Africa Oil & Gas: Nigeria unveils gas field projects, but funding is unclear

NNPC Tower in Nigeria
NNPC Tower in Nigeria

State producer Nigerian National Petroleum Corporation (NNPC) has detailed six upstream gas projects that it says can be put into production by 2020. But this claim has been met with scepticism by at least one industry player.

NNPC says the six projects it has identified – seven, if a joint project with Chevron called Sonam is included — could add about 3.4bn ft3/d (35.2bn m3/yr) of extra gas supplies as early as 2020, if accelerated to bridge a projected medium-term supply gap. That would represent a roughly 75% increase in Nigeria’s existing saleable gas production. Yet NNPC has not indicated how many, if any, of the six are close to taking a final investment decision.

Chevron and NNPC meanwhile remain tight-lipped about when their joint Sonam field development will start up despite having last year committed to funding its joint development; the project could provide a significant near-term increment in gas supply.

The six projects identified by NNPC are:  the 4.3 trillion ft3 Assa North/Ohaji South field; the 6.4 trillion ft3 unitised gas fields (Samabri-Biseni, Akri-Oguta, Ubie-Oshi and Afuo-Ogbainbri); the 7 trillion ftNigeria Petroleum Development Company’s OML 26, 30 & 42; a 2.2 trillion ft3Shell Petroleum Development Company joint venture supply project to the Brass Fertiliser Company; a cluster development of the 5 trillion ft3 OML 13 to support expansion of Seven Energy’s Uquo gas plant, and a cluster development of 10 trillion ftOkpokunou/Tuomo West fields (on OML 35 & 62).

NNPC has said the Buhari administration wants such gas projects developed, in order to expand the country’s gas-fired generation to 15 gigawatts, subject to power plant investment. That exceeds a 10 GW by 2020 target outlined by Nigeria’s minister of state for petroleum resources, Ibe Kachikwu said during a National Council on Hydrocarbons meeting in November 2017. The pre-Buhari government had talked of 20 GW gas-fired generation capacity by 2020 but did not put any structures in place to deliver this.

NNPC group managing director, Maikanti Baru, has now said that the various new gas projects could also make Nigeria a regional hub for gas-based industries (petrochemicals, chemicals, methanol, and fertiliser). But such talk contrasts markedly with the present situation, where for years Nigeria has been unable to fulfil even the modest contractual gas export volumes via the West African Gas Pipe to Ghana.

From NNPC’s announcement, it’s clear that the Nigerian government is ready to foster natural gas as a way of mitigating the economic affects of any future fall in oil prices, which has generated uncertainty in the upstream sector since 2014.

Equally clear is that, since Nigeria published its National Gas Policy last year, minister Kachikwu has called for a greater focus on gas, rather than oil, to reflect the fact that Nigeria’s huge gas reserves, and benefit from the absence of any reported vandalism on gas infrastructure since the start of 2018. But local producer Seven Energy’s senior manager for midstream commercial, James Odiase, told NGW March 8 that, just NNPC’s identification of these gas projects does not of itself mean they will start production by 2020.

“In 2017, Seven Energy was part of discussions with the NNPC based on this project. Identifying these projects basically mean noting where facilities already exist so as to get parties to work together,” said Odiase, adding: “It also means those who have licences will need to source for funds to achieve the outlined goals.” Seven Energy itself has been involved in what it called a “comprehensive capital restructuring” – indicative perhaps of the struggle some local upstream producers face in attracting investment capital. source: NGW

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: