An energy expert, and Programme Officer, Nigerian Gas Flare Commercialization Programme (NGFCP), Justice Derefaka at the weekend gave a statistics of Nigerians enjoying electricity as 12.5 million out of the estimated 180 million population.
Derekafa made this revelation at a two day workshop on gas flaring in Nigeria. which took place at the Parkview Astoria Hotels, Lagos. The workshop was organized by a law firm, George Etomi and partners in conjunction with Syncrest Energy Ltd, and the Federal Ministry of Petroleum Resources. The theme of the workshop is “Taking advantage of the flare gas.(Prevention of Waste and Pollution).
The communique issued after the workshop stated thus:
COMMUNIQUE ON THE NIGERIAN GAS FLARE COMMERCIALIZATION WORKSHOP SUPPORTED BY THE FEDERAL MINISTRY OF PETROLEUM RESOURCES
A 2-day workshop on the theme: “Taking Advantage of The Flare Gas (Prevention of Waste and Pollution) Regulation 2018” held on the 28th and 29th March 2019 at Park View Astoria Hotel, Ikoyi Lagos. The workshop, organised by George Etomi & Partners in partnership with Syncrest Energy Limited and the Federal Ministry of Petroleum Resources was facilitated by energy experts from the Nigerian Gas Flare Commercialization Programme (NGFCP), Wycliffe Advisory & Consulting Services, George Etomi & Partners, Tranergy & Co, Primera Africa Legal and Pioneer Energy.
Lawyers, In-House Counsel, Industry players, investors, representatives of the Ministry and Regulatory bodies in the oil and gas sector were in attendance.
The workshop unravelled insights into the nitty-gritty of the flare gas regulatory environment and delved into the Gas Industry in terms of gas monetization strategies, gas dynamics in Sub-Sahara Africa and other regional markets, the Nigerian Gas Flare Commercialization Programme, the Transnational and Commercial Structures, Project Bankability, etc.
At the workshop, Mr. Justice Derefaka (Programme Manager of the NGFCP) stated the importance of eliminating gas flare and stressed that: “flare gas is a waste of natural resources…only 12.5 million out of 180 million people have access to electricity”.
While giving an overview of the gas industry, Abimbola Olufore (Wycliffe Advisory & Consulting) highlighted that “with respect to commercialization of gas, there is a nexus of gas with virtually all sectors of the economy, from the power sector to the healthcare sector, the agriculture sector and the textile industry”. The seasoned consultant also underscored the importance of factoring non-technical as well as resource bearing host community risk issues into the risk matrix during the gas flare project development process, in order to ensure they are well addressed.
Ann Norman (Pioneer Energy) extensively showcased the benefits of various remotely operated modular flare gas processing solutions and underscored that currently there are technologies that exist and can be applied to difficult terrains in the Niger Delta region in order to deliver solutions.
Abolaji Femi-Ishola (Tranergy & Co) while discussing the gas-energy nexus stated that “the core of gas production goes to power consumption to ensure that power plants are not stranded and have enough gas as feedstock”. The financial expert drawing from his rich investment background within the gas sector underscored that “as gas prices come close to market prices, there will be an increase in gas deals”.
Israel Aye (Primera Africa Legal) enlightened participants about the legal and regulatory expectations within the Regulation and the Guidelines, while Ivie Ehanmo (George Etomi & Partners) discussed the legal, regulatory, transactional and commercial structures and strategies for flare gas commercialization and sale to off-takers.
- The Flare Gas Regulations had been signed into law by President Mohammed Buhari in July 2018. The Regulation seeks to underpin the Nigerian Gas Flare Commercialization Programme (NGFCP) which is designed to eliminate routine and non-routine gas flaring or venting through gas utilization projects which are technically and commercially sustainable. These projects would be developed by competent third-party investors who are being invited to participate in a competitive and transparent bid process, the first stage of which commenced in January 2019.
The NGFCP hopes to attract investment of about $ 3Billion USD, creating over 300, 000 direct and indirect jobs and reducing CO2 emissions by over 20, 000MT yearly.
HIGHLIGHTS OF THE WORKSHOP- DAY 1
Day 1 of the workshop commenced with a presentation by Abimbola Olufore, Principal Consultant with Wycliffe Advisory & Consulting on “Overview of the Gas Industry”. Abimbola made a case for the development of the Gas Industry by emphasizing that gas was in abundance, affordable and acceptable as such there is need for each component of the gas value chain to be bankable.
The seasoned consultant emphasised the various risk components associated with gas project development in Nigeria, some of which are: transport risk, infrastructure risk, regulatory risk, political risk, contract risk and project management risk.
On the commercialization of gas, the consultant stated that there is need for massive investment in physical and virtual pipelines, storage facilities etc. as there currently exist 40% of stranded gas assets in Nigeria.
Justice Derefaka, the Programme Manager of NGFCP during his presentation, introduced the objectives of the Nigerian Gas Flare Commercialization Programme (NGFCP) as an office in the Ministry of Petroleum Resources set up to provide the implementation strategy for the policy objectives of the Federal Government of Nigeria in eliminating gas flare from Nigeria’s oil and gas fields in the near term 2-3 years.
