NIGERIAN GAS MASTER PLAN AND SUSTAINABLE ECONOMIC GROWTH'

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NIGERIAN GAS MASTER PLAN AND SUSTAINABLE ECONOMIC
GROWTH.

• EGBUCHUA ASHIMEDUA SQUARE

Chevron Nigeria Limited, 2 Chevron Drive, Lekki,
Lagos, 0805 588 0525, 01 366 1783, 1 713 502
4478
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Objectives

• Has the Nigerian Economy been growing or
  declining
• What is responsible for this growth or decline
• Is the growth or decline sustainable
• What is the NGMP
• What role would the NGMP play to support economic
  growth

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Objectives Contd

• What are the challenges to the implementation of
  the NGMP
• How do we overcome these challenges

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Outline

• The seven point agenda
• Sustainable economic growth
• How Nigeria can achieve sustained economic growth
• NGMP
• Critical Elements of the NGMP

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Outline Contd

• Challenges of the NGMP and recommendations
• What can NSE do?

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The seven point agenda

• Critical Infrastructure
• Developing and improving the nations critical
  infrastructure is key to the governments 7-
  Point Agenda.  The critical infrastructure
  includes power, transportation, national gas
  distribution and telecommunications.  The
  development of these sectors is essential in
  ensuring Nigerias ability to develop as a modern
  economy and industrialized nation by 2020. 

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The seven point agenda Contd

• The Niger Delta
• Food Security 
• Human Capital
• Land Tenure Changes and Home Ownership
• National Security
• 7. Wealth Creation

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(No Transcript)
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Sustainable economic growth

• Economic growth can be defined as the rate of
  growth of gross domestic product (GDP)
• Sustainable economic growth means a sustained
  growth rate in the GDP

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Impact of sustainable economic growth
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Economic growth 2002 - 2006
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Economic growth 2002 - 2006

• Source of growth

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Economic growth 2002 - 2006

• Source of growth

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Economic growth 2002 - 2006

• Source of growth

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How Nigeria can achieve sustained economic growth

• With Oil and Gas?
• This sector contributes only about 25 of the GDP
  
• Contributes over 80 of government revenue
• Growth through this sector would depend on
• Favorable oil prices and
• Continuous growth in oil and gas reserves
• Massive investment in the oil and gas sector

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How Nigeria can achieve sustained economic growth

• With Oil and Gas?

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How Nigeria can achieve sustained economic growth

• With Oil and Gas?
• Most of these factors are not within our control
• Sustainable economic growth depending on this
  sector cannot be achieved.
• Our economy and economic plan will fluctuate with
  the price and volume of oil and gas produced.

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How Nigeria can achieve sustained economic growth

• With Non-Oil sector?
• This sector contributes only about 75 of the GDP
• Contributes less than 20 of government revenue
• Growth through this sector would depend on
• Achieved food sufficiency. This would mean
  growing the agricultural sector by more than
  N500 billion to plug the amount currently spent
  on food importation.
• Export processed and unprocessed agricultural
  products

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How Nigeria can achieve sustained economic growth

• With Non-Oil sector?
• Grow manufacturing to meet domestic demand. This
  would plug over N2 trillion in annual imports
• Export manufactured products.
• Sustain the growth rate in the telecoms industry
• Sustain the expansion of Nigerian banks and other
  services

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How Nigeria can achieve sustained economic growth

• With Non-Oil sector?
• Most of these factors are within our control
• The non oil and gas sector therefore is the only
  way by which we can achieve sustainable economic
  growth

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How Nigeria can achieve sustained economic growth

• Growth through the non oil sector depends on
• Availability of adequate and stable electricity
• Supply of natural gas to energy dependent
  industries
• Adequate transportation infrastructure
• Telecommunication infrastructure

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How Nigeria can achieve sustained economic growth

• Availability of stable electricity and the supply
  of natural gas depends on the oil and gas
  industry
• This implies that sustained economic growth in
  the country would not be achieved exclusively be
  focusing on one sector of the economy.
• We can therefore surmise that accelerated
  economic growth can be achieved by developing the
  non-oil and gas sector through effective
  utilization of the oil and gas resources of the
  country.

