’) in most cases or, but rarely, directly released into the atmosphere (‘vented’). Even when flared, a portion of the gas in not combusted and enters the atmosphere as methane – with the effect that flaring is a major source of GHG emissions with severe climate-damaging effects.
The Oil and Gas situation in the country Cameroon has been strongly impacted by the lower oil price environment, specifically:
• Given the decline in oil prices, oil development activities are at a near standstill. One result of that is that oil production in the first four months of 2017 is down by 20% from the same period in 2016. This has directly reduced associated gas (AG) production. • The international LNG industry is in a depressed state. In Cameroon, an onshore LNG scheme is stalled (if not cancelled); and the offshore floating LNG vessel, if installed, will be at the Sanaga non-associated gas (NAG) field, and not to capture flared AG.
The result is that aggregate AG production, and thus flaring, will almost certainly decline solely due to the aging of the mature oil fields that dominate the Cameroon oil sector. While natural decline impacts AG flaring, there are no reports about any current physical activities being undertaken to reduce flaring. Such a situation implies continuing major GHG emissions from flaring for the foreseeable future.
Approximately 80% of flaring in the country is located offshore Rio del Rey basin in the northern part of the country. The basin contains multiple oil platforms with at least fifteen separate flare points. The individual flares are relatively small and make reinjection of gas challenging on both a technical and cost perspective, such that possible solutions have focused on the capture and marketing of the AG. The distant location and the clustering of the flares in this one basin dictates that a single flaring solution could be optimized via capturing and gathering the gas to a single point and then either by pipeline or LNG move it to market.
Based on this, the operator (Perenco) considered setting of a Floating LNG (FLNG) vessel at the field site. From an AG capture perspective, this would have been a good solution, but the operator ultimately decided for economic reasons to site the FLNG at the Sanaga South Gas Field off the town of Kribi where a gas fired Independent Power Plant (IPP) is located. Another option that was considered but not developed was to bring the AG onshore at Limbe and utilize it there. A major reason that the Limbe option has not advanced is the lack of a sufficient gas demand in that region.
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One of the major results of the mission was to learn that 116 MW extension planned for the Kribi IPP will almost certainly be cancelled due to pricing issues related to the natural gas. This offers the possibility to relocate this planned gas facility to Limbe in the northern part of the country which would then create a market for a significant portion of the AG currently flared. (In essence, the NAG that would have been produced for the Kribi extension is replaced by AG in Limbe). This possible Limbe-AG project would capture a portion of the flared gas, transport it onshore at LImbe where it would be used for power and industrial purposes (see Figure 1). Such a project would result in a major reduction in GHG emissions while improving the sustainable development of the country.
Figure 1: Map Illustrating Possible Limbe-AG Project
Source: CLN
This option allows for gas to be used as a bridging resource to produce significant additional electricity with zero increase in emissions (indeed a reduction in emissions compared to the current flaring of the gas). The GHG reductions occur due to:
• Elimination of production and use of NAG for electricity, that would be replaced by an equivalent amount of electricity from AG that would otherwise be flared. • Reduction of methane emissions (a potent GHG gas) that occur in the flaring of gas at the oil fields. • Substitution of low-carbon content electricity from gas for that currently produced by a heavy fuel oil power facility in Limbe.
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The Limbe-AG project is now at the concept stage, and German technical assistance could be key in bringing it forward for serious consideration – by developing the technical analysis of the project and coordinating stakeholders from the several entities that need to be involved.
2. Overview of the Cameroon O&G Sector and AG Flaring
Cameroon ranks 27th on the list of major flaring countries published by the Global Gas Flaring Reduction Partnership (GGFR). Despite this low ranking, flaring increased by one-third in the 2013- 16 period.1 This increase was largely driven by an increase in oil production, spurred by a high level of oil development in mature fields associated with oil prices in the $100/bbl. range. After the collapse of the oil price in mid-2014, ongoing projects resulted in production increase through 2016, but now drilling activity is at very low levels and the oil fields have resumed their long-term natural depletion decline.
More than 80% of gas flaring and oil production is in the near offshore in the north of the country in the Rio del Rey basin, distant from the limited domestic gas markets.2 A domestic gas market is being developed in Douala, with the gas sourced from a NAG field in the immediate vicinity of the city. A major gas facility at Kribi, 125 km south of Douala was completed in 2013 and is now operating. Its gas supply comes from the offshore Sanaga NAG field.
