1

AHAOTU, J.O
PG/M.ENG/03/34157

PG/M. Sc/09/51723

AN EVALUATION OF THE POTENTIALS OF NATURAL GAS IN THE

ECONOMIC DEVELOPMENT OF NIGERIA

A THESIS SUBMITTED TO THE DEPARTMENT OF MECHANICAL ENGINEERING,

FACULTY OF ENGINEERING, UNIVERSITY OF NIGERIA, NSUKKA

MECHANICAL ENGINEERING

NOVEMBER, 2006

Digitally Signed by Webmaster’s Name

DN : CN = Webmaster’s name O= University of Nigeria, Nsukka
Webmaster OU = Innovation Centre
 2

UNIVERSITY OF NIGERIA, NSUKKA

DEPARTMENT OF MECHANICAL
ENGINEERING

TOPIC

AN EVALUATION OF THE POTENTIALS OF NATURAL GAS IN THE

ECONOMIC DEVELOPMENT OF NIGERIA

BY

AHAOTU, J.O
PG/M.ENG/03/34157

SUPERVISOR: PROF. A.O ODUKWE

NOVEMBER, 2006
 i

AN EVALUATION OF THE POTENTIALS OF NATURAL GAS IN THE ECONOMIC

DEVELOPMENT OF NIGERIA

BY

AHAOTU, JOHN OKECHUKWU

PG/M.ENG/O3/34157

SUBIMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE

AWARD OF MASTER OF ENGINEERING (M.ENG) DEGREE IN MECHANICAL
ENGINEERING DEPARTMENT

UNIVERSITY OF NIGERIA, NSUKKA

DECEMBER 2006

SIGNATURE OF AUTHOR: ___________________________

AHAOTU, J. O

CERTIFIED BY: -------------------------------------------------

PROF. O. A. ODUKWE
( PROJECT SUPERVISOR)

ACCEPTED BY: -----------------------------------------------

DR. A. N. ENETANYA
( HEAD OF DEPARTMENT)
 ii

TITLE PAGE

AN EVALUATION OF THE POTENTIALS OF NATURAL GAS IN THE ECONOMIC

DEVELOPMENT OF NIGERIA
 iii

DEDICATION

This work is dedicated to my dear friend,

Miss Ngozi Nwugbana. Who recently lost her life in the ill-fated ADC plane crash

on the 29th October 2006 in Abuja.

May her soul find eternal rest in the Lord, Amen.

 iv

ACKNOWLEDGEMENT

How does a person say “thank you” when there are so many people to thank?
Obviously my thank goes to my Supervisor, Prof. O. Odukwe, my lecturers, Prof.
D. Onyejekwe, Prof. O.V. Ekechukwu and Mr. Tunde Bakare of the Nigerian Gas
Company, Warri whose advice and contribution helped me immersely.
I must not forget to express my profound gratitude to my dear parents,
Chief & Lolo M.N. Ahaotu, my cousin Da Anayo, my brothers Chidi and Chuks
whose continuous encouragement and support I will forever be indebted to.
Lastly, to God the almighty creator, who before my creation have known perfectly
about this day.
 v

ABSTRACT
This study brought to the fore, a critical evaluation of the potentials of natural gas
in the economic development of Nigeria. Natural gas option was considered the
best alternative energy resource to other resources for optimizing income earning,
indigent capacity building and the socio-economic development of an over
populated Nigeria. Data and statistical reports from the various oil companies ere
collaborated with the central bank economic report to determine the income
generation from the resources. Parameters for measuring economic development
analysis were used, including the various applications of natural gas. There
impacts were then accessed in terms of efficiency of production, effectiveness of
use, human and social welfare conditions of the people. These results indicated
that natural gas production and utilization have not sufficiently contributed towards
the socio-economic development of Nigeria. It is therefore imperative that a
comprehensive energy policy should be formulated by the government to make-up
for the functional lapses in gas exploration and partner effectively with oil
companies to invest in transportation and marketing. Also a firm date should be
set by government to stop gas flaring in all ramifications so that the desired
economic benefit of natural gas will be sufficiently felt.
 vi

TABLE OF CONTENT
Approval Page - - - - - - - - - i
Title Page - - - - - - - - - ii
Dedication- - - - - - - - - - iii
Acknowledgement- - - - - - - - - -v
Abstract- - - - - - - -- -- - v
Table of Contents- - - - - - - - - vi
List of tables- - - - -- - - - - - viii
List of figures- - - - - - - - - ix
Chapter One: Introduction - - - - - - - 1
1.1 Back ground of the Study- - - - - - - 1
1.2 Typical applications of Natural Gas- - - - - 1
1.3 What are the potential contribution of Natural gas- - - 2
1.4 Statement of problems- - - - - - - 2
1.5 Justification for the current work- - - - - - 3
1.6 How export potential enhances market facilities - - - 4
1.7 Recommendation - - - - - - - - 4
Chapter Two: World Energy Demand and Supply in Relation to Natural Gas.
2.1 Historical Development of National Gas- - - - - 6
2.2 World Natural Gas reserves- - - - - - 7
2.3 Global Natural Gas Demand- - - - - - 9
Chapter Three: Nigerian Natural Gas Potential
3.1 Review of energy source in Nigeria- - - - - 12
3.2 Energy Resources and the Economy- - - - - 18
3.3 Natural Gas Reserves in Nigeria- - - - - - 22
3.4 Gas Demand and Supply in Nigeria- - - - - 25
3.5 Natural Gas flaring- - - - - - - - 27
3.6 Existing Gas Infrastructure- - - - - - 28
3.7 Domestic Gas market- - - - - - - 30
3.8 Nigerian Liquefied natural Gas - - - - - - 34
3.9 Constraints Barrier of Gas Demand and Supply- - - 36
Chapter Four: The Economic parameters that effect economic development
4.1 Cost Benefit / Analysis- - - - - - - 39
4.2 Life Cycle Cost- - - - - - - 41
4.3 Uncertainty Analysis- --- --- - - -- 44
 vii

4.4 Annualized Life cycle Cost- - - - - - 44

4.5 Payback Time- - - - - - - - 45
4.6 Return on Investment - - - - - - - 45
4.7 Export Diversification -- -- -- -- - - - 45
4.8 Human Development - - - - - - - 46
Chapter Five: Application of Natural Gas
5.1 Industrial Application of Natural Gas - - - - - 47
5.1.1 Natural Gas as fuel for power generation - - - - 47
5.1.2 Natural Gas in the steel industry - - - - - - 50
5.1.3 Natural Gas in the Cement industry- - - - - 51
5.1.4 Natural Gas in the Glass industry- - - - - 53
5.2 Domestic Application of natural Gas- - - - - 53
5.3 Natural Gas for the petro-chemical industries - - - - 55
5.3.1 Methane, Ethane, Propane, and Butane - - - - 55
5.3.2 Natural gas in Ammonia and fertilizer production -- - - 59
5.3.3 Natural gas in methanol production - - - - - 61
Chapter Six: The Economic impacts of Natural Gas Development in
Nigeria, In Terms of

6.1 In Terms of Effectiveness of use- - - - - - 62

6.2 In Terms of Efficiency of operation - - - - 64
6.3 Welfare- - - - - - - - 64
Recommendation and Conclusion - - - - - - 66
References - - - - - - - - - 67
Appendix- - - - - - - - - - 68
 viii

LIST OF TABLES

Table 2.3.1 Natural Gas in World Energy Consumption

Table 2.3.2 Total Non-renewable Energy resources by Types of Energy

Table 3.1.1 Review of Energy resources in Nigeria

Table 3.2.1 Shares of Commercial Energy Consumption in Nigeria

Table 3.6.1 Existing Gas Supply Systems

Table 3.7.1 Sources of Gas Supply to Domestic market

Table 3.7.2 Existing and Potential Demand on Nigerian Gas Company’s

Systems

Table 5.3.1 List of Petrochemicals that could be derived from methane

 ix

LIST OF FIGURES

Figure 3.3.1 Gas Reserves in Nigeria

Figure 3.5.1 Gas Flaring Reduction Efforts in Nigeria

Figure 3.6.1 Eastern Gas Pipelines

Figure 3.6.2 Western Gas Pipelines

Figure 3.7.2 Volumes of Sales of Gas by Category

Figure 3.7.3 Domestic Gas Utilization Historical Trend

Figure 3.8.1 Volume of Gas Export in Nigeria

 1

CHAPTER ONE

INTRODUCTION

1.1 Background of Study

The role of energy in economic development cannot be over emphasized.

