Sarki Auwalu is the director of the Department of Petroleum Resources (DPR) with the responsibility of regulating Nigeria’s oil and gas sector, from up to mid and down streams. In this exclusive interview with Businessday, he addresses a multitude of concerns: gas flaring, petrol subsidy, crude oil production costs and the biggest of them all, how gas will transform Nigeria. He spoke to Stephen Onyekwelu and Dipo Oladehinde. Excerpts:
Twenty-twenty was scheduled as the only for two years for you to renew bris. But in offshore when you remove year for zero gas flare. Gas flaring the licence or we withdraw it. That water and debris, disposing of it is not
has reduced significantly but it is not will ginger you to go and get investeasy. It is another cost so what do we at zero. Where are we on this? Please ment because the more you renew the do. We encourage technology in such comment also on the Gas Transport licence, the more we keep you on your a way that we do it at a minimal cost.
Network Code. toes to bring more money for Nigerians We encourage maximum enhanced et me first address gas flarto get jobs. cost recovery. ing. Technically Nigeria is a We have five private licensed reAgain the use of new technology gas province. It is not an oil fineries. One is not modular, four are is important for turnaround time. If province. We have over 200 modular. Among the modular, one is using a certain pump and comprestrillion standard cubic feet the Opac refinery in Delta State. This sor will give me maybe 20000 barrels of gas and there are many unexplored Opac refinery is 7000 barrels per day reprocessing capacity, I can use the basins with gas. When you do deep finery; it is at over 95 percent mechanisame that will process 40000 at the drilling in Nigeria, you encounter gas. cal completion. Walter Smith is 5000 same time. This will lower the cost. We are yet to properly harness our gas barrels per day capacity refinery. It is Those are the things we are looking at resources and when we do, we will at 85 percent completion as we speak. and advise in working with companies forget about oil. We have the Niger Delta Petroleum to achieve lower costs. We encourage
The global gas flare reduction Refining Company. This is the first piothe use of electric submersible pumps. initiative is to extinguish all forms of neer refinery in Nigeria. It started with flaring by 2030. What we did was to 1000 barrels, they were producing only take it upon ourselves as a country to Diesel. Then they added 5000 barrels to see how we can do it before that time. make it 6000. They expanded it to pro
At present, based on our production duce diesel and other basic products the gas flare volume is 11 percent of naphtha, diesel, kerosene with small the total gas production. petrol. They have added 5000 and it
This 11 percent has been identified now has a total capacity of 11000 barand we are commercialising it. The gas rels per day. The Edo refinery is 6000 flare commercialisation programme is barrels and at 60 percent completion. the first of its kind I think on the planet. So these refineries the Niger Delta
We have put a value on the 800 billion Petroleum Resources Limited 11000 standard cubic feet of gas that is being barrels, will take over 4 percent of our flared to create value for Nigerians. national requirements and national
On one hand, you create investinputs. It will reduce the burden on ment opportunities; on the other the foreign reserves, foreign exchange hand, you create value for Nigerians. and then when Opac and Walter Smith
This year indeed is a year of gas. Prestarts with a combined capacity of viously, we sang the song of gas to 12000 barrels plus Niger Delta 11000 power, but this year it is gas to people. that is about 23000 barrels per day.
We realised every household requires When we add Edo’s 6000 that is about clean energy, for survival and cook29000 which is a significant percentage ing. You have to cook and gas is the compared to our daily consumption most efficient energy source required of petrol, kerosene and diesel. So that to cook. is how the refinery equation is for the
It cooks easier, quicker and it is private refineries. cheaper in the long run when you compare it with the traditional fuel source, whether it is biomass or wood.
To harness this gas for Nigerians from flared gas we put together the commercialisation programme and have requested proposal. Good enough we have many interested parties.
We qualified over 200 companies.
They have shown seriousness and commitment to take up those flare points. Among the 97 flare points identified, we pulled out 45 that are unencumbered and unquestionable.
These will be priced and we will send commercial agreements to those successfully qualified companies to look at it, review it with the view to bring the investments in.
We plan to evaluate the bid that they will submit based on that commercial agreement that we send and we will announce the successful bidders for the45. The remaining will come and they will use the process to learn so that we will not only eliminate the flare but create value and opportunity for investors and Nigerians.
For the gas transportation network code, it is simply called Network Code.
You simplify and create open access to both gases being flared and to gas that is explored. This enables evacuation of both associated and non-associated gas. Remember, I told you the value and volume of gas that we do have, so we have to create open access so that people will have access to the transport system and the transmission system of the resource we do have. The gas to people programme will be actualised this way.
We have critical projects which will change the country; three critical pipelines that would change the country. One will connect the Eastern part of Nigeria and the Western. Another will provide the west with the required gas for development. The third will provide the entire north with gas for development and there is one that will connect between the west and the north.
The east-west line is Obiafu-obricom-oben (OB3) that will carry over 2 billion standard cubic feet of gas daily. The second one, the Escravos-lagos Pipeline System (ELPS) is already in existence and carries 1.1 billion standard cubic feet of gas daily. There will be an additional line with the same volume which will make it 2.2 billion.
The third pipeline is the AjaokutaKaduna-kano (AKK) system. There is a trans-nigerian line that will link Calabar, Lagos and Ajaokuta so that the gas will be available for the north. The AKK will give about 2 billion standard cubic feet of gas daily.