In the 2010-15 period, the development of LNG was a major focus and several projects were considered for both onshore and offshore. During this period, Perenco put forward an idea to install a floating LNG facility (FLNG) in the Rio del Rey fields. Such an installation would have collected AG from those fields for feedstock thereby significantly reducing flaring. With the downturn in LNG price and increasing global LNG supplies, the implementation of the onshore LNG project was put on hold and the Perenco FLNG redesigned. Now the plan is for the vessel to be moored at the Sanaga NAG field off Kribi. This presumably provides a lower cost gas for LNG feedstock but does nothing to reduce flaring. The installation has been repeatedly postponed but is now scheduled for 1Q18.
2.1 Legal and regulatory framework for gas development and valorization
Regulation on gas flaring appears to be minimal, indeed no fine or fee is levied. It should be noted that the Government and the Société Nationale des Hydrocarbures (the state oil company) appear committed to its reduction both by being members of GGFR and by endorsing the Zero Flare Initiative, albeit no firm plans seem to be in place for achieving this target.
The basic law for the O&G sector is the 1999 Petroleum Code which came into force on 30 June 20003 with the main objective of encouraging exploration and production. There was no provision on gas flaring. Law N° 2011/025 dated 14th December 2011 on the Development of Associated Gas has provisions to reduce gas flaring, encourage gas development and valorization and reinforce the protection of the environment. There are conflicting reports as to whether this has entered into
1 World Bank/GGFR: http://www.worldbank.org/en/programs/gasflaringreduction#7 2 Satellite data from National Oceanic and Atmospheric Administration via GGFR 3 See – Decree N° 2000/465 relating to the application of the Petroleum code
3 effect4, but the absence of any AG reduction activities implies that the law has no effect at the present.
It is interesting to note that since 2011 all gas development in the country has been sourced from NAG fields developed specifically for that purpose, while AG has had no development and flaring has continued unabated.
2.2 Structure of the Oil and Gas Sector
2.2.1 The Oil Sector
The oil sector is a tight and closed circle in Cameroon. The two main government stakeholders are: • Ministry of Mines, Industry and Technological Development which has policy and administrative responsibility for upstream oil and gas.5 • The Société Nationale des Hydrocarbures (SNH) which represents the government’s interest in all the hydrocarbon blocks and gas sales from the blocks.
The Ministry of Energy and Water Resources has responsibility for refining and supply and distribution of petroleum product but is not central to AG issues.
Only two private companies, Perenco and Addax, have any significant production in the country, with Perenco being dominant. After the sale of TOTAL’s production to Perenco, no major International Oil Company (IOC) has interest in the country. Several other companies have interests in exploratory blocks, but none have made any public announcements concerning commitments for future developments.
2.2.2. Companies6 Société Nationale des Hydrocarbures (SNH) SNH, the national oil company of Cameroon, has the mandate to promote the development of liquid hydrocarbons and natural gas including export projects and to manage the State’s interests in the development and exploitation of the country's oil and gas resources. The company manages the government’s interest in all the blocks operated by the private companies. Its only independent upstream operation is the small, Mvia field (began production 2013).
It has the responsibility for the wholesale marketing of gas, including pricing. It is the exclusive seller of gas to distribution companies, as well as any power plants that are directly connected to primary gas supplies (such as Kribi IPP), and LNG facilities. As the government’s representative for upstream
4 There are reports on internet that this law has been signed, however during the mission, the Ministry of Mines made no reference to the law in regard to policy or legislation. In follow-up to its status, the Deputy Director of the Ministry of Mines, Kelvin Ndzishepngong, wrote by SMS that the law was “under construction” meaning that “it is still revised and has not yet been signed” 5 Ministry of Mines official website http://www.minmidt.cm/en/ministry/institutional-framework/missions.html 6 Data on private companies is primarily for official company websites
4 and midstream gas development, SNH is perhaps the most important public player on initiatives to reduce gas flaring.7
Perenco The private O&G sector in Cameroon is dominated by Perenco which operates more than 70% of the country’s oil production. Perenco is a French oil company, privately owned by the Parrado family8. Founded in 1975, the company has grown steadily and now operates in 13 countries, primarily in Latin America and Africa and operates oil production of 450,000 bbls/day. Cameroon represents 17% of the company’s operated oil production.
The company began operations in Cameroon in 1993 and purchased TOTAL’s Cameroon operations in 2011. It currently operates and produces from the Rio Del Rey, Moudi and Ebome Marine concessions. It also operates three Production Sharing Contracts, two in production (oil from Dissoni North and gas from Sanaga South).
As the operator of the Rio del Rey production, Perenco operations are estimated to account for about 80% of the flaring in the country. The fall in oil prices has dramatically reduced their oil development activities from their highs in the 2014-2015. Perenco would clearly be a key stakeholder in a flare reduction initiative.
Addax Petroleum Addax is the only other company with significant operations in the country and operates the remaining oil production. Addax was founded in 1987 as an independent Swiss company and in 2009 was bought by Sinopec Group, the Chinese state company. Their Cameroon oil production is in the Iroko and Lekele fields, which are in the Rio del Rey basin. Addax and Perenco have joint interests in some areas, particularly in the Lokele field complex.
While it flares considerably less AG than Perenco, some of their flares are in the same area and could potentially be included in a flare reduction initiative. In this regard, it could be a stakeholder in any such AG capture project.
2.2.3. Regulators
The Ministry of Mines, Industry and Technological Development (MINMIDT) has a sub-directorate on hydrocarbons that oversees exploration, exploitation and valorization of hydrocarbons products in Cameroon9, albeit there does not appear to be any direct regulatory activities related to flaring. SNH is the manager of the government’s share of the oil and gas and principal liaison with the operators and plays an important role in seeing that government policies and objectives are put in place. Both the Ministry and SNH report directly to the Presidency. As both entities have direct involvement in the financial benefits of the oil and gas production, they should not be viewed as fully objective from a regulatory standpoint.
7 SNH www.snh.cm/ (not always working, but has up-to-date production data for all companies and blocks) 8 Forbes “Revealed: The Frenchman, The Model, And Their $10 Billion Oil Fortune”, 7 February 2014 9 http://minmidt-gov.net/en/ministry/central-administration/department-of-mines/division-of-abhydrocarbons.html
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No independent regulator exists and indeed the small number of operators and the strong government participation lends itself to informal regulation. Specifically, the government can make it clear to the operators what investments and actions are supported by the government and encourage their implementation.
2.2.4. The Current Gas Sector
As in the oil sector, SNH manages the government’s gas interests. In particular, SNH is responsible for assuring the aggregation of natural gas from producing companies and its transportation to industries, power producers, customers, distribution companies and gas exporting facilities. It is also the direct wholesale marketer and sets the price of the gas.
Gas infrastructure has only recently begun development and consists of two small grids with a total combined sales volume of less than 50 mmscfpd. One grid provides gas from Perenco’s Sanaga South NAG field to the Kribi IPP. The other grid is owned by Gaz de Cameroon (GdC), a subsidiary of Victoria Oil and Gas10. GdC provides gas to Douala, whose market consists of two power plants (combined 50 MW capacity) and a few industrial companies. All the gas comes from the onshore NAG Logaba field located near Douala, whose primary owner and operator is also Victoria Oil and Gas. GdC believes that Logaba field can provide enough gas for all mid-term needs and substantially more undeveloped gas reserves exist in another nearby field also controlled by Victoria Oil and Gas.11
Thus, the current situation is that both regional gas markets as currently configured are supplied for the foreseeable future from NAG fields. If the Limbe AG IPP project goes forward it would make a major expansion of the gas market and open up a new market area; while utilizing gas that would have been flared.
2.2.5 Geological and Production Technical Issues
Cameroon’s geology is largely sedimentary basins bisected by the Cameroon line, a 1,600-kilometer chain of volcanos. Five sedimentary basins belonging to three, active African petroleum systems are present in the country’s territory. From an oil and gas perspective, the most important is the Rio del Rey which has historically provided 80-90% of the country’s oil production.
