Strategic Gas Plan for Nigeria February 2004 Joint UNDP/World Bank Energy Sector Management Assistance Programme (ESMAP) CONTENTS Acknowledgments........................................................................................................xiii Abbreviations and Acronyms...................................................................................... xv Units of Measure............................................................................................................ xx Conversion Factors...................................................................................................... xxi Executive Summary ........................................................................................................ 1 1. Scope of Work ................................................................................................... 11 Current situation in Nigeria................................................................................. 11 Driving Forces for Change in Nigeria ................................................................ 13 Barriers to Development in Nigeria.................................................................... 14 2. The National Gas Strategy............................................................................... 15 General ................................................................................................................ 15 Government Policy ................................................................................. 17 Resources............................................................................................................ 19 Current Oil and Gas Reserves .............................................................. 19 Undiscovered (Yet-To-Find) Reserves ................................................. 23 Production............................................................................................................ 27 Production by Operator .......................................................................... 27 Current and Forecasted Production of Remaining Reserves............. 28 Cost of Gas Supply ............................................................................................. 33 Gas Pricing Issues.................................................................................. 37 Price Regulation and the Institutional Role of the Regulator .............. 39 Approach to Setting the Gas Price Level.............................................. 40 Nonprice and Other Contract Clauses.................................................. 40 3. Gas Utilization Options and Competition ..................................................... 41 Introduction.......................................................................................................... 41 Development of the Resource............................................................... 41 iii Gas Utilization Options ....................................................................................... 41 Typical Gas Utilization Projects ............................................................. 41 Priority 1:.............................................................................................................. 41 Gas Usage of Typical World-Size Plants.............................................. 42 Population ............................................................................................................ 46 Nigeria’s Competitors.......................................................................................... 49 Angola ..................................................................................................... 50 Equatorial Guinea ................................................................................... 50 Gabon ..................................................................................................... 51 Democratic Republic of Congo .............................................................. 51 Congo Brazzaville ................................................................................... 51 Cameroon................................................................................................ 52 Mozambique ............................................................................................ 52 Namibia.................................................................................................... 52 Saharan Africa (Libya and Algeria) ....................................................... 53 Egypt ..................................................................................................... 53 Chile ..................................................................................................... 53 Venezuela................................................................................................ 53 Trinidad and Tobago .............................................................................. 54 North America ......................................................................................... 55 4. Current Gas Utilization Project and Plans.................................................... 57 Existing Projects .................................................................................................. 57 Nigerian LNG Project ............................................................................. 57 Domestic Consumption Projects........................................................................ 59 Power Sector........................................................................................... 59 LPG Sector.............................................................................................. 68 Cement Sector ........................................................................................ 70 Fertilizer Sector....................................................................................... 71 Aluminum Sector .................................................................................... 72 Steel Sector............................................................................................. 73 iv Small Industry ......................................................................................... 74 Commercial, Residential and Other Sectors ........................................ 74 Proposed Export Projects................................................................................... 75 Proposed Major Nonpipeline Export Projects ...................................... 75 Proposed Additional LNG Projects........................................................ 75 Proposed GTL Projects .......................................................................... 78 Proposed Pipeline for Export from Nigeria ........................................... 79 5. Implementation Issues..................................................................................... 85 Observations: Perspective of Participants in Gas Developments................... 85 General.................................................................................................... 85 Contractual Rules for Gas...................................................................... 86 Gas and Project Planning—Government Policy and Framework ................... 86 Legal ..................................................................................................... 88 Fiscal ..................................................................................................... 88 Oil and Gas Sector Framework ............................................................. 91 Financial and Project Management....................................................... 93 Investment Promotion......................................................................................... 93 Investment Generating Activities........................................................... 94 Investor Servicing Activities ................................................................... 94 Industrial Development Vehicles........................................................................ 94 Industrial Parks ....................................................................................... 94 Export Processing Zones (EPZs).......................................................... 95 Human Resources .............................................................................................. 97 6. Conclusions and Recommendations............................................................ 99 Gas Reserves and Gas Usage Options ............................................................ 99 Technical and Implementation Action Plans ...................................................103 Planning.................................................................................................103 Policy, Strategic Objectives, and Priorities .....................................................105 Appendix 1: List of Reports Provided by the Nigerian Government via the World Bank and other Data and Reports Evaluated.................................109 v Reports/PowerPoints Supplied to Consultant:................................................109 Data ................................................................................................................110 IHS Energy Group Databases, Software and In-House Information110 Industry Sector Reports, Publications, and Journals .....................................110 Process Licensors.............................................................................................111 Appendix