The NGFCP Programme Manager observed that there are over 16, 000 flare sites in 90 countries globally many of which are in Nigeria. About 145 to 150 BCM gas is flared per year globally, enough to produce 750 billion kwh of power, which is more than the annual power consumption in the entire African continent, the NGFCP programme manager observed. He noted that over US10 Billion Dollars in revenue at $2.00 per MMBtu is lost annually and over 600,000 people die of air pollution as a result of flare gas, which can be akin to wiping an entire community like Polaku in Bayelsa State within a year. He used the occasion to give clarification and articulate the bid process as well as the expectations under the NGFCP for the investor community, representatives and industry stakeholders that were present during the event.
Ann Norman, the General Manager of Pioneer Energy, in her presentation highlighted the various technologies that exist to support the flare gas commercialization programme. In particular, she indicated that the new technologies such as flare gas capture technology and the fractioning unit are remotely controlled modular solutions with little footprint, relevant to the terrain in the Niger Delta region and designed for stranded gas. She stressed the importance of deploying end to end modular technology solutions in delivering comprehensive projects that are commercially viable.
HIGHLIGHTS OF THE WORKSHOP- DAY 2
The various gas projects in Nigeria were discussed by Abimbola Olufore, Principal Consultant with Wycliffe Advisory & Consulting, demonstrating the enormous opportunities within the gas space. In particular, she underscored the novelty of the Greenville project which deploys virtual pipeline trucking technology solutions and recommended the Greenville model for developers amongst other key gas projects.
Israel Aye, Senior Partner with Primera Africa Legal, underscored the importance of approaching the investment opportunities under the NGFCP with different lenses in order to fully appreciate the significance of the programme. The legal expert therefore took participants in a deep dive across the legal and regulatory underpinnings of the flare gas regulation. He noted the importance of all stakeholders to be realigned with the objectives of NGFCP in order for the laudable aspirations of the programme to be achieved.
Ivie Ehanmo, Head Energy and Infrastructure Projects with George Etomi & Partners elucidated on the commercial and contractual structures underpinning the flare gas regulation. The energy and infrastructure expert underscored the imperative for evaluating projects carefully under the NGFCP while deploying adequate commercial and contractual structures envisaged under the legal and regulatory framework. The energy expert further reiterated the need for an end to end understanding of the niceties in the commercial agreements, milestones, financial and performance guarantees, licencing regime, approvals and permits, particularly as it relates to Gas to Power Projects (G2P) in order to deliver robust projects that can attract private and development capital.
Ajibola Femi-Ishola, a financial expert and CEO with Tranergy & Co explained the need for gas projects to be bankable, buttressing the point that the few and sparse projects available in the pipeline today are not a function of lack of capital but because projects are not well structured and bankable to attract the needed capital in Nigeria. He stressed that a project is bankable when the banks become comfortable with it because the risks have been efficiently allocated. He therefore advised developers and sponsors alike to recruit investment bankers and legal counsel from the onset of project development so that it will be easy to manage the various risks associated with capital raising both locally and internationally for project delivery. He surmised that when all forms of risks, in particular macroeconomic risk are well managed, gas projects will most likely succeed in Nigeria.
The event came to a convincing end with the presentation of Abimbola Olufore (Wycliffe Advisory & Consulting). Her closing presentation was based on: “Understanding of Industry Metrics, Mechanics, Risk Analysis and Communities; Risk Assessment of the NGFCP”. The oil and gas expert re-accentuated the need for thorough evaluation of non-technical host community risk associated with gas projects in Nigeria and provided a case study of how the $20Billion USD project in Ogidigben Delta State was stalled and delayed due to failure in thoroughly evaluating host community issues as a potent risk to be factored into the project development life cycle. She underscored the importance of avoiding time stealers during the project development stages or delay in project timelines due to the impact of erosive currency value effect or forex change impact which may ultimately derail the project or make the project unduly expensive and therefore unattractive for financing.
KEY TAKEAWAYS AND RECOMMENDATIONS
The following are the key takeaways and next steps from the 2-day workshop:
• Flare gas is a tremendous waste of natural resources which can be used to develop the Nigerian economy;
• Nimble, scalable and modular technologies for capturing flare gas now exist and are economical and applicable to the difficult terrain where gas flaring sites are located;
• The Flare Gas (Prevention of Waste and Pollution) Regulation 2018 has been issued to underpin the policy of the Federal Government of Nigeria (FGN) in harnessing flare gas in a commercially driven market.
• Bidders under the NGFCP will have the flexibility of choosing which flare site to bid for, how much they wish to buy the flared gas from a floor price of $0.25c/1000scf, the end market or gas product, as well as the technology to be used.
• Bidders and project developers would be required to develop a comprehensive approach in ensuring that their flare gas projects are well structured to attract the much-needed finance.
• Project developers would require the support of legal counsel and finance advisors in drafting the commercial terms and agreements that would take into account the entire value chain of the specific project development.
• There is need for all industry stakeholders, lawyers, legal advisors, participants and investors alike to realign towards supporting the laudable objectives of the NGFCP in order to achieve a win-win outcome.
The 2-day workshop registered a monumental success with industry players, investors, representatives of the Ministry and Regulatory bodies in the oil & gas and power sector who were in attendance. Experiences were shared with deep insights distilled from the rich interactive engagements of all participants. The workshop afforded several interludes for networking and photo shoots leaving behind lasting memories of an impressively organised learning experience.