Geologically, the Rio del Rey Basin is in the eastern-most part of the Niger Delta complex. Productive reservoirs are shallow (less than 2000 meters) with good reservoir qualities. Most hydrocarbon fields are downthrown fault traps sealed by older pro-delta and marine shales and are located in the dome and ridge province. The source rocks are Paleocene to Eocene marine shales and the reservoirs Late Miocene to Pleistocene shallow water deltaics. The Basin is separated from the Douala Basin by the Cameroon Volcanic Line. Fields in the basin have been on production since
10 Gaz de Cameroon: Official website http://www.victoriaoilandgas.com/gaz-du-cameroun 11 Interview with GdC, 19 September 2017
6 the 1970’s and to date over a billion barrels of oil has been produced. It covers 7,000 square kilometers offshore and more than 400 wells have been drilled.
The Douala/Kribi-Campo basin, a 19,000-square-kilometer coastal sedimentary basin of which 7,000 square kilometers is onshore, accounts for the remaining output. Logone Birni (27,000 square kilometers), Mamfe (2,400 square kilometers) and Garoua (7,800 square kilometers) are intracratonic basins with no current production.12
Despite the recent increase in flaring driven by higher oil production, all the oil production is located in mature fields on long-term decline. Thus, the expectation is that field production is that of a natural oil production decline.
2.3 Domestic Power Sector
Expansion of the domestic gas market is tied to the growth of electrical demand. Currently electricity provided is 54% from hydro and will increase to 65% with the full completion of the Lom Prager hydro project. Fossil fuels provide for load management, peaking fuels during the dry season (7 months), and a portion of base demand.
Cameroon has the second largest hydro potential in Africa, but it is only 5% developed13. Gas reserves are not of global scale, yet at 4.7 tcf14, they represent potential fuel source for power far in excess to the country’s foreseeable needs. In adding future capacity, the issue of capital cost, planning, access to capital and the economics/availability of gas versus hydro. As the World Bank wrote in supporting the Kribi gas fired IPP:
“Although Cameroon has a planned expansion of hydropower capacity of 6000 MW, crucial projects were not expected to come online until after 2017. In this context, Kribi provided a low- cost gas-fueled option to increase reliability”. World Bank April 2015
While previously a state monopoly, the electrical sector has been partially opened up to private entities, albeit the state continues to have a strong presence. Electricity demand has been growing at 5-6% annually and this rate of growth is likely to continue. Such a rate of growth suggests that electricity capacity will increase from 1200MW in 2015 to 3000MW in 203015. If one fourth to one half of this growth was met by gas, this implies gas demand of about 200-300 mmscfpd in 2030. NAG supplies would need to be developed for this, but there is not a resource constraint.
12 Paul Bellingham, et al The structural and stratigraphic development of the Rio del Rey Basin (offshore Cameroon), implications for play distribution and remaining exploration potential, P.D.F. Limited, Oxfordshire, UK, 2 Tower Resources, London, UK; Barrie F. J., et al Estimate of the Unrisked Discovered and Petroleum Initially-in-Place for the Etinde Permit Area Doula Basin, Cameroon, W. Africa” Sproule, Calgary Canada, 2014; Coughlin R.M. et al Petroleum geology of the deltaic sequence, Rio Del Rey basin, offshore, AAPG Bulletin, January 1993. 13 USAID, “CAMEROON POWER AFRICA FACT SHEET”, https://www.usaid.gov/powerafrica/cameroon 14 Katsouris C, Presentation at Chatham House www.chathamhouse.org/sites/files/chathamhouse/public/Research/Africa/161111katsouris.pdf 15 Eneo website https://eneocameroon.cm/index.php/en/
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Industrial demand will likely increase as well, but given the current structure of domestic industry the absolute volume is limited. The Global Gas Flaring Reduction Partnership (GGFR) report lists several potential large industrial projects, but none are in the implementation stage; and should be considered speculative. The likely development of the gas demand in industry is likely to be a slow but constant increase as the gas network expands and companies move from liquid fuels to gas, combined with overall economic growth.
Absent the utilization of AG, for the next 3-5+ years, gas demand can be met by the developed NAG fields, and post that, by development of other known NAG fields.
2.4 Status of Oil and Gas Projects, including LNG
Current exploration and development activity in Cameroon is very limited. It appears that neither Perenco nor Addax have active rigs on their blocks and oil drilling is at a standstill. The only reported drilling is of two wells by Victoria Oil and Gas in their NAG field near Douala.16
Three LNG projects have been seriously considered in Cameroon, one of which the Perenco FLNG project is under implementation and the other two essentially suspended17. While in the initial discussions when multiple LNG projects were proposed, a possibility existed that the Perenco FLNG could be located in the Rio del Rey area, in which case it could have served as a productive outlet for a large portion of the flared AG. Now with the decline in LNG economics, the decision has been made to locate the FLNG vessel at the Sanaga NAG field which also supplies the Kribi LNG – presumable for cost reasons.
On September 30th, 2015, Perenco and SNH signed with London-based LNG company GOLAR a gas accord for 10 years to develop the remaining reserves of Sanaga field for the domestic market and LNG for exportation. 18 The FLNG is under construction and SNH is reported to have withdrawn from the project, albeit given the work already completed, the project appears to be moving forward. 19 The project activity was confirmed by SNH during the mission with the installation now scheduled for first quarter 2018. However, this will have no impact on flared AG.
16 Meeting with GdC, 19 September 2017 17 The two other LNG projects discussed are the Engie project with SNH at Kribi and the New Age project at Etinde. The Engie project was the most developed but has now been indefinitely suspended and the Etinde project is still in the planning stage. Neither would have any impact on AG flaring and neither seem likely to be implemented in the medium term. 18 Perenco website 19 Numerous news sources: https://www.icis.com/resources/news/2017/01/25/10072853/cameroon- flng-future-at-stake-after-snh-pulls-out/ http://www.offshore-mag.com/articles/2017/02/golar-updates-progress-of-flng-projects-offshore- west-africa.html http://www.upstreamonline.com/upstreamtechnology/1212720/flng-reaches-first-major-mileposts http://www.sourcewatch.org/index.php/Cameroon_FLNG_project
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3. A Potential Gas Flare Reduction Project: “Limbe-AG IPP”
3.1 Project Concept
Even with large hydro resources, an important role exists for fossil fuels in terms of seasonal and daily electrical demand fluctuations and overall load management. Currently the three existing gas plants are connected to the grid -- two relatively small plants in Douala and the 216 MW facility at Kribi. In addition, two heavy fuel oil peaking power facilities, each about 80 MW, are located at Limbe and Douala.20
Despite additions underway in hydro, increasing electricity demand and seasonal fluctuations led to the decision to implement a 116 MW Kribi expansion, which was scheduled for implementation in 2018. This initiative now appears about to be cancelled due to the gas price proposed by SNH for the Sanaga NAG field being judged too high for the project to be economically viable.21
The cancellation of the Kribi expansion presents an opportunity to develop a new gas power plant at Limbe whose primary fuel could come from the currently flared AG located in the Rio del Ray fields, which would bring significant GHG reduction benefits. In addition, economic and development benefits include:
• Given that the flared gas is already produced, upstream costs would be limited to gathering lines and gas compression, perhaps making gas prices competative • Limbe is relatively close (97 km) to the major offshore flaring area and thus gas transmission connection should be manageable • The Limbe IPP project would provide an anchor client for the project • Limbe has other potential clients for AG -- an existing 80 MW heavy fuel oil (HFO) electricity plant could be converted or replaced by gas and potential industrial clients exist as well. • An electrical connection exists from Limbe via Douala to the electrical grid (albeit this would need to be upgraded)
3.2 GHG Impacts
The most direct GHG benefit is simply using the AG instead of NAG for electricity production. The AG will be flared in any case, so its productive use for electricity generation will avoid the production of NAG for the same purpose. In addition, the flaring of gas at the field does not allow for full combustion of the gas and thus the release of methane. As methane has 25 times the Global Warming Potential (GWP) of CO2, relatively small emissions have major impacts. Estimates for methane emissions from flared gas ranges for 2% to more than 20%.22
20 World Bank/IINTERNATIONAL DEVELOPMENT ASSOCIATION PROJECT APPRAISAL DOCUMENT Number PAD2234, 20 April 2017 21 Meeting with Mr. Racine Kane, AFDB Permanent Representative Cameroon, 21 September 2017 22 Pieprzyk, B et all, Flaring and Venting of Associated Gas Current Developments and Impacts of Marginal Oil, ERA, December 2015
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In addition, an 80 MW heavy fuel power facility located at Limbe is used for peaking demand, and this could be switched to gas resulting in an approximately 20%+ reduction in emissions. Also, there is industry in the area, particularly CDC that produces agriculture products and is the largest industrial facility in the country. Presumably this industry currently uses diesel or fuel oil for some of their needs and this too could be switched to gas resulting in reduced emissions.
