GAS AS AN ENABLER OF ECONOMIC DEVELOPMENT

MARCH 08, 2012

Dr. David Ige Group Executive Director, Gas & Power NNPC

Draft – for discussion purposes only

Outline

Economic Potential of Natural Gas

Status Update on Gas

Our Challenges

Conclusion

2

Draft – for discussion purposes only

Enormous Gas Resources

3

159

187

193

213

273

283

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Algeria

Nigeria

Venezuela

United Arab Emirates

US

Saudi Arabia

Turkmenistan

Qatar 894

Iran 1,046

Russian Federation 1,581

Proved gas reserves1

2010 Trillion cubic feet

Top 10 gas-rich

countries

Enormous Gas Resources

SOURCE: BP Statistical Review of World Energy June 2011

Nigerian gas resource base is enormous

Draft – for discussion purposes only

Trinidad & Tobago – Economic Facts

4

1997 2002 2006

GDP Growth (%) 2.9 3.2 12.0

Inflation (%) 3.7 4.2 8.3

Unemployment (%) 15.0 10.4 6.2

Energy Contribution to GDP (%)

18.3 26.3 41.0

Gross Domestic Product

(TT$ billion)

37.0 58.2 114.4

GDP per Capita (US$’000) 4,445 7,345 14,000

Country Rating S&P (A-); Moody’s (Baa2)

Many countries with smaller gas reserves have leveraged natural gas for major gains in economic growth

Natural Gas Reserves (TCF)

Nigeria Trinidad & Tobago

187 13

Draft – for discussion purposes only

Major Existing Energy Based Plants - Trinidad & Tobago

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1 Natural Gas Liquids Processing Facility (70,000 bpd)

4 LNG Trains (15.2 mtpa)

10 Ammonia Plants (5.01 mmtpa)

7 Methanol Plants (6.5 mmtpa)

1 Urea Plant (600,000 mtpa)

4 DRI Modules

4 Power Generation Plants (1400 MW)

1 Petroleum Refinery (150,000 bpd)

1 Cement Manufacture Plant

Draft – for discussion purposes only

Economic Growth Driver for Natural Gas

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1. POWER

CRITICAL ECONOMIC LEVERS THROUGH

NATURAL GAS

2. INDUSTRIALIZATION

Strong statistical correlation between power consumption and GDP per capita (R2 above 80%) with every kWh leading to ~$2.5/GDP capita increase on average

Industrialization could enable Nigeria to substitute imports (e.g. plastics, rubber, food), diversify its exports base and create jobs

Draft – for discussion purposes only

`

Economic Potential of Gas - Power Generation

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y = 0.9582x1.1341

R2 = 0.8562

-

15,000

30,000

45,000

60,000

75,000

0 5,000 10,000 15,000 20,000 25,000

All countries

Power consumption KWh per capita 2009

GDP/capita, USD 2009

Power consumption KWh per capita 2009

GDP/capita, USD 2009

Countries with GDP below $15,000

y = 3.3083x0.9294

R2 = 0.8306

-

2,500

5,000

7,500

10,000

12,500

15,000

0 2,000 4,000 6,000 8,000

Draft – for discussion purposes only

Economic Potential of Gas – Job Creation and GDP Impact

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SOURCE: BP Statistical Review of World Energy June 2011

SOURCE: McKinsey

Draft – for discussion purposes only

Gas Master Plan – Our Aspiration

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GAS TO POWER

“… By 2014, we would have positioned Nigeria firmly as the undisputed regional hub for gas-based industries such as fertilizer, petrochemicals and methanol.”

GAS BASED INDUSTRIALISATION HIGH VALUE EXPORT

STRATEGIC THEMES OF GAS MASTER PLAN

Consolidate Nigeria’s position and market share in high value export markets

• Regional gas pipelines – consolidate national footprint and influence

Deliver on President’s Gas Revolution Agenda to:

• Create regional hub for gas-based industries – fertilizer, petrochemical and methanol

• Transform gas sector to value adding sector

• Deliver Gas for at least threefold increase in generation capacity by 2015

LNG Regional Pipelines

The Gas Master-plan is carefully crafted to deliver the nation’s aspiration for gas based economic development

Draft – for discussion purposes only

Gas Master Plan – Gas Demand Growth

This aspiration translates to an aggressive growth in gas supply

10

0

1,000

2,000

3,000

4,000

5,000

6,000

19

75

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76

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198

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85

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199

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00

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01

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201

4

20

15

20

16

mm

scf

Year

Nigeria’s Historical and Projected Gas Demand

Power Local Distribution Companies Gas Based Industries WAGP

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Nigerian Natural Gas Daily Production and Utilisation

Realising the aspiration will require a shift in the current utilization demography, with increased overall production, reduced flaring and refocus on domestic consumption

11

Export LNG (41%)

• 3.2 bcf/d (NLNG)

Domestic Consumption (12%)

• 0.9 bcf/d (power and industries)

Re-injection and Other Operational Usage (32%)

• 2.5 bcf/d

Gas Flaring (15%)

• 1.2 bcf/d Gas Wells

Production

•7.8 bcf/d

Draft – for discussion purposes only

Outline

Economic Potential of Natural Gas

Status Update on Gas

Our Challenges

Conclusion

12

Draft – for discussion purposes only

Realizing the Aspiration

13

Elimination of Wasteful Flares

Viable Commercial Framework Focused Kick-off of Gas

Industrialization

Supply Growth Robust Infrastructure Delivery

2 1

3

4 5

5 Pronged approach to realizing our aspiration

Draft – for discussion purposes only

Gas Master Plan Infrastructure Blueprint

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Steadily implementing the

infrastructure blueprint

In 2010/11 focused on

reinforcing the western grid

2012/13 will focus on

reinforcing the east and

Connectivity between

East/West/North

Draft – for discussion purposes only

Reinforcing Western Area Gas Infrastructure

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ELPS 2 OBIAFU-OBRIKUM-OBEN (OB3)

WESTERN CPF / OBEN –KOKO PIPELINE

GAS SUPPLY TO OLORUNSHOGO

ELPS A

OBEN – GEREGU 36” x 136km; Project completed in 2011 Gas supply to Geregu

power plant and access for gas to the North

24” x 31km Line Pipes procured and all

lengths welded Project to be completed by

end March 2012

24”/36” x 104km; Project progressing

steadily with issues being addressed

36” x 324km; Doubling pipeline capacity to 2

bscfd to support the growing demand in the West

Construction about to commence; expected completion – Nov. 2012

48” x 127km; Contract about to be awarded;

completion in 2013/2014

Tech configuration completed by Kellogs

Ready to commence Pre-FEED

1n 2011, we focused on reinforcing and expanding the Western supply infrastructure

1 2

3

4 5

6

1 2

6

3

4

Draft – for discussion purposes only

Eastern Gas Pipeline Network System

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IMO RIVER TO ALAOJI POWER PLANT - 24” x 24km;

Line Pipes procured and construction ongoing; completion date March 2012

NORTH OPTION PIPELINE (RUMUJI – OBIGBO NODE) - 24” x 52km;

Line will evacuate gas from Total to Obigbo Node

Contract awarded to Saipem; expected completion date is end 2012

OSO - QIT - 20” x 51km ;

Line will bring 400mmscfd from Oso to QIT

Expected completion date is 2014

QIT – OBIGBO NODE - 20” x 50km;

Pipeline to facilitate delivery of 250mmscfd stranded gas from ExxonMobil

Included in 2012 budget proposal

OB/OB – NOPL - 36” x 51km;

Line will bring 400mmscfd from Oso to QIT

Expected completion date is 2014

CALABAR – AJAOKUTA – KANO - 36”/48”/56”x 1340km;

Evacuate gas from Exxon to Eastern and Northern power plants

No funding, but developing basis for private sector funding

QIT

Bonny NLNG

Uquo

Alscon

IbomPower

CalabarNIPP

UnicemCement

Imo River

Obigbo

AlaojiNIPP

Aba Industries

Notore

Indorama

Obiafu/Obrikom

ObiteUbeta

Rumuji

AlakiriGTS 1

CawthorneChannel

Escravos

Oben

GereguNIPP

Ajaokuta

ELPS 1

ELPS 2

Egbin

Olorunshogo

Omotosho

Koko GasIndustrial Park

Ibadan

Jebba

OUR

Oso

Existing Gas Source

Existing Pipeline System

Ongoing/Planned Pipeline system

Legend

Power Plant

Industries

1n 2012, we will reinforce Eastern network and commence opening of Northern axis

1

2

3

4

5

6

4

1 2

3

5

6

Draft – for discussion purposes only

Northern Gas Pipeline Network

17

Draft – for discussion purposes only

Domestic Gas Supply Obligation

The gas supply to underpin agenda is from the Domestic Gas supply Obligation (DSO)

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Draft – for discussion purposes only

Domestic Gas Allocation Profile

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Manufacturing Industries

Increased penetration of

natural gas as fuel to

manufacturing sector

Gas Based Industries

2 World Scale

Urea/Ammonia Plants

1 World Scale

Petrochemical Plant; 1

Methanol Plant

Gas to Power

Unprecedented growth

in Gas to power supply

– Projected Equivalent

Power Generation of

about 12GW by end

2015

Draft – for discussion purposes only

Domestic Gas Supply Allocation

Our supply plan is targeted at meeting a rapidly growing demand particularly in power

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Draft – for discussion purposes only

Gas Flare Reduction – 5 Point Strategy

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1. Halt growth in flares by ensuring all new developments have implementable gas utilization schemes

2. Introduce Regulation to Force Supply Growth and Penalize Flares – resulting in many flare-out projects

3. Stimulated demand as sink for gas flares

4. Focused development of gas infrastructure backbone

5. Initiative to address last mile flares – too small to eliminate via grid solutions

Our flare reduction strategy is without prejudice to any flare-out legislation

Draft – for discussion purposes only

Gas Flare-Down Status

Flared gas remain a concern and critical element of our gas development...

