CREATING OPPORTUNITIES IN THE NIGERIAN GAS TO INDUSTRY SECTOR - - PowerPoint PPT Presentation

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CREATING OPPORTUNITIES IN THE NIGERIAN GAS TO INDUSTRY SECTOR - - PowerPoint PPT Presentation

Oct 27, 2022 566 likes •770 views

CREATING OPPORTUNITIES IN THE NIGERIAN GAS TO INDUSTRY SECTOR CHARTING A WAY FORWARD SEPTEMBER 2019 About the World Bank, IFC, and MIGA The World Bank Group (WBG) IBRD IDA IFC MIGA ICSID Investment and Advisory Loans to middle-

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CREATING OPPORTUNITIES IN THE NIGERIAN GAS TO INDUSTRY SECTOR

CHARTING A WAY FORWARD

SEPTEMBER 2019

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About the World Bank, IFC, and MIGA

The World Bank Group (WBG)

IBRD IDA IFC MIGA ICSID

Conciliation and arbitration of investment disputes Guarantees of private sector investment’s non-commercial risks Interest-free loans and grants to governments

  • f poorest countries

Loans to middle- income and credit- worthy low-income country governments Investment and Advisory Solutions for private sector development

Dakar Nairobi Johannesburg Cairo Washington Mexico City Bogota Buenos Aires São Paulo Santo Domingo Moscow Hong Kong New Dehli Almaty Istanbul Singapore

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0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 2005 2010 2015 2020 2025 2030 2035

bcm

Generation Other Losses and Gains Industry & Non-Energy Use Transport Residential/Commercial Production

Source: Historical Data: IEA; Forecast: Wood Mackenzie Energy Markets Service

Despite having 187 TCF of gas reserves - the world’s 9th largest - the

  • utlook on Nigeria’s domestic gas demand remains constrained and

undiversified

Emphasis of gas demand has been on use as a fuel Gas production expected to continue

  • utstriping Nigeria’s

demand

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Even when assuming energy self sufficiency, there remains significant headroom to leverage gas as a core driver of Nigeria’s domestic industrialization

Scenario – Assuming Electric Power Generation rises to 15,000MW 2019 (i.e. Today)

  • 12,522 MW
  • Installed Capacity

 Thermal: 81%  Hydro: 19%

  • ~3,500 MW
  • Actual Generated \ Distributed

~7.5 bcfd**

(Nigeria current gas production)

~7.5 bcfd

(Nigeria current gas production)

~3,500MW (2019) 15,000MW*

approx ~0.6bcfd to Electricity generation ~1.8 bcfd to Electricity generation Others: Exports (LNG), Industries, Re- injection, Flares etc

*Assumes: 80% of national Electricity generation is from gas fired plants; 150MMscfd per 1,000MW conversion ratio; Gas supply levels remains flat; 15,000 MW generated and evacuated ** Source: DPR and NNPC Statistics Bulletin

Main channels- Nigeria exports ~35%

  • f gas as LNG, Re-injection\Gas Lift

~30%, Flaring ~10%, Gas use as upstream fuels 5%, Piped gas to West African Subregion 1%, and Others **

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Benchmarking Nigeria and Saudi Arabia shows significant room to create value by expanding gas use for Petrochemicals & Fertilizers

Source: Team Research; Saudi Natural Gas & Vision 2020; DPR and NNPC Statistical Bulletin

Saudi Arabia – 4TCF Annual Gas Production Nigeria – 3TCF Annual Gas Production

Petrochemicals & Fertilizer 2% Electric Power 8% Flare 10% Gas Exports (LNG) 35% Gas Reinjection\Gas Lift 30% Others 15%

Gas Production- 11 bcfd Gas Reserves – 288 TCF Gas Production- 7.5 bcfd Gas Reserves – 187 TCF

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6 (A) Domestic Heavy Industry (as feedstock) (B) Light Industry (i.e Consumer) (C) Transport

Global Development Partners are uniquely positioned to help Nigeria leverage this endowment for accelerated economic diversification, and to achieve climate\emissions benefits