It should be noted that the Limbe- AG project will not utilize all of the AG currently produced in the field, even with a Limbe-AG IPP, gas demand is limited. The 216 MW Kribi facility uses on average 27 mmcsfpd, so the Limbe-AG IPP would likely be less than that, depending on the sizing of the facility. It is anticipated that the AG capture project has the technical capacity to collect about 50-70 mmscfpd initially, implying only about half of the AG will be initially used – albeit this percentage increases over time with the declining AG production and perhaps increasing gas demand. Current thinking indicates the use of about 250,000 mcm/yr. of gas, which implies GHG reduction of about
600,000 tCO2 for over 10 years. (Figure 2)
Figure 2: GHG Emissions Reductions as a Function of AG Captured and Used (includes reduction in methane)
source: CLN
Rio del Rey Flaring
During the mission, SNH stated that the flaring occurred in two main areas in Rio del Rey. One located in the eastern part of the basis (about 100 km from Limbe) flared about 70% of the gas, while the other to the west flared about 30%. SNH’s current view is that based on the location and cost of transportation only the eastern 70% is viable to transport to Limbe at this time. As the natural decline of the AG falls below what is needed, it is anticipated that the other AG sources would be tied in.
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The 2016 flaring volumes were in the range of 100 mmscfpd23. Dependent on future development, these volumes will likely decline at a rate of between 10-15% per annum. Indeed, in the first four months of oil production in 2017 were 20% below that of 2016.
3.3 Framework for Limbe -AG -- the Physical Project
For such a project to be implemented, it requires vertical integration from upstream gas through infrastructure, developing the Limbe-AG project requires a much more cross-cutting group of stakeholders than a more traditional flare gas capture project (Figure 3).
Figure 3: Schematic of Components of Limbe-AG Gas Project
Upstream Gas Mid-Stream Gas End Electricity Supply Gas Transport Users Users
Gathering Lines to Collect Flare Gas Limbe Gas IPP Limbe Area Gas Transmission Gas Compression Line to Limbe CDC Industrial Facilities Tie-in to Douala Other Industrial Grid
Source: CLN
Upstream Gas Supply: Company data was not provided, but satellite and industry data indicate that Rio del Rey has multiple flares from several separate production facilities. Capturing this flared gas will require gathering lines and most likely compression facilities at the flare sites. The gathering lines would take the gas to a central collection point where the gas would be compressed to a level to allow delivery to shore. Major unknowns are: 1) the gas pressure at surface. 2) if current platforms have available space to allow for the compression facilities, and 3) if there is an available platform site that can serve as a central collection and compression site.
The upstream investment and would almost certainly be undertaken by Perenco under the terms of the oil production agreement. SNH would also be involved as per the terms of the contract.
Midstream Gas Transport: This consists of the transmission pipeline that would connect the gas collection site to the landing point at Limbe. The pipeline would be underwater and laid by a pipe- laying barge – a normal procedure. The sizing of the pipe would depend on the maximum gas demand expected.
SNH would likely have responsibility for the pipeline and the sale of the gas. The ownership and operator of the pipeline could vary. Perenco apparently implemented and financed the gas pipeline
23 No precise quantities for flaring were provided. SNH in a meeting on 20 September 2017 mentioned 100 mmscfpd as an approximate amount. This is in line with NOAA/GGFR data.
11 from their Sanaga field to the Kribi IPP (approximately 20 km) as well as acting as operator, albeit SNH acts as seller of the gas to the facility. It is assumed that a tariff structure for the gas would repay the investor.
Gas End Users: The principal end-users would be the proposed Limbe-AG IPP. The size of the IPP would be somewhere be 116 MW or larger. The size being dependent on both the expected grid power needs and if the facility would replace fuel oil power facilities.
The existing Kribi IPP uses 13 Wärtsilä 18V50DF generating sets24 and this is likely what would be used for a Limbe-AG IPP as well. The use of generating sets allows for a modular design within a basic industrial style facility. Such a configuration allows the generation capacity to be sized to the amount of AG available and could be decommissioned with relative ease.
The investors and operators for the Limbe-AG IPP are to be determined, but could be the same as for Kribi (i.e. Globeleq and the State).
Electricity Users: Eneo, the national electricity company, is expected to take ownership of the electricity at the exit of the IPP and transport it to the grid. Any necessary investments such as the upgrading of the transmission lines are expected to be their responsibility. While this is to a degree outside the gas project investment, a Purchase Power Agreement would be necessary for an IPP financing. It should be noted that the electrical sector is currently being restructured in terms of ownership. This is not expected to cause changes in electricity demand and capacity planning.
3.4 Project Stakeholders
During the mission, SNH brought forward the Limbe AG project as their preferred option for reducing the gas flaring and the Ministry of Mines supported the idea. SNH’s analysis of the project appears to be at the concept stage, but represents the most plausible solution. SNH’s support is crucial in that it manages not only the government interest in the hydrocarbon blocks but has the responsibility for gas sales in the country. As the Ministry of Mines is in charge of upstream development and production, their support is key as well. (See Table 1)
24 Globeleq website, 14/10/2017 https://www.globeleq.com/power-plants/kribi/
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Table 1: Key Stakeholders Relevant for a Limbe-AG Project
Stakeholders Who they are Influence on Limbe-AG IPP Government Stakeholders Ministry of Mines, Policy and regulator for both oil and Industry and Approval needed for AG capture and gas. Endorsed GGFR Zero Flare Technological transport Initiative Development State O&G company, manages government involvement in sector, Would be a lead stakeholder relative to the SNH limited operations activities. GGFR AG capture and transport component Partner Private Oil Companies Private French O&G Company, Would be the implementer and operator of primary operator in Rio del Rey the AG capture and (probably) transport Perenco basin components Owned by Sinopec, Chinese State- Operates gas flares that could be connected Addax owned E&P company, Operator of to the project second largest flare in Rio del Rey Private Gas Companies controlled by Victoria Oil & Gas, UK Minor, possibly could participate in the listed company, operates Douala gas onshore gas grid in Limbe Gaz de Cameroon grid Electrical Sector Primary electricity provider, owned 51% by Actis (an international Would have role in Limbe-AG electricity Eneo investment fund), remained owned component. by state and employees 216 MW Gas power plant, sells to Potential role in Limbe-AG electricity grid, majority owned by Globeleq component Kribi IPP with rest by state Finance the major power projects, which World Bank, IFC, AfDB, etc. impacts gas demand, key to financing the MLFI project. NGOs, other None identified Source: CLN
During the mission, the African Development Bank (AfDB) brought up their concern that the Kribi expansion was likely not to go forward. The AfDB director expressed an interest in a Limbe alternative. As the AfDB is one of the anchor investors in the Kribi power plant, such an interest could be valid for the other major investors as well. Albeit any such support needs strong, detailed analysis of the technical and economic parameters.
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4.0 Areas of Potential Technical Assistance
Currently, the only known viable project that can significantly reduce gas flaring in Cameroon is the Limbe-AG project. Importantly, the apparent termination of the Kribi gas project25 provides an unexpected opportunity to provide needed power to Cameroon with significantly lower GHG emissions than the Kribi expansion.
While the project was discussed by SNH during the mission, much more analysis and capacity building is needed to develop a full project assessment to determine its benefits and viability. Importantly, several stakeholders during the mission mentioned that SNH has limited technical capacity to do such an assessment. (It should be noted they are generally a passive partner, leaving investment and technical issues to the operator). Given the structure of the project, numerous and varied stakeholders need to be involved and briefed on the project in order to obtain their support. This situation offers an opportunity for German Development Cooperation to make a crucial difference in reducing gas flaring in Cameroon. The activities in which technical assistance would be valuable include amongst others:
1. Project Pre-feasibility: Currently a potential gas power plant running on AG is at the concept stage. Analysis as to its technical feasibility, cost structure, GHG impacts as well as economic, GHG, and social benefits needs to be conducted. 2. Gas Production Availability Scenarios: The AG in the fields is on decline and future estimates on AG production are needed. This would have to be coordinated with the operator. 3. Fossil Fuel Demand for Electricity: A major increase in hydro power is underway in the country. The degree that this affects the need for fossil fuel for peaking and system management should be reviewed and used to estimate the demand for gas fired electricity. (The World Bank has a project on support on the electrical sector). 4. Project Specific Gas Demand (related to Activity 3): The gas demand (both power and industrial) specific for the potential gas clients in Limbe needs to be assessed so as to quantify gas needs. To be included in this would be the potential demand from conversion of the current fuel oil power facility in Limbe to gas, other local industries, and perhaps substituting for the fuel oil produced electricity in Douala. 5. Legal and Regulatory Framework: A priority given in electrical load management to favor lowest carbon content supplies should be considered. Such a load preference should include the GHG benefits related to use of AG for electricity. A GHG criteria in load management would also serve to support renewables such as hydro and solar. 6. Stakeholder Awareness and Involvement: A key component is to identify the major stakeholders for the project and assure they are briefed on the project, aware of its benefits, and the actions needed for its implementation. Stakeholders include both the public and private parties. 7. Strengthening SNH capacities to design flare out projects and assessing power projects
25 If Perenco’s floating LNG vessel is NOT employed at the Sanaga gas field, this could impact on the gas price offered by SNH.
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All of these activities as well as others are likely to be required for the project to move to the implementation stage. The design of a technical assistance program requires identifying the appropriate national partner(s) and signing a MoU. Coincident with this, the technical assistance package would need to be discussed and determined within the priorities and capacities of both parties. It should be noted that the activities noted before are not exhaustive, and activities can be combined and modified as necessary.
SNH as a public entity whose involvement and support is key to the project would be a logical choice for the host entity for technical assistance. This however should be complemented with strong ties to the one or more of the Multilateral Financial Institutions, which would act as the lead on the IPP and other onshore infrastructure.
Further, the likely cancellation of the Kribi expansion should take place in the very near future. To increase the chance for Limbe-AG, the project should be moved forward as soon as possible.
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Annex 1: Notes and Illustrations:
Note 1: Structure of Active Players in the Gas Sector in Cameroon
Producers Transporters Final Customer
Perenco PSC Sanaga Sud SNH Kribi IPP (30% SNH)
Victoria Oil and Gas (VOG) Eneo Power (44% State) Gaz de Cameroon Logbaba Field (40% SNH) Douala Industrials Source: CLN
Note 2: Map showing major flares in Cameroon
Source: GGFR data and CLN mapping NB: Gas infrastructure is limited to pipelines of about 15 km in the Douala region and 20 km in the Kribi region.
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Annex 2: Major Sources
AES-Sonel. “Environmental Impact Assessment, Limbe Power Project” September 2003 (Note: this is for the oil-fired facility not the gas IPP discussed in the report, but is useful background).
African Development Bank: “CAMEROON: JOINT 2015-2020 COUNTRY STRATEGY P APER AND COUNTRY PORTFOLIO PERFORMANCE REVIEW (CPPR) REPORT” Report: ADB/BD/WP/2015/92, 22 June 2015
BTI (Bertelsmann Stiftung’s Transformation Index), “Cameroon Country Report”, 2016 Centurion LLP, “Africa Energy Frontiers: Cameroon” (recent but undated)
Cameroon Oil and Gas Magazine, “Oil production falls by 20.8% in the first quarter”, April 2017
Gauthier B. and Zeufack A. “GOVERNANCE AND OIL REVENUES IN CAMEROON”, Revenue Watch Project, OxCARRE, Oxford University, October 2009
IMF: “Cameroon, Selected Issues”, Country Report No. 15/332, Washington, December 2015
United States Geological Service, “Geology and Total Petroleum Systems of the West-Central Coastal Province (7203), West Africa” U.S. Geological Survey Bulletin 2207-B, Reston Virginia, 2005
Wartsila, “Introducing the World’s Largest Gas Engine, WÄRTSILÄ TECHNICAL JOURNAL” January 2011 (Note: This describes the gas technology used at Kribi IPP)
World Bank; “Cameroon: Kribi Power Plant”, Report number 96880, Washington DC, April 2015
World Bank: “Lom Pangar Hydropower Project, Cameroon” Washington DC, March 2012
World Bank: “HYDROPOWER DEVELOPMENT ON THE SANAGA RIVER TECHNICAL ASSISTANCE PROJECT” Washington, DC, APRIL 20, 2017
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