The nature and extent of energy demand and utilization in a national economy

are to a large extent, indicative of its level of economic development. With these,

there is no gain saying the fact that energy is required in its various forms for

every aspect of our social, economic and political lives. The application of

modern technology, to ease the modern living and modern ways of life would

other wise be impossible without the use of an energy source in one form or the

other.

A case study of natural gas a source of energy is being use to determine

the rate of economic development in Nigeria because of its abundance reserves,

tremendous potential, environmental friendly and its industrial and global market

demand. This becomes even more glaring when it is remembered that all modern

production activities, transportation, telecommunication etc. depend on this

energy resources for the realization of their full potentials. The role of Electricity in

the economy cannot be overstated because reliable electricity supply is vital to

the Nigerian economy and also to the various sectors driving that growth. Natural

gas then would be appreciated as it contributes the highest quota to these energy

sources.

1.2 Typical applications f natural gas

There are so many different applications for this fossil fuel called natural

gas that it is hard to provide an exhaustive list of everything it is used for. And no

doubt new uses are being discovered all the time, these includes
 2

i Residential Applications – These includes Residential heating, Water heating,

Cooking

Commercial uses

- Uses in industries

- Natural gas in the transportation sector

- Electric Generator using natural gas

1.3 What are the potential contribution of natural gas

- it facilitates the growth of industries.

1.4 Statement of Problem

The ultimate recoverable gas reserves in Nigeria is 235 trillion cubic feet, but

the proven gas reserve in Nigeria is 187 trillion cubic feet of which 209 billion

cubic feet is produced annually. Out of this figure produced annually 44.82%

are presently fared. This level of gas still flared is capable of generating 69GW

of electricity and translating to lost in economic value of $5 billion dollars

annually.

Statement on domestic use of natural gas.

Natural gas could be distributed through pipeline to domestic and

commercial consumers like schools, Hotels. and Hospitals. Even for small

consumers located in remote areas, natural gas could be transported and

supplied in bottles. This not only holds for heating, but for other users of

energy around the home as well.

(iii) Statement harnessing/production of natural gas

Natural gas is a vital company of the World‟s supply of energy. It is one of

the cleanest, safest, and cheapest and the most useful of all energy

sources.

(iv) Statement on natural gas a major foreign-exchange earner

 3

Nigerian economy is now headily dependent n gas in both domestic and

export market and thereby generating as much revenue (as oil) within the

decade.

1.5 Justification for the current work

- Look critically at the problems associated with natural gas

exploration/production in Nigeria/faring.

- The huge investment requirement are considerable high, ranging from

exploitation, transmission and distribution.

- The high percentage of gas still being flared is so high that it can generate

the electric power requirement for the whole West African Countries

(Natural Energy policy publication)

- The absence of a comprehensive natural gas transportation grid t link

supply pints with potential demand center.

- The social, community and environment issues have create a potential

open-ended liability for effective gas production and private participation.

- look at the problems associated with the domestic natural gas utilization in

Nigeria.

- A major problem exist with natural gas utilization due to the inability of the

gas Companies to produce the gas requirement to satisfy the domestic

market and the non existence of a comprehensive gas pipeline network to

link the commodity to the consumers.

- The present gas production level channeled for domestic use is grossly

inadequate 80 billon cubic feet per annum, which is not adequate for the power

sector alone. Hence, the existing gas flow station requires expansion and if possible

building more flow station to meet the ever increasing demand for gas. Linking to

West African Countries, Algeria, Tunisia and plans are under way to extend it
 4

incorporate a legal and regulatory framework that is attractive to private investor,

beneficial to Nigerians, and stimulate natural gas expansion programme.

(vii) Government should provide a comprehensive frame work to tackle the problem of

Youth restiveness in the Delta Region to encourage effective exploration and

exploration of gas.

