The Trans-Saharan Gas Pipeline Project · Infrastructure Concession Regulatory Commission (ICRC ) The Trans-Saharan Gas Pipeline Project Dr. Ghaji Bello Acting Director …

( I C R C )

Infrastructure Concession Regulatory Commission

The Trans-Saharan Gas Pipeline Project

Dr. Ghaji Bello Acting Director General

INFRASTRUCTURE CONCESSION REGULATORY COMMISSION

Hamburg & Hanover, April 2013

( I C R C )


1. Introduction

2. Overview of the Trans Saharan Gas Pipeline

3. Overview of the Trans Nigerian Gas Pipeline

4. Financing the TNGP

5. PPP framework in Nigeria

6. Conclusion

Content Outline

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1.0 Introduction: Agenda for Natural Gas in

Nigeria

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1.1 Introduction: Gas framework in Nigeria

Nigerian Gas Master Plan (NGMP)

The aim of the reform in the gas sector is to maximize the multiplier effect of

the gas-value chain and linkages, optimize Nigeria’s share and competitiveness

in the export markets and assure national energy security. The reform seeks to:

Deliver a blueprint for gas resource management for economic growth

Target increase in gas penetration into the domestic economy

Deliver a commercial framework that ensures sustainable investment in

domestic market

Target infrastructure development for robust gas market

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1.2 Introduction: Gas framework in Nigeria Cont…

• NGMP Pricing & Domestic Supply Obligation (DSO)

The key elements of pricing under the NGMP are :

Sector based. -Strategic Power Sector, Commercial Sector and Gas Based

Industries (GBI)

Target export parity in domestic gas pricing

Regulated prices during an interim period for supplies under DSO

The FGN has approved a new domestic gas price Framework for the Power

and Commercial sector pursuant to the National Domestic Gas Supply Pricing

Policy and Regulation 2008. The framework for GBI is yet to be announced.

Buyers

Power

$1.5/Mscf for 2013

Commercial $2.5/Mscf for 2013

Gas Based Industries

yet to be announced by FGN

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1.3 Introduction: Enabling Policy Thrust

…

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1.4 Introduction: Projected Gas Demand

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1.5 Introduction: Gas Infrastructure Network

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1.6 Introduction: Gas Infrastructure Development

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2.0 Overview of the TSGP

Nigeria

• Calabar-Kano-Nigerian border with Niger Republic = 1037km

Niger

• Nigerian border with Niger, which extends/continues to the Nigerien border with Algeria = 841km

Algeria

• Gas Infrastructure pipeline route within Algeria = 2303km

Subsea

• The border between Algeria & Spain = 220km

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2.1 Overview of the TSGP cont…

• DIVERSIFICATION OF EXPORT ROUTE FOR MARKETING NIGERIAN NATURAL GAS

• CREATION OF WEALTH BY OPENING UP ECONOMIC GROWTH OPPORTUNITIES IN THE SUB-REGION

• BOOSTING THE GDP AND IMPROVING THE LIVING STANDARDS OF THE PEOPLE WITHIN THE SUB-REGION

• BOOSTING DOMESTIC GAS SUPPLY IN THE COUNTRY

• ASSISTING IN THE FIGHT AGAINST DESERTIFICATION THROUGH SUSTAINABLE AND RELIABLE GAS SUPPLY

Project Objectives

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• MOU TO JOINTLY DEVELOP THE TSGP PROJECT SIGNED DURING THE INAUGURAL SESSION

OF THE BI-NATIONAL COMMISSION BETWEEN NIGERIA AND ALGERIA ON 14 JANUARY 2002

• NNPC AND SONATRACH EXECUTED A PRELIMINARY STUDY AGREEMENT IN MARCH, 2003

• FEASIBILITY STUDIES CONCLUDED AND ACCEPTED BY SPONSORS IN SEPTEMBER 2006,

• NIGER REPUBLIC WAS ADMITTED AS PROJECT CO-SPONSOR IN FEBRUARY, 2008 AT ABUJA

• INTER-GOVERNMENTAL AGREEMENT (IGA) BETWEEN SPONSOR GOVERNMENTS WAS

EXECUTED IN JULY 2009, AT ABUJA

• RATIFICATION OF THE IGA BY SPONSOR GOVERNMENTS HAS BEEN CARRIED OUT BY NIGER

AND ALGERIA

• REVIEW OF UNINCORPORATED JOINT VENTURE AGREEMENT (UJVA) IS ON HOLD PENDING

THE RESOLUTION OF SONATRACH’s (SH) PARTICIPATION IN NIGERIA’s UPSTREAM

ACTIVITIES


Historical Background

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• GAS MARKET OF 20BCM/Y (2BCF/D) EXISTS IN EUROPE FROM 2015

• PIPELINE CAPEX : US$10b (48”) & US$13.7b (56”) LINE DIAMETERS (2006)

• GAS GATHERING CAPEX: US$3b (2006)

• BORDER PRICE: 4.2 – 5.1 US$/MMBTU (MSCF) @ $25 – 40/BBL OIL

• PROJECT FUNDING: EQUITY + DEBT FINANCING

• INTERNAL RATE OF RETURN: 15.5 - 25%

• EQUITY PAYBACK: 4 – 7 YEARS


The study indicated technical and commercial viability. However so much has changed

in the global gas market since then

2006 Feasibility study

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Phase 1:

Conceptual

Phase 2:

Feasibility

Phase 3:

Definitional

Phase 4:

Construction

Phase 5:

Operation

• Determine Gas Market /demand

scenario

• Identify Gas supply sources

• Establish Pipeline Infrastructure

requirement

• Determine EIA/SIA Issues

• Establish Project cost Estimates

• Policy

• Regulatory and Institutional

Framework Analysis,

• Economic and Financial Analysis and

Regional Benefit

• Develop Sponsors’ JV Agreement

• Select Consultant / Financial Adviser

• Incorporate SPV/TSGP Company

• Identify and obtain long-term

commitments for the development and

supply of gas and for gas buyers in Europe

• Establish TSGP companies, carry out

EIA/SIA, route survey and implement them

FEED, EPC contract packages, etc

• Execute Commercial/Term Sheets/

Agreement

• Prepare a Final Development Plan

• Conduct upstream resources due

diligence

• Complete tendering for EPC

• Conclude land acquisition

• Take FID

• Implement EPC to Mechanical Completion

• Develop company Policies & Standards

• Develop company HR Resources

• Institute continuous Corporate Governance

• Transition to business unit

• Develop sustainable CSR

• Project development

philosophy

• Sponsors’ buy-in

• Appoint Consultant

• Deliver Gas

• Meet contractual obligations

• Commit for expansion

• Meet Shareholder expectations

• Meet environmental/social

standards

• Maintain CSR

2004 - 2005

2005- 2006

2013- 2016

2016- 2018

2018+


Current Position

Status update

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15 14

In preparation of the TSGP, the following are

being undertaken

1. Linking up the supply sources and delivery to

Kano - the take-off for the TSGP through the

Trans Nigerian Gas Pipeline (TNGP)

2. Revalidating the market study for the TSGP

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OPPORTUNITY IN THE TRANS- NIGERIAN GAS

PIPELINE (TNGP)

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Gas Infrastructure Blueprint

17 An infrastructure blueprint has been approved and being implemented, comprising 3 central processing facilities and 3 backbone pipeline networks 16

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GAS MARKET OF: 2BCF/D

PIPELINE DIAMETER: 48” x 587KM (AKK); 56” x 55KM, 48” x 340KM (CAP)

LINE PRESSURE: 100BARG

PIPELINE CAPEX: US$ 3.14bBill (US$1.86b -AKK + US$1.28 - CAP)

PROJECT FUNDING: EQUITY + DEBT FINANCING

INTERNAL RATE OF RETURN: Min 15 %

3.0 Overview of the TNGP

2006 Feasibility study

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A re-validation of the market study through Standard Chartered Bank is being

carried our to ensure its bankability

Government is committed to the project from on-going work on the Front End

Engineering

Government is raising $1billion Euro bonds this year to augment its equity in the

project and act as an incentive for private investors.

Government is incentivising supply through the fiscal regime in the Petroleum

Industry Bill (PIB)


Progress report

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The TNGP process…

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•Determine debt + equity structure

•Give an affordable tariff

Develop Bankable project

Involve Nigerian Electricity Regulatory Commission

(NERC) to ensure appropriate

tariff

Regulatory process for tariff

•Viability Gap fund

• Line of credit

Obtain Sovereign guarantee

Nigeria and private investor to fully develop

project

Develop Project

Once process above is completed, an information

memorandum will be issued inviting private sector participation

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4.0 Financing the TNGP

Financing the project will be through equity + debt arrangement involving

Public Private Partnership (PPP)

“PPPs involve the design, build, finance and operation by the

private sector, of assets and services that the government has

traditionally procured and provided to the community and

which have previously been funded by taxpayers. In return,

the private sector generates revenue either from the levying

of tariffs on users or the receipt of periodic service payments

from the government over the life of the PPP agreement”

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5.0 PPP framework in Nigeria

The ICRC Act 2005:

Establishes the Infrastructure

Concession Regulatory Commission

(ICRC).

Empowers MDAs to enter into a

contract with or grant concession to

duly pre-qualified private sector

partner.

Empowers the ICRC to;

Provide general policy guidelines,

rules and regulations.

Take custody of every concession

agreement entered by the Federal

Government and ensure efficient

execution.

The ICRC Structure:

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6.0 Conclusion

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• We have an enabling policy framework in place to support critical

mass gas supply development for the domestic market

• Very good progress being made in development of robust gas grid

that will enable rapid growth of supply from diverse sources thereby

increasing the liquidity of supply

• Conclusion on the funding strategy for implementation of Gas

Infrastructure is being pursued

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THANK YOU

CONTACT DETAILS:

Dr. Ghaji Bello

Acting Director General/CEO


1270 Ayangba Street, Abuja, Nigeria

Phone: +234 (9) 4604900/+234 (9) 8750286

Email: [email protected]

Website: www.icrc.gov.ng

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The Trans-Saharan Gas Pipeline Project · Infrastructure Concession Regulatory Commission (ICRC ) The Trans-Saharan Gas Pipeline Project Dr. Ghaji Bello Acting Director …