Investment Opportunities in Nigeria`s Downstream Oil and Gas

Report
Investment Opportunities in Nigeria’s Downstream Oil
and Gas Value Chain
By
Diezani Alison-Madueke (Mrs.) CON
Honourable Minister of Petroleum Resources
July, 2012
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Investment Opportunities in Nigeria’s Downstream Oil
& Gas Value Chain
Nigeria in Perspective
•
Politics
• Presidential System (Democratic since
1999)
• Bi-cameral Parliament
• Federation: Three tiers of government
(Federal, state and local government)
• 36 states and Federal Capital Territory
• Land Mass Area - 923,768 sq km
•
Natural Resources (Capacity)
•
•
•
•
•
•
•
•
•
Oil – 37 Bln bbls
Gas – 187 TCF
Coal & Lignite – 2.7 billion tonnes
Tar Sands – 31 bln boe
Hydro Power – 14750 MW
Solar – 7.0 Kwh/m2/day
Wind – 2-4m/s at 10m height
Biomass – 320 mln hectars
Economy
• GDP (PPP) - US$418 Bln (The 2nd largest
in Africa)
• Ranked 31st largest in the world
• GDP growth rate – 7.2%
• Ranked 27th largest in the world
• Population – 160 million (the largest
market in Africa
•
• Electricity consumption per capita –
120.51 kwh
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Investment Opportunities in Nigeria’s Downstream Oil &
Gas Value Chain
Scope of Investments in Nigeria
Investment
Opportunities
Midstream &
Downstream – Refining
& Petrochemicals&
Fertilizer Plants
Exploration &
Production
Gas & Power
•
•
Oil block acquisition
•
Refinery optimization
•
Drilling Rig Leasing
and drilling related
services
•
Greenfield refineries
• engineering, construction •
• New Petrochemical Plants
•
Engineering services
•
• New Fertilizer Plants
•
Heavy Equipment
leasing
•
•
Seismic Acquisition
and processing
•
•
3
Pipeline production and
laying
Services
•
Remote pipeline monitoring •
and control devices
•
LNG design, fabrication
etc.
•
Gas Metering and
Monitoring devices
•
Power Plant engineering, •
construction and operation •
Gas Processing
Haulage and logistics
services
Equipment leasing
Pressure vessel
fabrication yards
Turbo-machinery –
procurement, servicing
Spare parts fabrication
Financial Services
Manufacturing of LPG
3
cylinders/Accessories
Investment Opportunities in Nigeria’s Downstream Oil
& Gas Value Chain
Midstream & Downstream – Refining & Petrochemicals
Downstream Industrial Park / Gas Hub Concept
P et r o chemi cal s
F er t i l i z er
P r i vat e P o w er
P l ant ( P P P )
S ea P o r t
Refineries
Refineries
Each facility to be an independently owned Venture
 Roll out of 3-Industrial Parks viz.:
•South West
•East Niger Delta
•Northern Area (Along Trans Nigeria Gas Pipeline Route & Excl. Refinery)
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Investment Opportunities in Nigeria’s Downstream Oil
& Gas Value Chain
Nigeria’s Gas Resources Confers Significant Opportunities for
Investment
Gas is a viable resource to spur economic development through use in
power generation and industry…
Variety of gas uses that can generate
economic development
Gas has attractive fundamentals for the
economic development agenda
▪ Com pared with oil which has a “liquid”
Power
Gas-fired power generation
(OCGT and CCGT)
▪ Relatively low capex and
m ature power generation
technology
▪ Clean fos sil fuel in term s of
CO2 em is sions per unit power
generated (compared with hard
coal or lignite)
▪ Flexible (back-up for RES)
Industry
Gas-intensive industries:
▪ Feeds tock (e.g., fertilisers,
petrochemicals, m ethanol)
▪ Heat and power (e.g., cem ent,
s teel)
Gas light-industries:
▪ Us ed as s econdary input
and/or heat generation (e.g.,
paper, glas s)
global m arket, gas is primarily a local or
regional energy s ource (although it is
becom ing more easily trans portable with
LNG)
▪ Gas is difficult to s tore and, in the
abs ence of a s table off-take position, is
flared or re-injected
SOURCE: Team analysis
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Investment Opportunities in Nigeria’s Downstream Oil
& Gas Value Chain
Nigeria’s Gas Resources Confers Significant Opportunities for
Investment (2)
…and an abundant natural resource in Nigeria
Top 10 gas-rich
countries
Prov ed gas reserves1
2010 T ri lli on cubi c feet
Russi an Federati on
1,581
Iran
1,046
Qatar
894
T urkmeni stan
284
Saudi Arabia
283
273
US
213
Uni ted Arab Emirates
193
Venezuel a
Ni geri a
Al geri a
187
159
1 Generally taken to be those quantities that geological and engineering information indicates with reasonable certainty can be recovered in the future
from known reservoirs under existing economic and operating conditions (predominantl y conventional gas reserves)
SOURCE: BP Statistical Review of World Energy June 2011
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Investment Opportunities in Nigeria’s Downstream Oil
& Gas Value Chain
Gas & Power
Strategic Framework for Nigeria’s Gas Industry
The Gas Reform is anchored on a robust strategic framework that is focused on maximum economic
impact through gas. Aims to drive linkages with agriculture, manufacturing and dispersed small
enterprise through Power
STRATEGIC FRAMEWORK FOR
NIGERIAN GAS
GAS TO POWER
GAS BASED INDUSTRIALISATION
“… By 2014, we would have
positioned Nigeria firmly as the
undisputed regional hub for
gas-based industries such as
fertilizer, petrochemicals and
methanol.”