1. Eleme Indorama Complex (Petrochemicals and Fertilizer) 2. Notore Chemicals (Fertilizer) 3. Dangote (Fertilizer) 4. Chevron EGTL (Gas to Liquids) 5. ? 1. LPG supply to consumers a) One primary domestic supplier (NLNG) b) 5 Coastal Storage Facilities c) >1,000 inland distributors d) ? 1. CNG Vehicles a) Little to no domestic track record b) ? 1. Nigeria LNG a) 6 trains in operations b) Train 7 under consideration 1. Installed Capacity, 12,000 MW of gas fired plants 2. ELPS\ WAGP Domestic Supply 3. Trans Nigeria Gas Pipeline (TNGP)

Areas of new

  • pportunity
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S/n Country Oil Reserves Gas Reserves Exports of Crude Oil in 2017 (Value) Exports of Chemicals and Derivative Products in 2017 (Value) Installed Capacity of Petrochemicals and Fertilizer (Tonnage) 1 Venezuela 297 bn bbls 195 tcf US$ 22.0bn US$ 0.8bn N.A 2 Saudi Arabia 267bn bbls 288 tcf US$ 110.0bn US$ 38.5bn 96.0m tpa 3 Iran 154 bn bbls 1,187 tcf US$ 38.5bn US$ 5.9bn 60.0m tpa 4 Iraq 141 bn bbls 112 tcf US$ 57.5bn Nil N.A 5 Kuwait 104 bn bbls 64 tcf US$ 31.5bn US$ 4.5 bn 8.8m tpa 6 UAE 98 bn bbls 215 tcf US$ 40.0bn US$ 10.0 bn 13.6m tpa 7 Russia 80 bn bbls 1,688 tcf US$ 97.0bn US$ 20.0 bn 40.0m tpa 8 Libya 48 bn bbls 55 tcf US$ 16.0bn Nil N.A 9 Nigeria 37 bn bbls 187 tcf US$ 35.0bn US$ 0.2 bn ~5.0m tpa (current and upcoming)

(A) Gas to Heavy Industry – As seen in other gas rich countries, the chemicals sector needs to become a core part of Nigeria’s industrial agenda, and a major foreign exchange earner

i.e. Petrochemicals, Urea Fertilizer, Methanol, Ammonia etc A concerted effort to diversify from crude oil exports On track to increase Petrochemicals capacity at least 2.5x

  • ver next 10 years

* Other noteworthy examples include efforts in Qatar, Trinidad & Tobago, and Brazil

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(A) Gas to Heavy Industry (Contd) – Untapped possibilities in Nigeria

Source: www. Petrochemistry.eu

The Petrochemicals Map

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(A) Gas to Heavy Industry (Contd) – Gas producers also seeking credible and commercially viable channels to monetize reserves

i.e. Petrochemicals, Urea Fertilizer, Methanol, Ammonia etc

Image Source: Petroleum Economist

Gas Producer % of national gas prod

Structure

Shell

25% JV, PSC

Exxon

24% JV, PSC

Chevron

16% JV, PSC

ENI

16% JV, PSC

Total

10% JV, PSC

ND Western\ NDPC

4% JV

Others

21%

Independents and Marginal Field Producers

Gas production levels may not necessarily reflect the reserves of each company

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(A) Gas to Heavy Industry (Contd) – A vision for Nigeria could be to quadruple its Petrochemicals capacity by 2029

5 Mtpa ~ 20-25 MTPA 2019 2029 (?)

Implications (early assessment)

  • Gas Needs ?
  • 2 – 3 bscfd
  • Expectations from gas suppliers?
  • # of Projects
  • Completion of 15 to 20 heavy chemicals

plants (1MTPA each)

  • How would Chemicals companies reach

financial close \ accelerate project execution?

  • Chemicals Clusters
  • At least 5 (or more) Chemicals clusters

could emerge

  • Investments required
  • US$25bn-US$35 bn
  • More needed?
  • Industry Turnover
  • Over US$2bn p.a additional earnings to

gas suppliers (depending on gas pricing)

  • Over US$15bn p.a grows earnings to

Chemicals Companies i.e. Petrochemicals, Urea Fertilizer, Methanol, Ammonia etc

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(A) Gas to Heavy Industry (Contd) – What have others done ?

