By Dr. David Ige. Gas Aggregation Company Nigeria Limited (GACN) Strategic Aggregator. Roles and Functions In the Nigerian Domestic Gas Market

Transcription

1 By Dr. David Ige Gas Aggregation Company Nigeria Limited (GACN) Strategic Aggregator Roles and Functions In the Nigerian Domestic Gas Market

2 OVERVIEW OF THE GAS SECTOR The Gas Resource Base Source: Oil & Gas Journal, (December 18, 20 The gas sector holds significant economic potential for the nation huge high quality gas reserves.

3 3 Demand Growth Unprecedented growth opportunity available to the domestic, regional and export LNG markets. If adequately harnessed, gas offers potential for a huge economic transformation for Nigeria

4 THE GAS MASTER-PLAN 4 Challenges Facing Nigerian Gas Sector 1. Gas Availability - Unprecedented pace of growth in demand domestic, regional and export. 2. Gas Affordability - Unprecedented rise in global gas price vis-à-vis the varying capacity of gas buyers to pay. 3. Gas Deliverability - Inadequate gas transportation and processing infrastructure 4. Commerciality of Supply - History of commercial poor performance of the domestic gas sector low price, unpaid bills, weak and unenforceable GSPAs 4 Factors have combined to create a near impossible gas supply situation in Nigeria. This is most evident in the number of power plants idle for lack of gas. GMP was initiated to address these

5 The Nigerian Gas Sector - Existing Gas Infrastructure 5 5

6 THE GAS MASTER-PLAN 4 Step Plan

7 THE GAS MASTER-PLAN 4 Step Plan Despite an aggressive timeline for the implementation of the master-plan, significant progress is being made in the critical building blocks

8 8 THE GAS MASTERPLAN Key Focus Areas Focus Areas of the Gas Master-Plan Short/Medium Term Gas Availability (Domestic Obligations) Sustainable Commercial Framework for Domestic Market Scalable & Cost Effective Gas Infrastructure Demand Stimulation Gas for Power and non-power industries Collaborative effort with E&P, G&P, IOCs etc. Develop and entrench a commercial framework that will enable investment in supply Infrastructure Blueprint adopted CPF investor bid under evaluation Pipeline contract s to be awarded Identify and contract anchor gas based industries to utilize DSO supplies

9 9 THE GAS MASTER-PLAN Sources of Gas in Domestic Market 3 Sources of Gas in Nigeria Domestic Supply Obligations (DSO) Excess IOC Gas Unutilized Gas Flares FGN Imposed obligation, backed by Regulation Most significant planned source of gas for evolving domestic market Plan is to use the DSO specifically to drive development of market and structures Managed centrally by the Strategic Aggregator Gas in excess of the DSO available to monetize Managed bilaterally on a willing buyer, willing seller basis i.e. negotiated terms Likely to be a limited volume in the short term, particularly from IOCs. Most typical of small operators who have very small DSO Gas being flared and for which no utilization plan is in place Usually small volumes utilizable on a discrete project basis Ideally on bilateral term, but may involve MPR intervention for access

10 THE GAS MASTER-PLAN Domestic Gas Pricing Roadmap to Export Parity $2 by 2014 Index to Product Price $3 by

11 THE GAS MASTER-PLAN Revised Gas to Power Pricing Framework

12 THE GAS MASTER-PLAN Revised Gas to Commercial Sector Price/mscf Price/mscf

13 THE GAS MASTER-PLAN Gas Infrastructure Blueprint

14 CASE FOR STRATEGIC AGGREGATOR Evolving Gas Sector Demand growth, particularly in the domestic market is characterized by a more numerous and diverse group of buyers, necessitating supply from a much wider group of suppliers than is currently the case. The evolving sector is inevitably more complex than the existing one

15 CASE FOR STRATEGIC AGGREGATOR How the Egyptians Handled Complexity Egypt has experienced phenomenal growth of its gas sector Introduced a sector based gas pricing structure Suppliers get a single pre-determined aggregate price EGAS is single buyer of gas from suppliers The introduction of the intermediary EGAS institution enabled the Egyptian government to balance the affordability challenge of customers with commerciality of supply concern of suppliers. We have adapted this model for Nigeria

16 CASE FOR STRATEGIC AGGREGATOR How the Egyptians Handled Complexity EGAS is single domestic buyer in Egypt GASCO does all transmission Gas pricing arrangement; All suppliers get paid $2.5/mscf Industrial and Power stations Residential / Commercial customers via LDC pay $1.5/Mscf EGAS pays commission to EGAS pays service fee to $0.03/Mscf Govt of Egypt subsidizes residential customers $3.2/Mscf

17 GAS AGGREGATION COMPANY NIGERIA LIMITED The Strategic Aggregator GACN The concept of a Strategic Aggregator was introduced and approved by the Federal Government as part of the Gas Pricing Policy in February, 2008.

18 GACN (THE STRATEGIC AGGREGATOR) 4 Roles of the Aggregator Strategic Aggregator Gas Demand Management Aggregate Price/ Securitization / Escrow Management Network/System Administration Trading Platform There are 4 distinct roles for the SA 1. Demand Management 2. Aggregate Price / Securitization / Escrow Management 3. Network / System Administration 4. Trading Platform Each of the roles has a different life span in essence the SA s focus will shift over time Span of Roles 1. Demand management will continue until the end of FGN intervention through the DSO 2. Aggregate Price / Securitization / Escrow Management will continue until the expiry of the foundation GSPAs 3. Network/system administration will be a core and life-long activity 4. Trading platform will commence in the future when the market is fully mature commercially

19 4 ROLES OF GACN

20 4 ROLES OF GACN (contd.)

21 KEY INTERFACES 3 Key Interfaces to be Managed by GACN Regulatory Operational Governance The SA is not a Regulator, but a regulated entity Will interface with the Regulator 1. Due diligence, demand rationing criteria etc. 2. Domestic Supply Obligations management Will interface with PIC on 1. Metering related issues 2. Reconciliations of readings, energy content issues etc Interface with potential buyers, suppliers and transporter on GSPA and GTA Interface with buyers and suppliers on volume and $ reconciliation issues Interface with buyer, supplier and transporter on daily gas nomination and swing deployment issues Interface with the CPF for periodic reconciliation of volume supplied for billing purposes Interface with Regulator on broad regulatory controls Governance interface with shareholders through a duly constituted board

22 KEY INTERFACES Strategic Aggregator is a Regulated Entity PIC PPRA Measurement issues Energy value reconciliation Gas quality and specifications Other technical issues Strategic Aggregator Pricing Supply demand allocation approaches Disputes Profit of SA Any other commercial issues

23 THE AGGREGATOR Options for Ownership of SA

24 24 THANKS GAS AGGREGATION COMPANY NIGERIA LIMITED 1B, Malcolm Fraser Street, Asokoro District, Abuja, Nigeria Telephone: