Saudi Aramco Ramps up IPO Preparations Despite Weakened Demand Outlook
As at the end of 2018, Nigeria’s total proven gas reserves were 202Trillion Cubic Feet (TCF), 37.26% of the total African deposits. With these reserves, Nigeria is second to none in Africa, and 9th in the world. The potential is even more, with 600TCF in unproven reserves. In the one year period between June 2018 and June 2019, gas production printed at 3.04TCF. This amounts to a Reserve: Production ratio of 66.5 – implying consistent production for at least 66.5 more years.
However, with growing LPG adoption and with the NLNG set to finally increase production by an additional 8MTPA (from 21.6MTPA currently), there is a need to intensify the find for new gas reserves. In August, there was some breakthrough for efforts, as the NNPC/NAOC/Oando JV announced a significant gas and condensate find in the deeper sequences of the Obiafu-Obrikom fields, in OML61, onshore Niger Delta. This discovery amounts to 1TCF of gas and 60 million barrels of associated condensate, and brings Nigeria’s total proven gas reserves to c. 203TCF. More relevant than the accumulation of gas reserves is their commercialization.
There is a necessity to invest in the requisite infrastructure to capture and process the gas into Liquefied Natural Gas (LNG), Liquefied Petroleum Gas (LPG) or Compressed Natural Gas (CNG) for domestic consumption and the export market or for use as feedstock for powering gas plants. As at 2018, Nigeria had 7.3% of the global LNG export market, with annual export of 21.3MTPA. By October 2019, NLNG is expected to take Final Investment Decision (FID) on the Train-7 project which has been in the pipeline for years. The project is worth an additional 8MTPA and will rank Nigeria 3rd largest LNG export country in the world on completion. Other local players and IOCs are also ramping up their efforts at gas commercialization. Shell and the SEPLAT/NPDC joint venture are pushing through with the Assa North/Ohaji South (ANOH) Gas Processing Company’s project. The project recently reached FID and requires c. USD700mn in financing. Transcorp Power Plc is also making significant forays into the gas business with its acquisition of 2 oil prospecting licences. The conglomerate has laid out extensive plans to capture the gas from its oilfields as feedstock for its recently acquired Afam Power plants. Quite importantly, critical transportation infrastructure for export such as the 614km Ajaokuta-Kano-Kaduna Pipeline would be required to complete the value chain and achieve the earning potential of these reserves. As it were, competition in the global LNG export intensifying rapidly, with the US and Australia leading the charge.