The two, that is east-west-elps, will be commissioned this year. For AKK we have issued the permit to survey for the line, we have issued the preliminary engineering design approval. So we hope in the next 18 months it will be commissioned like the others.
What does that mean for Nigeria? It means opening up opportunities. There are many Gas Based Industries (GBIS) springing up, many factories will come up. By way of case study, all the textile companies that are on gas in the eastern part of Nigeria are still on. They do not rely on transmitted and distributed power to operate, they have their gas, they generate their power, so they are on and employment is assured. While those on transmitted power are all down.
Pushing this volume of gas across the nation will guarantee employment. The aspiration of taking 100 million Nigerians out of poverty is a reality since these pipelines are there. The only one that we are about to construct is the AKK, which as you know the design is at an advanced stage.
So the GBIS will provide many opportunities then again our aspiration for gas to people, can easily be reached because there is a deliberate attempt to create penetration of liquefied petroleum gas is LPG and compressed natural gas (CNG).
This will give Nigerians alternative energy which creates wealth and reduces poverty. The launching of Nigerian Gas Transport Network Code is deliberate to create open access for gas bulk sellers, bulk producers and bulk purchasers to have structured and seamless relationships just like the network of communication.
There are conflicting figures regarding modular refineries. How many are they, have some been commissioned, how many are in operation?
First the government of Nigeria through the Department of Petroleum Resources licenses refineries generally. Every refinery in Nigeria is licensed by the DPR. There are government-owned refineries that are being operated by government-owned companies and that company is the Nigerian National Petroleum Corporation (NNPC).
So the Warri refining, the Port Harcourt refining and Kaduna refining and petrochemical companies are companies under NNPC owned by the government. The shareholders there are 200 million people, Nigerians.
There are private refineries, we license private refineries too. We ensure that any prospective refiner has land that he wants to put his refinery on. Secondly, he must have a proven technology because we do not allow refiners to refine at a loss. Thirdly, he must have a crude oil source, you must have money to source crude oil. Fourth, you must have means of receiving feedstock and evacuating the product; this is what we look at basically.
Other considerations are that the company has to be registered in Nigeria, must pay taxes and must have the capacity in terms of the human capacity to execute the job.
When you say modular you mean it is a refinery that is not very complicated. It produces two or three products and the bottom products and you can recycle and get more. It is not a complex refinery. Currently, we have over 28 licences that are active and we issue
How in your view can Nigeria’s crude oil production costs be made competitive, it is $4 per barrel in Saudi Arabia but more than $20 per barrel in Nigeria?
First terrain matters. In Saudi Arabia and Russia oil production is mainly onshore. On-shore production is cheap. You do not need floating production storage and offloading (FPSO) vessel, you do not need subsea, and you do not need so many things. You just punch a hole, bring it up, put it in a pipeline and sell.
But in Nigeria for example, leave our onshore go to the swamp, even for the rig you have to bring a swamp rig or jack up which is different from a land rig that a truck will just bring and you couple it. The prices are different if land rig will charge for example $10000 per day swamp rig will charge like $30000. When you get to offshore it will be higher and when you get to deeper offshore it will be even higher.
So you see the terrain matters. Most of our crude oil production now comes from deep offshore where onshore would cost you like $16 million, in deep offshore, it will cost you like $150 million so that is a big difference.
To reduce costs, we encourage anyone that is going to drill in deep and water to do a well that has many tributaries. It is one slot but you have so many sands, many reaches, rather than drilling five wells. Handling of crude itself involves costs. Onshore, when you produce your crude, you just treat it to remove the water and de
What is your view on subsidy removal?
We are not talking about subsidy removal. We are talking about alternative fuel. As a government, we promised Nigerians alternative fuel. We want Nigerians to get affordable fuel and energy freedom. Nigerians buy at any price because they do not have alternatives. Compressed natural gas (CNG) is an alternative fuel.
Some countries have gone far with alternative fuels. Italy, Mexico, China, Brazil and Iran are some examples. Our goal is to use the global system for mobile communications (GSM) strategy.
Before the advent of GSM telephone and communication were privileges. When the government decided to sell the Nigerian Telecommunications Limited (NITEL) people were crying it is a national asset, and then the government introduced the GSM. It was very expensive at the beginning – subscriber identity module (SIM) sold for thousands of Naira and handsets were out of reach for everyday Nigerians. But right now SIM cards are free. Handsets go for as low as N3, 000 or even N1, 000 and you are connected. You can get one minute for as low as N2 or N3, it costs N50 before, technically everybody is connected.
Nigerians now have alternatives. This is the same thing we want to do with energy, petrol. We want to introduce CNG. Cars will be converted, especially commercial ones, to become CNG and enabled. One litre equivalent of CNG will give you at least 180 percent more when compared to one litre of petrol and it is cheap.
The current landing price for CNG is less than N90, no subsidy. If you know a litre of CNG costs say N100 and gives you 1.8 kilometres more than petrol that costs say N125, you will not go for that. Once Nigerians have this alternative the issue of subsidy does not even arise anymore. It becomes a question of choice. It is working, we have a success story in Benin City. We want to rewrite our history. We can replicate this story across Nigeria. We have the gas, we have everything.
This is why a special committee was set up for LPG and CNG penetration which DPR is hosting. The aim is to take gas to people by converting commercial vehicles such as tricycles, taxis, buses and some of the conglomerates have started converting their trucks that carry products across the nation to CNG. They have this big pot behind for CNG.