Nigeria’s gas utilisation and economic development

Apr 18, 2005 02:00 AM

by Funsho Kupolokun

Presidential directives to the Nigerian National Petroleum Corporation (NNPC) is to domesticate significant portion of economic derivatives from the oil and gas industry, so as to increase the contribution of the industry to the nation's GDP. In particular, the industry should use the abundant natural gas resources in the country to generate power.
This would complement the generation from the existing hydro and thermal power stations towards shoring up the nation's generation capacity to a target level of 10,000 MW by 2007. Of this amount, the oil industry was expected to contribute 3,500 MW through establishment of independent power plants.

When the present government took over in 1999, about 68 % of produced associated gas was being flared. Apart from ranking as number one in the world, the environmental impact of the practice was of concern to government.
Besides, the flared gas, with a conservative value of more than $ 2.5 bn annually, was capable of generating up to 6 GW of electric power annually, enough to meet the power requirements of the whole sub Saharan Africa. Consequently, Government directed the industry to work towards ending gas flaring by 2008.

In response to the above directives, the industry articulated a number of programs that would commercialise the gas while addressing environmental issues. The programs include independent power plants, LNG projects, the West African Gas Pipeline project, the Trans Saharan Gas Pipeline project as well as a Gas to Liquid plant.
Many of these projects are now being executed at various locations in the oil industry.

In the area of power generation, commitments have been made by respective joint venture companies for the following plants:
-- 480-MW Kwale/Okpai IPP -- NNPC/Agip JV.
-- 930-MW Afam IPP -- NNPC/ShelI JV.
-- 450-MW Obite IPP -- NNPC/TotaI JV.
-- 780-MW ljede IPP -- NNPC/ChevronTexaco JV.
-- 350-MW Bonny River Power LNG -- NNPC/ExxonMobil JV.

While appreciating these commitments, we must reiterate to our partners that all participants in the nation's resource exploitation must show corporate responsibility by investing in IPPs or similar projects, which have a multiplier effect on the economy. As part of this new initiative, for instance, for new LNG plants, it is now mandatory that their power plants have excess capacity to be able to inject significant amount into the national grid.
The 480-MW NNPC/Agip plant is complete with 2 gas turbine generating trains, 54 km of 330-ky transmission lines to the National Grid at Onitsha/Obosi, 12 km of 18 inch gas pipeline, and 12 km of condensate recovery line. The plant will consume about 70 mm cfpd of gas, which would otherwise have been flared.

We are pleased with the timely response of Agip to directive on the subject of IPPs. For us in the NNPC, this is particularly important as it demonstrates good faith in our joint-venture relationship, as well as a commitment to corporate social responsibility of oil and gas industry players.
We note with delight the involvement of local engineering companies in the execution of some aspects of this work. This has not only contributed to a significant Nigerian content in the industry, but also built in-country capacity, which would be invaluably utilized in similar ventures in the future.

It is particularly noteworthy that during the engineering phase, NETCO, a subsidiary of NNPC participated actively in the project by performing about 2,000 man-hours of engineering study. Another Nigerian Company, Alcon (Nig) laid all the pipelines, while a substantial number of indigenous contractors worked as sub contractors to Alstom, Saipem and ABB Solutions. Overall, a local content of about 25 % was achieved. The expectation of government from the oil and gas industry is not limited to the establishment of IPPs.
The basic, tenets of the nation's economic philosophy, as captured in the Nigerian Economic Empowerment and Development Strategy (NEEDS) document, positions the oil industry as the vehicle for diversifying and transforming the economic. Ironically the industry, with its vast potentials, has remained largely an enclave economy, with limited impact on the lives and living of ordinary Nigerians.

For us to play the role envisaged by government therefore, the industry must take deliberate action to impact linkage industries and encourage in-country value creation and addition, both of which constitute the basis of the current local content drive.
In this regard, government has set a target local content attainment of 45 % by 2006 and 70 % by 2010. On our part as industry practitioners, we must encourage the utilization of local raw materials and establishment of supply and service facilities in-country. Towards this end, plans are at an advanced stage for the establishment of an electronic market place by 3rd Quarter 2005 to facilitate bidding for projects and services white adherence to local content policy will be monitored by NAPIMS using a computer-based Joint Qualification System (JQS).

It is expected that our partners will play a positive role in the local content drive by encouraging, and where necessary, nurturing fledgling supply and service companies. In very simple terms -- the oil and gas industry in Nigeria needs to be fully linked to the larger society. In furtherance of this, only recently the following guidelines were issued for implementation on all Joint-Venture, PSC and gas projects:
-- Henceforth, all fixed platforms (offshore and onshore), piles, anchors, buoys, jackets, bridges, flare booms and similar structures and storage tanks are to be fabricated in-country, to maximize utilization of local fabrication yards.
-- FEED and Detailed Engineering for all projects, as well as seismic data processing projects and all reservoir management studies, are to be domesticated effective end-2005.
-- All FPSO topsides integration to be done within the country starting from mid-2006.

Source: This Day
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