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The Nigerian Gas Master Plan (NGMP)
Develop an integral industry development plan

• Ensure supply continuity to meet current and
  future contracts

Make gas available in all parts of the country

• Promote gas use investment to replace imported
  products (or replace them for export)

Make gas available at commercial and affordable
prices to local markets, yet reflecting
eventually the full market value
NGMP
Allow for widespread distribution of gas to more
remote areas, regional and international markets
Allow refurbishment and more rapid development of
the crippled power sector
Eliminate gas flaring
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The Nigerian Gas Master Plan (NGMP)

• Before NGMP
• Gas development was uncoordinated
• Some IOCs and independent producers had no plan
  for gas than to flare it
• A couple of others had solid plans for example
  Chevron
• The Chevron achievements
• Escravos Gas Plant
• Major supplier of dry gas to NGC
• First gas to Liquids plant in Nigeria
• West African Gas Pipeline Project
• Agura IPP
• OKLNG Project
• Escravos Lagos Offshore Pipeline System Plan

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NGMP

• Critical Elements
• Gas Pricing Policy
• The strategic domestic sector this being the
  sector with the greatest multiplier effect on
  economy namely Power (to residential and light
  commercial users)
• The strategic industrial sectors this being
  the sector that takes gas as feedstock in the
  creation of new products e.g. fertilizer,
  methanol, GTL, and
• The commercial sector this being the sector
  that uses gas as industrial fuel e.g.
  manufacturing industries

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NGMP

• Critical Elements
• Domestic Gas Supply Obligation Regulation
• Mandates all oil and gas operators in the country
  to set aside a pre-determined amount of gas
  reserves and production for the domestic market
• The Honorable Minister of Energy (Gas) will
  stipulate the requisite amount of gas
  periodically for a period lasting about 5-7yrs
• The gas obligation will take into consideration
  governments aspirations for the domestic economy
  ensuring that adequate gas resources are
  dedicated for rapid industrialization
• All operators will be required to comply with
  their obligations or face penalty which includes
  2.5/mcf of gas under supplied, restricted export
  or both as the Honorable Minister of Energy may
  decide, and
• The regulation also stipulates the establishment
  of a Department of Gas within the Ministry of
  Energy (Gas) that will oversee the execution of
  this regulation in concert with the DPR

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NGMP

• Critical Elements
• The Nigerian Gas Infrastructure Blueprint
• 3 domestic central processing facilities at the
  Warri/Forcados area, Akwa Ibom/Calabar area and
  Obiafu area (north of Port Harcourt).
• The Central Processing Facilities will be the
  major gas hubs where wet gas from gas fields will
  come, get treated and processed.
• only licensed investors within a franchise area
  will be allowed to develop and operate the
  facility

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NGMP
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NGMP

• Critical Elements
• The Nigerian Gas Infrastructure Blueprint
• 3 major domestic gas transmission systems in
  Nigeria
• The Western System comprising the existing
  Escravos Lagos Pipeline System (ELPS) and a new
  offshore extension to Lagos.
• The first South-North gas transmission line. This
  will take dry gas from the Akwa Ibom/Calabar
  facility to Ajaokuta, Abuja, Kano, Katsina. The
  line will serve the Eastern states of Anambra,
  Abia, Ebonyi, Ebonyi, Enugu and Imo,and
• An inter-connector that links the Eastern gas
  reserves centre with the 2 transmission systems
  above

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NGMP
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NGMP
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Challenges of the NGMP and Recommendations

• Funding
• 20billion for short to medium term goal. My
  Estimate given today's market is 40billion.
• Funding expected mainly from investors
• In the global competitive index Nigeria is ranked
  94 and our political risk index is ranked as BB-
  by both Standards and Poor and Fitch compared to
  BBB for South Africa and A- (Standards and
  Poors) and A (Fitch) for China.

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Challenges of the NGMP and Recommendations
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Challenges of the NGMP and Recommendations

• If we fail to attract the investments needed to
  implement the NGMP what alternative path would we
  take?
• Have we evaluated the risk associate with
  inadequate investment from investors and drawn up
  mitigation plans?
• The bottom-line is that the government may have
  to step in to directly fund portion of the NGMP
  if we intend to meet our schedule.
• We may also need to be prioritize the scope of
  the NGMP and devote resource to them.
• We need to look at our national income to
  determine if the economy can handle the impact of
  such expenditure over the next five years.