(vii) Government should look into the integrate problems in some extension

infrastructure hampering direct extension or spurring of pipeline example Oben-

Ajaokuta line.

(V) No deliberate effort to exploit for gas in Nigeria to date –gas found are incidental to

oil exploration activities.

(x) Most of the existing gas facilities in the country are mostly own by the Nigeria gas

company which is empowered by the government.

1.6 How Export potential enhances market facilities.

Natural gas export by volume currently 4 billion standard cubic feet and plans have been

concluded to increase the volume to 3trillion standard cubic feet due to export demand.

These will necessitate building more flow station, terminals construction of new pipeline

network linking to other West Africa Countries (which is at 80% completion stage)

Algeria, Tunisia and plans are underway to extend so to key European Countries through

sub sea pipe network laying from Algeria to satisfy the increasing market demand for the

commodity.

1.7 Recommendation.

(i) Natural gas is a vital component of world’s supply of energy; it is one of the

cleanest, safest, cheapest and most useful of all energy sources.

(ii) At current production and utilization level, Nigerian gas resources could last more

than 100years, thereby out living that of oil which is 40 years.

 5

(iii) To attract private sector instrument in gas projects through the creation of enabling

environment as is currently pursued by the present administration.

(iv) Government should provide incentives and access to long term credit facilities to

finance gas projects.

(v) Putting in place a national gas transportation grid to link supply points with

potential demand centre.

 6

CHAPTER TWO

LITERATURE REVIEW

2.1 Historical Development of Natural Gas

Natural gas, in itself, might be considered a very uninteresting gas-it is colourless,

shapeless, ad odorless in its pure form. Quite uninteresting-except that natural gas

is combustible, and when burned it gives off a great deal of energy. Unlike other

fossil fuels, however, natural gas is clean burning and emits lower levels of

potentially harmful by products into the air. We require energy constantly, to heat

our homes, cook our food, and generate our electricity. It is this need for energy

that has elevated natural gas to such a level of importance in our society, and in

our lives.

Natural gas is a combustible mixture of hydrocarbon gases. While natural

gas is formed primarily of methane, it can also include ethane, propane, butane

and pentane. The composition of natural gas can vary widely, but below is a chart

outlining the typical makeup of natural gas before it is refined.

Typical Composition of Natural Gas

Methane CH₄ 70-90%

Ethane C2H6 0-20%
Propane C3H8 -
Butane C4H10 -
Carbon Dioxide CO2 0-8%
Oxygen O2 0-0.2%
Nitrogen N2 0-5%
Hydrogen Sulphide H2S 0-5%
Rare Gases A,He,Ne,Xe Trace

In its purest form, such as the natural gas that is delivered to your home, it is

almost pure methane. Methane is a molecule made up one carbon atom and four

hydrogen atoms and is referred to as CH4.

 7

Natural gas has for a long time been associated with the United States

where it was first used as a source of energy. The development of the gas industry

was initially very slow with large quantities of natural gas produced in association

with crude oil flared in many areas.

Gas flaring, then was inevitable due to inadequate technology and skilled

manpower needed for effective gas exploitation. Natural gas was usually found at

locations quite distance from the centres of population. So, it was not until the

development of steel pipes capable of transporting natural gas at high pressure

and over considerable distance that the industry really began to make appreciable

impacts. By 1931, steel pipes capable of withstanding high pressure under varying

operating conditions were constructed. This development was possible due to the

technology innovations, not only in steel pipe design and fabrication, but also in

electrical welding, corrosion protection and mechanical pipe laying. This led to the

emergence of a dynamic natural gas industry (Peter B.C, industrial fuels, New

York; Macmillan Press Ltd 1971, p79).