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A closer look at IOC supply plans show 20% will come from flare out initiatives; efforts will be intensified to further reduce wasteful flares

Draft – for discussion purposes only

Commercial Framework

Bankable contractual framework for gas supply and appropriate revenue securitization for gas purchased

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•New and more sustainable domestic gas pricing to

Power and other sectors now in place

•World class contractual frameworks for supply,

transmission and Network access now in place

•World Bank revenue securitization scheme in place

to mitigate risk of payment failures for gas supplied

• Gas Aggregation Company of Nigeria established to

manage DSO and price aggregation

• Good progress being made in Negotiations and

execution of various GSAA ongoing

Draft – for discussion purposes only

Gas Based Industrialization Programme – Koko Industrial Park

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Koko Port

2,300 Hectares of Land

DESCRIPTION • The FTZ is currently a 2300 Hectare mangrove

forest

• Strategically located between Ologbo and Benin river and served by a natural port

• Proposed location for first gas-based industrial park housing fertilizer & petrochemical plants and CPF

STATUS • EIA ongoing

• Port redevelopment study completed

• River-way dredging requirement assessment concluded

Draft – for discussion purposes only

Koko Gas-based Industrial Complex – Status Update

The gas based industrialisation agenda is kicking off with the Koko FTZ project. This is anchored on 5 critical and mutually dependent investments

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CENTRAL PROCESSING FACILITY FTZ INFRASTRUCTURE PORT INFRASTRUCTURE

PETROCHEMICAL PLANT FERTILIZER PLANT

• 1.3MTPA/400KTPA Polyethylene/polypropylene plant

• Product evacuation study and high level plant configuration commenced

• Pre-FEED study commencing

• 3*1.3MTPA Urea Fertilizer plants

• 5 Fertilizer Blending plants

• Lump Sum Turn Key contract tenders ongoing

• Progressing towards financial closure

Draft – for discussion purposes only

Outline

Economic Potential of Natural Gas

Status Update on Gas

Our Challenges

Conclusion

26

Draft – for discussion purposes only

Challenges

27

1. Flare Elimination

Progress with big flares, but Last mile flares require infrastructure bankability

Need sustainable and spot utilization projects

Policy to support the commercial viability of flare out programmes

2. Short/Medium Term Supply Growth

Long gestation period for high impact projects

Funding of critical infrastructure

Underperforming supply assets

3. Commercial Issues

Poor payment

Draft – for discussion purposes only

Northern Gas Pipeline Network

28

Draft – for discussion purposes only

Roadmap to Assuring Bankability of Pipeline Projects

29

Assess Pipeline Tariff Review Tariff Affordability

Review revenue securitisation

Source for Investors

Secure Financial Closure

Assessment of pipeline tariff required to make 3rd party financing viable – this study now completed by NNPC

Engagement of stakeholders (e.g. NERC) on affordability of tariff and implication for medium-term MYTO

Checking of possible tariff revenue securitisation to make 3rd party financing bankable

Road show to attract investors / financiers, selection of willing financiers/investors

Investors secure financial closure

Description

Sept 2011 Dec 2012 Jun 2012 Jan 2012 Dec 2011

Draft – for discussion purposes only

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Short Term

2012

Medium Term

2013 - 2014

Longer Term

2015+

Expedite Ob/Ob – Oben

pipeline delivery to enable

excess gas in east to be

used in West

Accelerating high impact gas

supply projects e.g. Assa North

(1bcf/d); Erha GFD

(400mmcf/d); Utorogu

expansion (300mmscf/d; Odidi

(350mmscf/d)

Stabilize existing supply and achieve gas plant potential

o Ughelli gas plant repairs + Utorogu workover

Unlock stranded volume and bottlenecks

o ELPS A completion – FGN intervention

o Complete Olorunshogo pipeline

Explore short term opportunities for additions

Gas Supply Improvement Strategy

Draft – for discussion purposes only

Impact of Improvement Strategy

31

Draft – for discussion purposes only

Outline

Economic Potential of Natural Gas

Status Update on Gas

Our Challenges

Conclusion

32

Draft – for discussion purposes only

Where We Will Be

33

=

Grown thermal power to 12GW (excluding hydro)

Commenced supply to fertilizer and target self sufficiency locally and about 5% market share globally

Grown supply to industries and about to open up North to gas

Created platform for market-led unhindered growth of power sector

Commenced supply to petro-chemical – Africa's largest

Opened up North and South East to gas

Position to generate 6GW of thermal power (excluding hydro)

Supply 140mmscfd to run 21MTPA cement plant making Nigeria self sufficient in cement production

Increase supply to other manufacturing industries

Met contractual obligations to WAGP

Short Term

(2012)

Medium Term

(2013 – 2015)

Long Term

(2015+)

Draft – for discussion purposes only

Thank You

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