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Challenges of the NGMP and Recommendations

• Given the prevailing social, political, economic,
  regulatory and technological climate there exist
  so many factors that needs to be put in place for
  Nigeria to attract the level of investment
  required for executing the NGMP. As a case study,
  let us consider the licensed private refineries.

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Challenges of the NGMP and Recommendations

• Private refinery Model
• The governments recent statement that it intends
  to build refineries is a clear indication of
  dissatisfaction at the pace of constructing these
  private refineries.
• The sponsors of these projects have not been
  able to commit investments on those projects on a
  timely manner despite the massive government
  support and comparative advantages of those
  projects.
• While the idea situation would be for a
  completely private sector driven implementation
  of the NGMP, todays reality dictates that what
  is required is public private partnership to meet
  our schedule. The structure of this partnership
  needs to be established and all the stakeholders
  engaged to ensure success.

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Challenges of the NGMP and Recommendations

• The NGMP does consider the fiscal policies and
  regulatory frameworks needed to implement it.
• However, other countries seeking FDI have similar
  frameworks. We need to guide against situations
  where we give incentives that down the road would
  look like selling our birthright and then we try
  to change them mid stream. This would scare
  investors. A clear example is the concern that
  NNPC renegotiation of the PSC agreements with
  oil majors has generated

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Challenges of the NGMP and Recommendations

• 2. Social Political Stability
• The Niger Delta Issue
• 3. Human Resource and Training
• Do we have the right caliber of human resources
  to manage projects of this size?
• Do we have a plan to train personnel that would
  manage and maintain these facilities when there
  are completed?
• Are our universities and polytechnics equipping
  graduates with the right training to fit into
  this industry?
• The government should develop a plan to address
  the human resource and training needs of the NGMP
  and implement it as part of the NGMP..

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What can the NSE do?

• The NSE must personalize its support for the
  NGMP.
• The benefits of the success of the NGMP would
  strengthen the engineering profession in Nigeria
  and make us take our pride of place.
• Here are some roles the NSE needs to play to
  ensure the actualization of the NGMP
• Advocacy NSE should set up a NGMP implementation
  committee. This committee should follow the
  activities of the various body set up to
  implement the NGMP and monitor progress. This
  committee should be actively involved in advising
  the government and serving as a watchdog over the
  governments implementation of the NGMP.
• Human Resources and training We need to work
  with COREN to ensure that the universities and
  polytechnics have the right programs to produce
  personnel suitable for this industry. NSE needs
  to ensure that the government white paper on
  Strategic Plans for Engineering Development in
  Nigeria is implemented.

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What can the NSE do?

• Involvement of Nigerian Engineers We would
  definitely require the use of expatriate resource
  in the course of the implementation of the NGMP.
• How many? What role will they play?
• How would we ensure that they is transfer of
  knowledge?
• How do we regulate the quality of expats that
  come into the country?
• We need to work with COREN and other government
  agencies to ensure that Nigerians engineers are
  not sideline in the implementation of the NGMP.
  This is a golden opportunity to build capacity in
  the gas industry.

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What can the NSE do?

• Entrepreneurship The implementation of the NGMP
  opens a new vista of enterprise for Nigerians. We
  need to educate our members on the business
  opportunities that exist during and after
  execution stages.
• Discipline We cannot completely dissociate our
  members from the corruption that has ruined many
  laudable projects. The NSE must work closely with
  COREN to ensure that our members involved in
  these projects follow the ethics of our
  profession and are sanction appropriately when
  necessary.

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Conclusion

• Sustained economic growth can be achieved by
  developing the non oil sector of the Nigerian
  economy. To do this we must provide the necessary
  infrastructure. The NGMP is a fundamental
  infrastructural development plan that must be
  implemented if we must achieve the objectives of
  vision 2020.

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Conclusion

• Attracting enough investment funds and the Niger
  Delta crisis will pose the biggest challenge to
  the implementation of the NGMP. But these
  challenges can be addressed by proactively
  ensuring that we have adequate mitigation plans
  and tailor our plans within the social and
  economic capacity of the country.

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Conclusion

• Nigerian Engineers have a big role to play in
  ensuring the success of the NGMP. The NSE should
  set up a committee that will focus its advocacy
  efforts on the successful implementation of the
  NGMP.

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• Thank You !