2.2 World Natural Gas Reserves

Global natural gas reserves estimated based on data from various world regimes,

though helpful to some extent in energy analysis, quickly become out-dated and

hence unreliable. In most instances, gas data are based on different

interpretations of such terminologies as proven reserves, probable reserves, and

possible reserves. Some reserves either offshore or on shore are located in areas

which based on existing technical and economic criteria cannot be partially or

wholly exploited. Examples are the huge gas reserves in the North Sea and the

seberian region in the US and USSR respectively as well as enormous reserves in

hydrocarbon producing developing countries. Also, proven world natural gas

reserves are subject to the fluctuations of the oil industry as most gas reserves are
 8

associated gas. Consequently, natural gas reserves often increases with oil

production and vice versa. It is because of these factors that proven natural gas

reserves estimated, even within a given period of survey, from various sources

vary. These variations not withstanding, gas reserves estimates are indispensable

in analyzing the past and present role of gas in the world energy scene and its

relation to other alternative energy sources.

The world proven natural gas reserves stood at 95 billion m3 while potential

recoverable resources amounted to over 191,000 billion m 3 Figure (2.1.1) shows

the contribution of the first ten countries with the largest natural gas reserves.

Figure 2.2.1

World Reserve Ranking

FIRST TEN COUNTRIES WITH LARGEST NATURAL GAS

RESERVES:
2003 PROVED RESERVES
Russia 1,700.0

Qatar 916.0

Iran 913.6
Other FSU 332.1

Saudi Arabia 234.6

UAE 204.1

USA 186.9
Nigeria 178.5

Algeria 170.0

Venezuela 149.2

0 200 400 600 800 1000 1200 1400 1600 1800

TCF

Source: World Oil, August 2003

No deliberate effort to exploit for gas in Nigeria to date. Gas

found are incidental to Oil exploration activities

From the above figure 2.2.1, it should be noted that the proven reserves in

Nigeria is estimated at 178.5 trillion cubic feets and that as of this day there is no

deliberate effort to exploit for gas in Nigeria. The gas found in Nigeria and which is

being used are incidental to oil exploration activities. This means that the

enormous deposit of gas in Nigeria is still untapped.

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2.3 Global Natural Gas Demand

The rate of increase in global natural gas demands since the 1950‟s when it

caught international attention has far exceeded that of other energy sources like

coal, oil, hydro and nuclear power. In 1950, Coal, Oil and Natural gas constituted

59.0%, 25.8% and 9.4% respectively of the global energy consumption. Hydro and

Nuclear energy also contributed a significant percentage.

Natural Gas in World Energy Consumption

Years Coal % Oil % Natural % Hydro % Total %
Lignite Gas Nuclear
Elite
1950 1043 59.0 457 25.8 166 9.4 102 5.8 1768 100
1960 1500 49.4 924 38.4 404 13.3 207 6.9 3035 100
1970 1645 33.2 1997 40.4 931 18.8 374 7.6 4.947 100
1980 1907 26.1 2793 40.3 1700 24.6 622 9.0 6922 100
1990 2010 21.7 3893 42.0 2364 25.5 1012 10.9 9275 100
1995 2215 16.3 4961 36.5 5000 36.8 1421 10.5 13,597 100
2000 2637 14.5 6161 33.8 7210 39.6 2210 12.1 18,218 100
Source: UN world Energy Supplies 2001

Total Non-renewable energy resources by types of energy

Resources Proven and currently Estimated Total
recoverable recoverable
1) Natural Gas
109 m3 48900 – 73700 26000 – 27000
12
(10 cu.ft ) 1726 – 2604 9200 – 9600
2) Natural Gas Liquids
109 m3 tons 6.2 – 9.3 32.7 – 34. 2
(109 bbl ) 46 – 69 244 – 255
3) Crude Oil
109 Metric tons 72 – 98 207 – 252
9
(10 bbl ) (533 – 730) (1540 – 1880)
4)SYN CRUDE
109 Metric tons 36 324
(109 bbl ) 270 2415
5) COAL
109 Metric tons 609 4880 – 5560
9
(10 sh. Ton ) (670) 5378 – 6130
6) URANIUM OXIDE
1000 Metric ton (S 33/kg) 1585 3706
1000 sh. Ton (S. 15/lb) 1747 4085
Source: World Energy Report June 2000
 10

But in 1980, the shares of Coal, Oil and Natural gas in overall global energy

consumption where 29.8% and 18.4% respectively as illustrated in the table above

(Table 1.3 ). In 1995, the energy consumption pattern changes drastically. Natural

gas toping the shares of energy consumed by 36.8% while oil reduced to 36.5%,

coal and hydro reduced also to 16.3% and 10.5% respectively. Evidently, natural

gas almost tripled its share of world energy consumption within the period.