Significantly increase gas
supply to the Power Sector

Focused delivery plan to
support existing and ongoing
power plants by PHCN and
NIPP

Deliver Gas for at least 12GW
by 2015
Deliver on President’s Gas
Revolution Agenda to:


Position Nigeria as the
regional hub for gas-based
industries such as fertilizer,
petrochemical and methanol
Transform gas sector to value
adding sector
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HIGH VALUE EXPORT
LNG
Regional
Pipelines
Consolidate Nigeria’s position and
market share in high value export
markets
 Targeted LNG export
opportunities
 Regional gas pipelines that help
consolidate nation’s footprint
and influence
Investment Opportunities in Nigeria’s Downstream Oil
& Gas Value Chain
Midstream (Gas) & Downstream (Power)
Policy Initiatives
To support the agenda, a set of enabling policies were approved by His Excellency, Dr.
Goodluck Jonathan. These are being rolled out and have created a major boost and
jumpstart for the sector’s agenda
• Legal basis for gas supply to domestic
market now in place
− The underpinning Regulation was put
in place in 2008
− Incorporation in Petroleum Industry Bill
(PIB) also ongoing
• DPR issued the first set of supply
obligations to all IOCs in 2009
• Recent supply growth fully linked to the
respective DSO obligations of the
suppliers – the concept is essentially now
institutionalized
Scalable Gas
Infrastructure
Blueprint
• New and more sustainable domestic gas pricing
to Power and other sectors now in place
• World class contractual frameworks for supply,
transmission and Network access now in place
• World Bank revenue securitization scheme in
place to mitigate risk of payment failures for
gas supplied
• Gas Aggregation Company of Nigeria
established to manage DSO and price
aggregation
• Good progress being made in Negotiations and
execution of various gas supply agreements
(GSAA) ongoing
• Infrastructure Blueprint approved by Federal Executive Council (FEC) in 2008
and being rolled out—anchored on a network of critical pipelines and 3 CPFs
• Critical pipelines identified and development in progress for some
• Investors assembled for the Central Area CPF and have commenced project
development
• Feasibility study concluded for the Western Koko CPF
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Investment Opportunities in Nigeria’s Downstream Oil
& Gas Value Chain
Gas & Power
Investments in Nigerian Gas Infrastructure System
Future of Nigerian Gas Infrastructure When Completed

Over 5,000km of gas
pipelines to be laid

At least 3 gas processing
facilities (about 1bcf/d
capacity each) to be
designed and built

Aggressive Timeline
Anticipated for delivery

Numerous gas utilization
projects to be developed
concurrently – LNG,
fertilizer, Power etc.
Investment Opportunities in Nigeria’s Downstream Oil
& Gas Value Chain
Opportunities for Gas Investments In Nigeria
Absolute import to Nigeria
(2009, Mn USD)
Illustrative, relative mapping
of Power and Export
Energy competitiveness
Mmscf gas used per m$ output, Nigeria(2)(3)
Power generation
LNG export
110
100
Methanol
90
Cement
80
70
Nitrogenous f ertilizers
60
50
40
Aluminium
30
Pulp
20
Corn
Iron & Steel
10
Petrochemicals (ethylene f rom LPGs) Downstream plastics
Glass
Paper
Synthetic rubber
0
0
100
200
300
400
500
600
700
800
900
1,000
1,100
2,400
Total job impact
Total jobs created per mmscf d of gas used, Nigeria 1
1 Estimate based on USA impact and x3-4 ratio f or job creation and x1,2 energy ef f iciency between developed and developing countries
2. Ethylene f eedstock in Nigeria would be LPGs, consumption of natural gas is only utility needed f or conversion vs f eedstock. Downstream
plastics, only non-ethylene energy required is taken into account not initial f eedstock needs.
SOURCE: OECD; US f ederal statistic of f ice; Team analysis
Investment Opportunities in Nigeria’s Downstream Oil
& Gas Value Chain
Midstream & Downstream – Refining & Petrochemicals
Downstream Assets - Historical Perspective
Current NNPC Supply & Distribution
Infrastructure
Refining Capacity
NPHR
(150,000BPSD)
KRPC
(110,000BPSD)
WRPC
(125,000BPSD)
OPHR
(60,000BPSD)
1989
1979
1978
1963/1972
Simple …. Complex …. State of the Art
445,000BPSD
Refining Capacity Per Capita, %
10
5,120 kilometers Of Pipeline Network
21 Petroleum Products Depots
9 LPG Depots
Atlas Cove Terminal
PPMC Escravos Terminal
Bonny Export Terminal
MT Oloibiri/MT Tuma
6.17
1.37
0.96
Algeria
Egypt
0
New Refineries







Libya
0.3
1.11
Nigeria
S/Africa
0.81%
Bayelsa Refinery
Kogi Refinery Lagos Refinery
TOTAL PROPOSED NEW CAPACITY
750,000BPSD
850,725m3
1,202,01m3
578,238m3
748,398m3
CRUDE
PMS
DPK
AGO
Linkage To Existing
Backbone Mandatory
Downstream Infrastructural Growth Plateaued In The Early Nineties. FGN Is Re Strategizing To Face Current
Consumption Challenges & Preparing For Additional Product Volumes From Envisaged New Refineries
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Investment Opportunities in Nigeria’s Downstream Oil
& Gas Value Chain
Midstream & Downstream – Refining & Petrochemicals
Refineries, Pipelines and Depot Infrastructure
• Close to $3 Billion required in upgrading pipeline Infrastructure
• The PIB to prescribe the Commercial tariffing models for pipelines
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Investment Opportunities in Nigeria’s Downstream Oil
& Gas Value Chain
Midstream & Downstream – Refining & Petrochemicals
Refinery Rehabilitation
Strategic objective of the TAM is to drive up average utilization of refineries to 90%, thus creating
domestic self sufficiency in HHK and AGO, whilst significantly reducing imports of PMS
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Investment Opportunities in Nigeria’s Downstream Oil
& Gas Value Chain
Greenfield Refineries Project
• Greenfield Refineries
•
• Status of Implementation
•
Build three (3) Refineries in Lagos, Bayelsa
and Kogi States with a combined
capacity of 750KBPD & Fertilizer plant
along the Trans Sahara Gas Pipe line
corridor, subject to Technical and
Commercial viability.
•
•
•
• Near Term Impact
•
•
•
Secured 1500 Ha of land in Lekki Free Zone
from Lagos State Government for the
Refinery and Industrial Park.
Secured 324Ha of land in Oloibiri from
Bayelsa State Government for Refinery.
Location Studies for Kogi State ongoing.
Negotiations for Project Funding from
Chinese ongoing.
• Long Term Impact
Expected Investment estimated at US$23
billion.
Save about US$10.0 billion spent annually
on importation of White Petroleum
Products.
Engage about 15,000 construction workers
at peak and 2,000 fulltime plant operators
for the three Refineries.
•
•
•
•
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Achieve self sufficiency in supply of
Petroleum Products by 2018, and eliminate
importation of Petroleum Products
completely.
Save over US$2.5 billion annually in
subsidies on Petroleum Products.
Become a major exporter of PMS in the
energy market
Trigger the switch from firewood, charcoal
and kerosene to LPG
Investment Opportunities in Nigeria’s Downstream Oil
& Gas Value Chain
Economic Benefits of Downstream
Non-Fuels Industrial Developments
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Investment Opportunities in Nigeria’s Downstream Oil
& Gas Value Chain
Service Sector
Service Sector Opportunities
Engineering Design
•
Over $500 Mln/year will be spent on Engineering Design projects in the next 5 yrs
Fabrication & Construction
•
Over $8 billion/year earmarked for fabrication scope in the upstream for the next 5
years
•
Need for new fabrication yards / dry docking facilities and expansion of existing yards
Materials, Manufacturing & Equipment Leasing
•
About $25bn to be spent on procurement of materials over the next 5 years
•
Some equipments and materials to be assembled/manufactured in Nigeria are Valves,
fittings, heaters, static equipment, pumps and other rotating equipment
Banking & Insurance
•
Financing of low risk Oil/Gas projects through direct funding and venture capital
•
Partnering of Local insurance firms in the Insurance and Reinsurance of small Oil and
Gas projects
Shipping & Logistics
•
Partnership with Nigerian shipping companies unlocks over $ 600 million annual spend
on international transport of crude
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Investment Opportunities in Nigeria’s Downstream Oil
& Gas Value Chain
Conclusion
• Nigeria as the largest market in Africa offers unique opportunities for
investment in refining, storage, transportation, distribution and marketing of
petroleum products.
• The downstream oil and gas value chain is the focus of government intention
in creating the necessary business environment through price liberalisation
and strong independent regulation.
• The PIB offers fiscal rules of general application and open access regulations
for the domestic oil and gas activities.
• Nigeria plans to upgrade existing refineries, build new refineries, build new gas
infrastructure (pipelines and central processing facilities), power plants,
petrochemicals, fertiliser etc. in order to enhance linkages between the oil and
gas sector and the wider Nigerian economy.
• Nigeria is open for business.
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