Agbada Non-Associated Gas Plant, Rivers State
SHELL IN NIGERIA
UNLOCKING
NIGERIA’S POTENTIAL
IN NATURAL GAS
Natural gas is the cleanest burning fossil fuel and is abundantly available
in Nigeria, which has the largest reserves in Africa and the ninth largest in
the world.
LARGEST
NATURAL GAS
RESERVES IN AFRICA
9TH LARGEST
NATURAL GAS
RESERVES IN THE
WORLD
12%
of Nigeria’s grid-connected electricity
in 2016 supplied from SPDC JV’s
Afam VI power plant
Approximately
93% 7%
reduction in gas flaring volume
2002 –16
81%
reduction in gas flaring intensity
2002 –16
16
of global LNG production capacity
from Nigeria LNG in 2016
ALL NEW SPDC
JV FACILITIES
DESIGNED TO HAVE
NO CONTINUOUS
FLARING SINCE 2000
SHELL IN NIGERIA UNLOCKING NIGERIA’S POTENTIAL IN NATURAL GAS
The Federal Government of Nigeria has made it a priority to unlock
and harness the potential of this resource to increase domestic and
industrial power supply, raise living standards and support sustainable
economic growth and diversification. According to the Oil Producers
Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry,
Nigeria has around 181 trillion cubic feet (TCF) of proven gas reserves
plus much more in undiscovered gas resources. However, despite
having the largest gas reserves in Africa, only about 25% of those
reserves are being produced or are under development today.
Nigeria currently has around seven gigawatts (GW) of installed electricity
capacity but often less than four GW actually in operation. OPTS states that
Nigeria generates the equivalent power of just one 40-watt light bulb per
person – one of the lowest power generation levels per person in the world,
e.g. in South Africa, the UK and the USA it is 20, 33 and 80 light bulbs per
person respectively. The Federal Government of Nigeria has an aspiration to
increase electricity generation from the current four GW to 40 GW and this
represents a huge development opportunity for Nigeria’s gas industry.
SHELL COMPANIES IN NIGERIA HAVE PLAYED A
PIONEERING ROLE IN THE PRODUCTION AND DELIVERY
OF NATURAL GAS TO DOMESTIC CONSUMERS AND
EXPORT MARKETS
SHELL’S ROLE IN SUPPLYING GAS TO MARKETS
Shell wants to “power progress together by providing more and cleaner
energy solutions”. Natural gas is the cleanest of fossil fuels and Shell
Companies in Nigeria have played a pioneering role in onshore, shallow
and deep-water gas exploration and production and its delivery to
domestic consumers and later, export markets since the early 1960s.
Since 2010, the SPDC JV has also been producing at the Gbaran Ubie
integrated oil and gas plant in Bayelsa State, which has the capacity to
process one billion standard cubic feet of gas per day for the domestic
and export markets. Several projects are currently underway at Gbaran
Ubie and nearby Kolo Creek and at Soku to develop around 2.8 trillion
standard cubic feet of non-associated gas. Natural gas in a reservoir
which contains no crude oil is called non-associated gas. This additional
gas infrastructure will be used to sustain gas supply to the NLNG plant
at Bonny and continue to fuel a 225 MW capacity power plant built
in Gbaran by the federal government under the Nigeria Integrated
Power Project.
The SPDC JV also produced more gas in 2016 from the Agbada
Early Gas Production Facility, which is expected to further boost gas
availability on the eastern Niger Delta domestic gas network and
enhance power generation by over 150 MW of electricity. In addition,
the SPDC JV operated Okoloma gas plant supplies gas to the Afam VI
power plant, which alone contributed approximately 12% of Nigeria’s
grid-connected electricity in 2016. Afam VI uses combined cycle gas
turbine technology that burns 40% less gas than plants using older open
cycle technologies. This also contributes significantly to the reduction of
greenhouse gas emissions.
Shell Companies in Nigeria remain committed to working with the
Federal Government of Nigeria to increase gas supply to the domestic
market. For example, the Assa North / Ohaji South project in Imo State,
which is a joint development involving SPDC, NNPC and SEPLAT, a
leading indigenous producer, has the potential to be one of the largest
domestic gas projects in the country, supplying 600 million standard
cubic feet per day. This translates into almost 2,400 MW of potential
electricity generation when it comes to fruition.
Other Shell Companies in Nigeria continue to play a crucial role in the
national gas energy mix. The Bonga deep-water field operated by Shell
Nigeria Exploration and Production Company Limited (SNEPCo) produces
gas that is piped from the Bonga floating production, storage and
offloading facility to the Nigeria Liquefied Natural Gas Company (NLNG)
joint venture plant on Bonny Island where it is cooled to make LNG for
export to consumers around the world. Through its 25.6% interest in the
NLNG joint venture, Shell has since the early 1990s played a key role in
Nigeria’s emergence as a global player in LNG.
17
SHELL IN NIGERIA UNLOCKING NIGERIA’S POTENTIAL IN NATURAL GAS
Shell Nigeria Gas Limited (SNG) supplies natural gas used as fuel for
various industrial processes and power generation in Nigeria. In 2016,
SNG distributed an average of 33 million standard cubic feet a day
(MMSCFD) of natural gas against 42 MMSCFD in 2015 to industries
and factories in its areas of operation in Ogun, Abia, and Rivers States
of Nigeria. The lower supply volume in 2016 was due to damage
to equipment from attacks on oil and gas facilities in the Niger Delta.
SNG also supplies natural gas to private companies that specialise in the
delivery of compressed natural gas to industries located far from existing
pipelines. SNG carries out its operations with an all-Nigerian staff and
engages the services of a range of Nigerian companies as contractors.
Saghara AGS projects have been mechanically completed. The
expected on stream date for the Forcados Yokri project is in 2017.
There is reasonable expectation that the above-mentioned projects will be
brought online subject to adequate funding and improved security in the
Niger Delta.
HARNESSING ‘ASSOCIATED’ NATURAL GAS
GROWTH AMBITIONS AND GAS SUPPLY
CHALLENGES
SPDC continues to make progress in close collaboration with its joint
venture partners and the Federal Government of Nigeria towards the
objective of ending the continuous flaring of associated gas.
Since 2000, all new SPDC JV facilities have been designed to eliminate
continuous flaring of associated gas. In parallel, a multi-year programme
has been successfully implemented to install equipment for capturing
associated gas from older facilities. As a result, flaring volume from
SPDC JV facilities was reduced by 93% between 2002 and 2016 and
flaring intensity (flare divided by total hydrocarbon produced) by around
81% over the same period. A reduction of gas flared from SPDC JV’s
operations continued in 2016 with a 53% decrease compared to 2015
and a flaring intensity reduction of about 35% from the previous year.
The decline of flared gas in 2016 is also attributed to the interruption of
operations and associated production shut-in at certain SPDC JV facilities
(e.g. Forcados export terminal and Trans Niger Pipeline) due to acts of
vandalism and sabotage.
SHELL COMPANIES IN NIGERIA VIEW NATURAL GAS AS
A RESOURCE WITH GROWTH POTENTIAL, GIVEN THE
RIGHT INVESTMENT CONDITIONS
Unlocking Nigeria’s potential in natural gas will require partnerships
between the Nigerian government and oil companies, with the ability to
innovate, capacity to deliver major projects and willingness to take on
long term commitments.
The aspiration of the SPDC JV is to transform into a gas-oriented business
designed to secure value across the entire gas value chain that creates a
sustained positive socio-economic impact for Nigeria. It aims to grow its
gas production capacity to meet domestic gas supply obligations as well
as commitments to supply gas to the NLNG plant for export.
The SPDC JV therefore views natural gas as an opportunity with growth
potential, given the right investment conditions. However, there are several
challenges that need to be overcome in order to successfully develop
growth projects for the domestic gas market.
n Resolving
The SPDC JV is committed to reducing the volume and intensity of flaring
even further through a number of associated gas gathering projects
and progress continues to be made on these projects. A summary of
2016 performance shows that Bonny Associated Gas Solutions (AGS)
commissioned as per plan, Escravos Beach, Adibawa and Otumara/
18
our biggest challenge – sufficient funding from our JV
partners – would increase gas production by optimising existing
operations as well as accelerate the completion of new gas
development projects. Operationalizing the new funding regime for
joint venture oil and gas operations in Nigeria, which is expected to
resolve Nigeria National Petroleum Corporation’s funding constraints
SHELL IN NIGERIA UNLOCKING NIGERIA’S POTENTIAL IN NATURAL GAS
in the SPDC JV, will aid in the delivery of key projects aimed at
boosting gas production.
n A second challenge is to clear the backlog of unpaid deliveries
of both power and gas to customers. Without the repayment of
outstanding gas and power invoice arrears, and securitisation
of current and future revenues, operators are reluctant to commit
additional investments to grow domestic gas supply.
n Another challenge deals with the need to attract investment to further
develop infrastructure along the gas value chain, for example, to
create a more robust pipeline network to improve reliability of and
security of supply. The reliability of the existing power transmission
also needs improvement. For example, SPDC JV’s Afam VI power
plant, which has the capacity to generate up to 650 MW, only
generates between 350 –450 MW most of the time because the
power transmission system is unable to evacuate the full output.
n Finally, ensuring a conducive business environment is essential to
attract investments and have reliable operations. This includes a
predictable regulatory, commercial and legal framework across
the country and overcoming security challenges, particularly in the
Niger Delta that has experienced an increased risk to personnel and
property as well as the disruption to operations.
The SPDC JV continues to boost the production of natural gas for domestic
power generation and export while SNEPCo’s growth ambitions in
deep water also includes expansion of natural gas production. NLNG
will remain a strategic asset in a growing and increasingly competitive
global LNG marketplace, in which the Shell Group has a world-class
portfolio.
19