NCDMB, Xenergi lay template for flare gas commercialization

• Collaboration promotes local knowledge and capability

Sopuruchi Onwuka

The recent delivery of the twin projects of Kwale Gas Gathering (KGG) and Nedogas Central Processing facilities has clearly proved that home grown technical expertise, sound and viable commercial concepts and inventive funding solutions are not the key impediments to realisation of key government’s economic aspirations in the nation’s gas sector.

After delivery of the projects, the road appears to be open on how government’s policy drivers would facilitate the replication of the same concept across about 150 onshore, swamp and shallow water oilfields from where government intends to harness flare gas for monetization.

The direct interpretation of the efficiencies hosted in the KGG and Nedogas CPF projects is the existence of a clear and proven model for the actualization of the nation’s flare gas commercialization programme.

The projects also demonstrates how the private players can form the fulcrum that levers cross-sectoral collaboration for activation of some the prime national economic aspirations that are currently trapped in latent polices, programmes and plans aimed at elevating the status of natural gas as a leading fuel choice, raw material and key economic growth enabler.

The gas gathering facility located in the quiet village of Umusam in Kwale, Delta State, was conceived and realized to harnesses and commercialize upstream flare gas from proximate oil production sites.

The Kwale Gas Gathering (KGG) facility targets to take out flares from oilfields, clean out the dry gas to meet specifications before feeding into the national transportation trunklines operated by the Nigerian National Petroleum Company (NNPC) Limited.

The KGG and Nedogas CPF are developed by the Nedogas Development Company Limited (NDCL) to commercialize flare gas from a cluster of small producing oilfields operated by different companies in the Oil Mining Lease (OML) 56 area where produced associated gas is stranded due to infrastructural and facility deficits.

The NDCL is a joint venture between local gas technology company, Xenergi of the Oilda Energy Group, and the Nigerian Content Development and Monitoring Board (NCDMB). And the KGG and the CPF enjoy close collaboration with the Gas Infrastructure Company (NGIC) of the Nigerian National Petroleum Company (NNPC) Limited. And this would form one of the strongest private-public collaboration in pushing a government conceived gas agendum forward.

Whereas the Oilda Group comes with business concept and technology, the NCDMB enables the commercial proposition with equity funding contribution and the NNPC provides the infrastructure conduits that channel gas to market.

Thus, with equity investment from the NCDMB and the new build Obiafu-Obrikom-Oben (OB3) pipeline provided by the NGIC, Xenergi is capable of providing significant 300 million standard cubic feet per day (MMscfd) of KGG for ease of market access to community of small players in OML 56 and proximate OML 26.

The oilfields in the area include Ebendo operated by Energia Limited; Umusadege operated by Midwestern Oil and Gas Limited; Umuseti operated Pillar Oil; and Matsogo operated by Chorus Energy. Other possible beneficiaries of the gas commercialization facilities are operators of Obudugwa, Obodoeti, and OML 26 oilfields.

The existence of third party investors in gas commercialization relieves the producers of the burden of ancillary value optimization investments at operated assets. Part of the prime values of the CPF for the producers would be the backflow of stripped condensate which adds volume and quality to their crude oil output.

Another liquid product the CPF derives from the rich upstream gas include the highly prized liquefied petroleum gas (LPG) also called cooking gas which Nedogas forwards to local offtakers to help meet demand and tame prices in the domestic market.

And the KGG receives, processes, primes and meters the dry gas before feeding it into the 48 inch OB3 pipeline to also meet demand from the industrial sector of the domestic economy.

Beyond the commercial players operating at oilfields, the Kwale facilities also lay strong economic value propositions for wider stakeholders.

Minister of State for Petroleum Resources (Gas), Rt. Hon. Ekperikpe Ekpo, stated at the commissioning ceremony in Kwale that the KGG hub holds potential to spur an annual $250 million value in the domestic economy in the first four years.

The envisaged values would derive from trunk line tariffs, liquid products sales, infrastructure tolling and network code charges. He also pointed at the positive ripple impacts expected from the twin facilities on ancillary businesses and distribution channels flowing the products to homes and industries.

According to him, output from the Kwale hub would enhance pipeline and virtual gas supply to power industry where regulatory and operating rights have been devolved from the federal exclusive list to all tiers of government. He also noted that the operations at the facilities would add boost to industrial activities, energy diversification for homes and businesses as well as spur an uptick in the nation’s overall domestic productivity.

For the host communities and Delta State, the KGG facility would in addition to the gas delivery obligations of the facility, also supply the Delta State Economic Zone (DSEZ) from an integrated supply node within the manifold at the hub. The guarantee of steady flow of gas to the zone is envisaged accelerate development and make the zone attractive to investors.

In the job market, the KGG facility flaunts the potential to create hundreds of direct and indirect jobs for indigenes of the host and nearby communities.

For the Executive Secretary of the NCDMB, Engr Felix Omatsola Ogbe, the board’s partnership with private players in the industry is a multi-pronged victory for the country, the industry and the commercial investors.

He pointed at the initial million dollar dividend from the Nedogas’ fractionation plant as a positive indicator of high commercial viability of the projects, adding that the NCDMB still awaited more success stories from other strategic investment partners.

The Nedogas projects are part of “the several strategic and successful investments of the NCDMB, funded from the Nigerian Content Development Fund (NCDF) in line with the Board’s mandate to build capacity and catalyze local projects in the Nigerian oil and gas industry as enshrined under the Nigerian Oil and Gas Industry Content Development (NOGICD) Act 2010,” the agency declared in a statement.

“Some of them are near completion and have not started operations yet,” Engr Ogbe said of about 14 other operators developing similar midstream processing plants in the industry.

The Oracle Today reports that the statutory Nigerian Content Fund (NCF) from which the NCDMB draws the NCIF is built from mandatory contribution of one percent of the value of contracts executed by oil services companies in the industry. And the Oilda Energy Group which houses Xenergi and its daughter companies forms part of the dedicated contributors to the fund.

Chairman of NEDOGAS, Mr. Emeka Ene, had commended the NCDMB on rising to the task of throwing its weight to push struggling but commercially sound projects through difficult stages. He stated that the role of NCDMB in supporting about 15 indigenous companies to drive revival of the Nigerian midstream petroleum industry remains outstanding.

“NCDMB is now doing effectively and practically and tangibly what it was set up to, which is to impact the economy by direct interventions. That is the way the economy can grow, improve the gas infrastructure in such a way that is sustainable despite the tight economic conditions,” he declared.

 Still on value to stakeholders, the Managing Director of Nedogas, Mr Debo Fagbemi, listed nearly 10 domestic offtakers of LPG from the gas processing plant where, he said, wet gas is processed to extract condensate and different specifications of liquefied petroleum gas.

He noted that the offtakers and wider LPG domestic consumers are served the benefits of displacing imported cooking gas with domestic production. The local production of LPG, he noted, helps in moderating the retail prices of the product which fuels homes and businesses in the country.

The liquid gas varieties also feature prominently in the government’s auto-gas programme which seeks to develop robust demand for compressed and liquefied natural gas in the road transportation sector.

On policy targets, the KGG and Nedogas processing facilities deliver significant values across all known government’s objectives in the gas sector. They are now part of the forerunners in realization of the numerous plans conceived under various polices and programmes that target to reduce greenhouse gas emission at the country’s oil production sites, convert flare gas to high revenue yielding commodity, contribute to meeting fuel supply for industrial activities and power generation, optimize commercial values of associated gas, and stimulate enhanced activity in oilfield operations.

More uniquely, the twin facilities fit directly into the targets of the government’s flare gas commercialization programme which is designed to enable third party investors to recover gas from flare booms for additional value generation for all stakeholders.

The Oracle Today reports that the government’s flare gas commercialization programme implemented by the nation’s lease administrator, The Nigerian Upstream Petroleum Regulatory Commission (NUPRC), is yet to translate into active oilfield activities following development of cold investment feet by foreign investors.

Although bid round has happened, the volumes of flared gas continue to rise in the industry despite visible efforts by some indigenous companies like Seplat Energy and Platform Petroleum which are self driving gas commercialization at operated oilfields.

With the KGG and CPF, Nedogas has initiated advances in activating the flare gas commercialization programme by providing the opportunity for addressing routine gas flaring within Kwale axis. This is in line with the Xenergi’s unstained reputation of creatively innovating and inventing cleaner energy sources for Nigeria’s growth and economic development.