Natural gas consumption was originally associated with the United States between

1920 and 1950. Then, the United States consumed about 92% of total world

consumption. Even in 1970, when natural gas consumption rose to 404 billion m 3 –

supplying 14% of world primary energy demand, the United States were the only

outstanding natural gas consumers in the world. Then the United States supplied

30% of its gas requirement from their domestic reserves.

With time, gas consumption assumed international dimension with the

establishment of more pas powered industries in Western Europe, Soviet Union

and Japan, but on a smaller scale. By 1970, natural gas consumption more than

doubled and amounted approximately to 1270 billion m 3. In 1980, gas demand

totaled 1700 billion m3 representing a three fold increase over 1960.

Gas demand and consumption though on the decline in the United States due to

natural limitation has increased significantly in the USSR, Western Europe, Japan

and to a lesser extent in Middle East, Algeria, Argentina and other third world

countries. The rate of natural gas application differs from country to country but, it

is generally determined by the development of dense gas distribution network and

domestic natural gas resources. In area where local reserves are inadequate as in

the United States and Western Europe, international gas trade is indispensable.
 11

The growing global consciousness of natural gas as an excellent industrial fuel is

quite impressive. Most developed countries like the Russia and Japan are

substituting natural gas for coal in power station and other related industrial

applications. In United States for instance 32% of the natural gas consumed in

1992 was for industrial applications, other than power plants which took 17%.

Domestic uses consumed 46% while 5% was sold. Similarly in Russia in the same

year, gas consumed shows that industries took 60.2% power plants 23.7%

domestic application took 12.4% while 3.7% was for miscellaneous uses. Industrial

uses consist of steel production, oil and gas production construction materials,

chemicals and copper (Natural gas in a changing world – The importance of world

wide cooperation 11th world energy conference, munich sept 8-12, 1980 p.259).

Future Gas Demand and Supply 2006 – 2020

Worldwide natural gas consumption is expected to continue to rise and

reach a level of approximately 8000 billion m 3 in the yearly world energy

conference in Geneva 2005, the production potential could exceed the expected

demand by 50%, given sufficient financial and technical resources. By the year

2020, natural gas demand would have risen further to 9000 billion m 3 with an

excess products potential of 10%. With the continuous rise in global energy

demand, Natural gas would have to maintain its current high share of global

energy supplies even in the further years to come. Similarly countries like America,

Russia, Western Europe and Japan would also remain the potential centre of gas

consumption in the world.

 12

CHAPTER THREE

NIGERIAN NATURAL GAS POTENTIALS

3.1 Review of Energy Resources in Nigeria

Nigerian is richly endured with vast natural resources. These natural

resources include Coal, Lignite, Gas, Crude oil, Tar, Rivers, Gold, Tin etc. Many of

the natural deposits in Nigeria till date are still untapped.

Nigerian energy resources are shown below.

Types of Reserves of unit Aver. Energy Total resources Energy Energy
Resource of measurement content energy content ratio of ratio of
per unit in KJ KJ resources total
to oil % resources
A Coal & 650m shot tons 22.7x 106 14.75 x1015 11.20 3.86%
Lignite
B Gas 3.615 x 10 12m3 38.556 x 106 139.4x105 105.9 36.49%
C Crude oil 3.42 x 10 9m3 38.48 x 106 131.6 x1015 100.00 34.45%
D Hydro 31..5 x 10 11 kWh- 3.6 x103 11.34 x1015 8.6 2.95%
100y
E Solar 180 x 10 11kwh 3.6 x 103 64.8 x105 49.3 16.97%
F Wood 25 yrs available 2.2 x1012/day 20.075 x1015 15.2 5.26%
fuel KJ
Source: Federal Republic of Nigeria: (1) Nigerian Energy Report 2000

From table 3.1.1 above, the energy resources data in Nigeria with each resource

estimated in terms of reserves, average energy content per unit, total resources

energy content and their percentage energy ratio to oil.