Chemical Plants Clusters Large creditworthy gas Offtakers Domestic Capital Gas Pricing Shared gas gathering & Product evacuation infrastructure

Standardized gas contracting framework

Investor Specialization Political Risk

Strong Anchor Chemicals Projects

i.e. Petrochemicals, Urea Fertilizer, Methanol, Ammonia etc

?

(additional thoughts from Industry Stakeholders) (Pipelines and Jetties)

Note: Bubble size indicates relative importance

* Source: A synthesis from prior discussions, meetings, and research

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(B) Gas to Light Industry\Consumers – Nigeria is a high priority LPG market

  • Liquified Petroleum Gas (LPG) is an alternative fuel for cooking in

households but has been in limited use due to a regulatory framework not conducive to increase market penetration – only middle and upper income households participate

  • There have been series of engagements with the LPG Association in

Nigeria, revealing major constraints to establishing LPG as the primary cooking fuel, to substitute kerosene and firewood in most homes in Nigeria

  • A specific gap is the insufficiency of cylinders in the market, to lower

switching costs for consumers.

  • Benefits of an intervention in LPG include:

(i) boosting Nigeria’s economy (ii) reducing negative health impacts of cooking with dirt fuels, (iii) protecting the environment, and (iv) accelerated growth in LPG industry turnover

20 22 22 25 27 32 33 35 42 44 46 49 61 81 111 118 131 135 612 705 100 200 300 400 500 600 700 800 Ghana Mozambique South Korea Nepal Afghanistan Uganda Kenya Sudan Tanzania Myanmar Phillipines Vietnam DRC Ethiopia Pakistan Nigeria Indonesia Bangladesh China India

Source: World LPG Association

#People without access to clean fuels i.e. Liquefied Petroleum Gas

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Firewood 56% Kerosene 27% LPG 5% Charcoal 6% Electricity 4% Saw dust 2%

Nigeria Household Fuel Annual CO2 Emissions (in tons) Firewood 37,208,640 LPG 1,793,400 Saw Dust 1,661,100 Kerosene 992,250 Electricity 980,000 Charcoal 705,600 43,340,990

Each year, approximately 43m tons of CO2 emissions from Nigeria’s household fuels Household Fuel use in Nigeria, heavily dependent on high CO2 emissions sources

Source: The Engineering Toolbox; Team Estimates Source: World LPG Association

Nigeria can eliminate ~15million tons of CO2 emissions over 10 years, by doubling LPG usage

600k tons 1.2m tons 1.8m tons Equivalent to keeping 300,000 cars off the road each year 1.5m tons CO2 savings Per Year 3m tons CO2 savings Per Year

Note: Calculation assumes LPG displaced use of Firewood and Sawdust

x2 x3 Today

Implications-

  • High CO2 emissions
  • High rates of deforestation
  • Health hazards especially in poorer

households

(B) Gas to Light Industry\Consumers (Contd) – Opportunities to drastically cut CO2 emissions by growing the use of LPG in homes

i.e. Liquefied Petroleum Gas

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14 Consumption Per Capita (kg/person) Total Annual Consumption (mt) Household cylinders in circulation (est)

1 India 16kg/ person 22.5 million tonnes 150 million cylinders 2 Brazil 35kg/person 7.5 million tonnes 100 million cylinders 3 Indonesia 25kg/ person 6.7 million tonnes >60 million cylinders 4 Senegal 10kg/person 0.16 million tonnes 5 Ghana 6kg/person 0.18 million tonnes 6 Nigeria 3kg/ person 0.600 million tonnes ~2-3 million cylinders 7 African Average 11kg/ person 13.2 million tonnes

(B) Gas to Light Industry\Consumers (Contd) - Despite being a major producer

  • f LPG itself, Nigeria continues to lag in LPG adoption

Nigeria’s LPG Production (annual)

  • NLNG Bonny

1,200,000 tons

  • Mobil Bonny

700,000 tons

  • Chevron Escravos

350,000 tons 2,250,000 tons

Nigeria remains a net exporter of LPG, despite huge needs for cleaner fuels in it’s households

Source: World LPG association; updated with team research

i.e. Liquefied Petroleum Gas

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(B) Gas to Light Industry\Consumers (Contd) - Countries have adopted different

policies to boost their respective LPG sectors, resulting in varying levels of success

BRAZIL INDONESIA SENEGAL GHANA

  • Government’ overarching

regulations and standards on cylinders, refilling etc.

