Mini-LNG Model Gains Foothold in Nigeria

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ENERGY ANALYSIS

Nigeria recently signed a Gas Sale Aggregation Agreement to support the establishment of a $500 million mini-liquefied natural gas plant in Rivers State, paving the path for new avenues to harness the country’s gas resources, writes Chineme Okafor

Nigeria’s efforts to deepen the commercial values of her huge gas resources could be gaining some level of tractions with a fresh attempt to set up a mini LNG liquefaction plant in Rivers State.

At the moment, mini and small scale liquefaction plants are becoming increasingly attractive complements to large scale LNG plants, following advances in technology made to monetise small and stranded gas reserves to open new opportunities in natural gas extraction and commercialisation.

Expected to be built with $500 million worth of private funds garnered by Greenville Oil and Gas Company Limited, the mini LNG facility in Rumuji, would when completed supply gas as fuel to industrial clusters, embedded electricity generation plants, and perhaps other stranded customers who could substitute Low Pour Fuel Oil (LPFO) for gas in their operations.

To bring this to reality, a GSSA for the delivery of 74 million standard cubic feet (mmscf) of gas to the plant was executed between parties – Greenville, the Nigerian National Petroleum Corporation (NNPC), Total Exploration and Production Nigeria Limited (TEPNG); and Gas Aggregation Company of Nigeria (GACN).

In prospect, this could become a significant milestone in the development of Nigeria’s gas market considering that the GSAA will demand and strengthen gas supply to the mini LNG project from NNPC/TEPNG joint venture Obite oil field.

This would also buttress the commitment of the parties to further develop and harness the oil field to meet the terms of the GSAA.

Expectedly, 74mmscf of gas from the Obite field would be supplied to the LNG plant in Rumuji, from where it would be processed into LNG and transported to various points of need around the country with specialised LNG trucks.

Operational model

While the new gas investment drive is expected to further the federal government’s intentions for the country’s gas resources, that is, enhance local utilisation of gas for national development as pictured in the national gas policy, encourage private sector participation in the sector, and create jobs within the gas value chain, it also has the potential to be expanded into a $850 million facility in phases.

The plant according to the model shared with journalists at the GSAA signing in Abuja by Greenville’s Chairman, Mr. Eddy Van Den Broeke, will have an installed production capacity of 2,250 metric tonnes per day (mt/d) of LNG, in addition to being powered by a 50 megawatts (MW) gas-fired captive electricity plant among other ancillary infrastructure.

In addition to the infrastructure on site, Den Broeke, noted that Greenville has purchased LNG transportation trucks and tankers, and was constructing retail stations and secondary storage facilities across the country to facilitate delivery of LNG and other logistics supports.

Broeke said the mini plant would be developed in phases, with the first phase costing $500 million of equity investment, while the second phase will take another $350 million.

He also explained that the plant will produce gas for domestic use in Nigeria, adding that electricity and transportation sectors, as well as other industrial users would be served by the mini LNG plant.

“We have just decided to invest in the first three mini LNG plants in Africa, but the big challenge today is that no bank is available to finance this investment because of the temporary problems that Nigeria is going through. We have taken the bold step in saying: ‘this country will come back in the next two or three years with the revolution that is going in the country and development of more agriculture’,” Broeke said.

He further stated: “Our project is done with Total Gas, local gas coming from Obite. That means no need for foreign exchange. Today, we have passed the dark tunnels and we are getting back.

“The investment is around $500 million in the first phase, and we will go up to about $850 million, and completely on equity without any bank financing up till now. We hope that in the second phase, as the minister has said today, more assistance will be given once the people see the investment and once the product come to the market, automatically there will be confidence and we have to build the confidence.”

The execution of the GSAA brought to conclusion, the negotiations on supply of gas to the plant which is expected to commence operations before the end of 2017.

Further plans to expand the production capacity to 5,250mt/day would be followed up subsequently.

Expected economic impacts

Today, natural gas has become one of the world’s most needed feedstocks as well as an important energy source with global consumption steadily on the rise.

Environmentally, replacing liquid fossil fuels such as heavy fuel oil and diesel with gas could contribute to emission reduction, in addition to other economic benefits.

From the various segments of the mini LNG plant – feed gas/source, gas pre-treatment, liquefaction, LNG storage, and LNG transportation, various economic activities are expected to directly benefit Nigerians who would be engaged by promoters of the project.

As disclosed by parties during the agreement, the project will be able to create up to 2,000 direct jobs and 5,000 indirect jobs as it provides an avenue for seamless movement of gas to stranded locations across the country, facilitate the use of gas for embedded electricity generation, revive gas based industries that have become docile in the country, and supply Compressed Natural Gas (CNG) for transportation.

It will significantly contribute to the displacement of more harmful and expensive fuel sources used in the country, conserve foreign exchange used by the country to import petrol, and improve Nigeria’s revenue base from oil and gas.

Sharing his thoughts on the project, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, stated the agreement will unlock gas-based business opportunities in the country, adding that: “President Muhammadu Buhari provided this leadership under the seven big wins. Conversations have been on over the last two-three years.”

Kachikwu further explained: “Our first step was to set up the Nigerian Gas Management Company and Nigerian Gas Pipeline Transportation Company. I am happy that a few months after we launched the gas policy we are seeing this happen. We want to ensure that the payment issues are dealt with and made on time so there is a good financing for the project.”

Project not likely a pioneer   

Although parties to the Greenville mini LNG plant publicised it as the first in Nigeria and perhaps Africa, checks by THISDAY, however, showed that an indigenous company – Oando Gas and Power Limited (OGP) which is a fully-owned entity of Oando Plc, had in March 2016 announced its intention to build a mini LNG plant through its Transit Gas Nigeria Limited (TGNL) subsidiary in Ajaokuta, Kogi State.

At that time, Oando said the liquefaction plant would be completed within the second quarter of 2017, and primarily supply gas as fuel to captive power plants and industrial clusters in northern Nigeria, as well as stranded customers in the South.

It listed its off-takers to include power plants and industrial customers who utilise liquid fuels such as diesel and LPFO, and noted that they could lower their expenses on energy by up to 40 per cent in addition to significantly decreasing their carbon emissions.

Also at that time, the Chief Executive Officer of OGP, Mr. Bolaji Osunsanya said in a statement that: “The establishment of the Ajaokuta mini LNG project is in firm alignment with our mid-to-long term gas conversion strategy. This venture further emphasises our push to broaden our asset portfolio and strengthen our market play within the gas sector; and by providing the gas advantage, we will help spur the development of self-sustaining industrial clusters to bolster the country’s socio-economic growth.”

“LNG is a viable provisional solution and an industry game-changer for the development of gas markets ahead of the actualisation of a far-reaching nationwide gas pipeline network as stipulated by the Nigerian Gas Master Plan,” Osunsanya added, noting that the modular nature of mini LNG projects require minimal infrastructure development, thus substantially reducing design complexity, and the time and cost attributable to traditional gas pipeline development.

While Oando’s Ajaokuta mini LNG project has yet to commence operation, Greenville’s proposed plant in Rumuji could become the first mini LNG to become operational in Nigeria, but certainly not the pioneer in terms of initiation and investment.