Thus, the KGG hub makes history as an independent midstream investment exclusively harnessing and commercializing associated gas designated for flares. And with a 300 MMscfd expandable to 600 MMscfd, Nedogas has provided rare commercilaization facility for all lean pocket indigenous oil producers in OMLs 56 and 26.

Mr. Fagbami explains that the KGG Facility also provides the proof-of-concept for the government’s flare gas monetization programme, to ensure that waste of invaluable gas resources is arrested.

Mr. Emeka Ene, an eminent industry engineer who has led professional and investment groups in the petroleum sector, noted that development of the Kwale gas hub aligns perfectly with the Decade of Gas initiative which the Federal Government has continued to promote.

And in paying tribute to the strategic capacity development initiatives under successive managements of the NCDMB, Mr Ene explained that the agency’s partnership with Xenergi in the two projects proved very enabling.

With the proof-of-concept projects now delivered and proved commercially viable, he stated, time has come for replication of the model and scaling up of existing modules across the country’s 140 oilfields in conventional terrains, including onshore, swamp and shallow water.

 “This is a modular plant; it can be scaled 10 times over,” he said, noting that modular nature of the KGG concept makes for quick development and deployment even in challenging terrains.  

Engr Omatsola Ogbe added that the success story of Nedogas at Kwale could be replicated in other oil production sites in the country to address gas flaring. He declared the board’s readiness to continue collaborating with Xenergi.

“Their model should be extended to other parts of the country where gas flaring is continuing. They have shown that with the modular system, we can quickly remove flaring from our operations in Nigeria.

“Our partnership with NDCL on construct the KGG hub represents another important achievement in our 10-year Strategic Roadmap to utilize local resources, develop in-country capacities, and create job opportunities in line with the mandate of the board,” the NCDMB boss stated.

Industry enthusiasm at the realization of the KGG showed in the sheer number and diversity of high profile personalities drawn from both the private and public sector during the commissioning ceremony.  Goodwill messages poured in from the NNPC Limited, the NUPRC, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), and the Ministry of Petroleum Resources.

Tributes also chimed in from the Nigerian Gas Association (NGA), the Nigerian LPG Association (NLPGA), Petroleum Technology Association of Nigeria (PETAN), and the Society of Petroleum Engineers (SPE). And then there were captains of industry, traditional rulers and elected political office holders.

The Oracle Today reports that all important government agencies took keen interest in the KGG and CPF hub, highlighting the strategic importance of the initiative in the petroleum industry where government has evolved creative licensing system that allows third party investments in untapped assets.

Whereas companies like Shell, Seplat and Platform have developed robust gas portfolios through integrated asset developments in operated assets, the Xenergi’s Kwale hub is a clear leader in bringing commercialization solutions to non operated oilfields.

A Chief Operating Officer of one of the business arms of the NNPC Limited told The Oracle Today at the event that government is willing to assist any investor staking money in commercializing flare gas because the operators do not pay royalty on flared gas. And the country’s loss position, he said, is worsened by rising volumes of flared gas, associated environmental impact, social crises related to gas flares, and cost of building flare infrastructure.

It is therefore in the foreground of mounting economic losses, environmental impacts, and rising cost of oil production that the NCDMB’s funding support for flare capture initiative is perceived a diamond intervention.

Deployment of the NCIF in capacity development, opportunity enhancing and revenue targeted equity projects can only be brilliant; considering that KGG project came online at a time of acute debt funding squeeze in the local financial market which is already bogged with severe foreign exchange crisis.

Engr Ogbe states that “the equity investment in NDCL is one the strategic projects geared towards actualizing the Federal Government’s aspirations in key areas of the oil and gas industry.”

Rt Hon Ekpo declared at the event that the outcome of the strategic collaboration between NCDMB and Xenergi represents “a significant advancement in the country’s efforts to promote sustainability, energy efficiency, and economic expansion.”

“The NCDMB and Nedogas Limited, of which Xenergy Limited is a part, deserve praise for their tireless work and steadfast dedication to this admirable cause,” he said, adding that the collaboration “serves as evidence of the effectiveness of our local content policy, which seeks to increase the involvement of Nigerian businesses in the oil and gas industry while promoting local knowledge and capability.”

With the government, national oil company, all industry regulators satisfied with the capacity, expertise, technology and business model demonstrated in the Kwale gas gathering and processing hub, the only path to progress is for the regulators and other relevant authorities to flag off the flare gas commercialization programme with tested hands.