  • LPG distributors made stoves,

cylinders loaned out at no cost for customers

  • Introduction of consumer credit

products for LPG

  • LPG subsidy on cylinders
  • LPG subsidy on products to make

it affordable

  • Extensive cylinder rehabilitation

programmes

  • Launched numerous programs,

including ‘Zero Kero Program’ in 2007 to switch consumers from Kerosene to LPG

  • LPG cylinder and product price

subsidies (especially 3kg cylinders)

  • Free ‘ Starter kits’ to covert poorer

households to LPG

  • Aggressive communication

programs

  • Distribution of subsidized (or free)

14.5kg and 5kg cylinders

  • Free LPG transportation services
  • LPG product price subsidy
  • Setup a national LPG fund to

absorb key sector costs LPG use:35kg \person LPG use: 6 kg\person LPG use: 25kg\person

  • Launched the national ‘Butanisation’

policy

  • Differentiated pricing policy for

three market segments: 2.75kg, 6kg, and 12.5kg

  • Promotion of subsidized LPG

cooking appliances based on 2.75kh cylinder, regulators, hose etc.

  • Fiscal incentives to import LPG

equipment tax and duty free

  • Incentives to encourage distributors

to build refilling plants outside Dakar and other major urban areas LPG use: 10 kg\person

i.e. Liquefied Petroleum Gas

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(B) Gas to Light Industry\Consumers (Contd) – A vision for Nigeria could be to triple LPG consumption by 2029

600k TPA ~ 2M TPA 2019 2029 (?)

Implications (early assessment)

  • Gas Needs
  • 2M tpa of LPG
  • Can the market absorb?
  • # of Cylinders
  • Over 5 million new cylinders

injected into the market

  • How would this be funded?
  • Supporting infrastructure
  • Recertification plants
  • Investments required
  • TBD
  • Industry Turnover
  • Over US$1 billion a year for LPG

producers

  • Over US$200m a year for

distributors (wholesalers and retailers)

  • Depends on global LPG prices,

and whole-retail spreads.

i.e. Liquefied Petroleum Gas

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(B) Gas to Light Industry\Consumers (Contd) – What have others done?

LPG Cylinders

(available and affordable)

Alternative uses for LPG

Grassroots Distributor Penetration

LPG Pricing Market Model

(Distributor owned cylinder models)

Consumer Awareness Distributor incentives

Enforcement of Forest Protections

i.e. Liquefied Petroleum Gas

?

(additional thoughts from Industry Stakeholders)

Note: Bubble size indicates relative importance

* Source: A synthesis from prior discussions, meetings, and research

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IFC Eme Essien, Country Manager, Nigeria | eessien@ifc.org Femi Akinrebiyo, Manager, Manufacturing , Agribusiness, and Services (Global Upstream) | fakinrebiyo@ifc.org Kalim Shah, Chief Investment Officer, Manufacturing, Agribusiness, and Services | kshah@ifc.org Musonda Chipalo, Principal Investment Officer, Manufacturing , Agribusiness, and Services | mchipalo@ifc.org Bambo Kunle-Salami, Manufacturing, Agribusiness, and Services | akunlesalami@ifc.org Ibrahim Dikko Adamu, Country Officer, Nigeria | iadamu@ifc.org World Bank Feyi Boroffice, Senior Private Sector Specialist, World Bank | fboroffice@worldbank.org MIGA Nkemjika I. Onwuamaegbu, Senior Underwriter, MIGA | nonwuamaegbu@worldbank.org

Team