The National energy policy journal estimated that the crude oil reserve in

Nigeria is the 6th largest in the world, while natural gas is the 9th largest. Tar sands

and coal reserves are quite significant by world standards.

(Source: Natural Energy policy provision for oil, gas and solid energy minerals July

2003)
 13

Energy Sources

1 Oil

Crude Oil was discovered in commercial quantities in Nigeria in 1956 while

oil production started in 1958. The nation had a proven reserve estimate of about

32 billion barrels of predominantly low sulphur light crude as at January 2002. The

annual oil production peaked at about 845 million barrels in 1979. There was a

decline in production to 451 million barrels in 1983 after a major market collapse

that began in 1981 and lasted till 1987. Thereafter it rose again to 776 million

barrels in 1998.

Nigeria presently has four refineries with a total installed capacity of

445,000 barrels per day. However, their capacity utilization is inadequate to meet

the required domestic demand. Consequently annual consumption of petroleum

products is not fully met by internal production and has to be supplemented by

imports. The nation is clearly over dependent on crude oil for its foreign exchange

earnings hence, the economy is vulnerable to the unstable nature of the

international market. Therefore, there is a need to promote the expansion of the

processing sub-sector to allow for the export of value-added petroleum products.

Furthermore, it is desirable to diversify the domestic energy mix away from ever

increasing consumption of petroleum product in order to avert any possible conflict

between domestic and export requirement.

Oil will continue to play a major role in the nation economy, hence the need to

expand the reserve base through continuous exploration activities.

 14

2 Natural Gas

Natural gas is found in underground structures similar to those containing

crude oil. There are 3 types of Natural gas reservoirs.

(i) Structures from which only gas can be produced economically. Called non-

associated gas (or unassociated gas)

(ii) Condensate reservoirs which yield relatively large amount of gas per barrel

of light liquid hydrocarbon. Although many condensate reservoirs are

produced primarily for gas. There are cases where gas is re-injected or “re-

cycled‟ to improve liquid recovery particularly if no gas market is yet

available. This gas also is termed non-associated.

(iii) Reservoirs where gas in found dissolved in crude oil (solution gas) and in

some cases also in contact with underlying gas saturated crude (gas-cap

gas). Both are called associated gas (Gas-cap gas in almost never

produced until most of the economically recoverable oil has oil yielded). In

such fields, gas production rates will depend on oil output with the oil

usually representing the major part in terms of energy equivalents.

Nigerian proven natural gas reserves, estimated at about 187 trillion standard

cubic feet (associated and non-associated gas ) are known to be substantially

larger than its oil resource in energy terms. Gas discoveries in Nigeria are

incidental to oil exploration and production activities. As at 2001, over 50% of the

gas produced (mainly associated gas) as flared.

In view of the increasing domestic oil consumption an economically optimal

strategy to replace oil with gas and gas derivatives will enhance the availability of
 15

more oil for export. This will also promote the conservation of the oil reserves.

Apart from economic advantage, fuel substitution from oil to gas in more

environmentally friendly because gas is a cleaner fuel than oil.

Given the current reserves and rate of exploitation the expected life-span of

Nigerian crude oil is about 44years, base on about 2 million barrels per day

production, which that for natural gas is about 90 years based on 2004 production

rate of 1900 billion standard cubic feet. It is therefore strategically important to

undertake major investments in the gas sector in order to prepare adequate for

gas as substitute for oil both for domestic and foreign exchange earning.

The continued flaring of natural gas has resulted in a substantial waste of energy

resource, in addition to contributing to atmospheric pollution. It is therefore

imperative to take effective measures to curtail gas flaring so that the ending of

gas flaring does not exceed the deadline of 2008.

3 Tar sand

Tar sand are known to exist in Nigeria. The deposit is preliminarily

estimated to contain a total reserve of about 30 billion barrels of oil equivalent. The

heavy crude from the tar sand can be a major feed stock for the kaduna refinery

which refines imported heavy crude with similar properties.

Bitumen, which is derived from the tar sand is used in road construction and it is

also used in electrical, chemical, petrochemical and other industries. If properly

harnessed, the tar sand resource in the country would contribute immensely to the

nations energy resource base.

 16

4 Coal

Available data shows that coal of sub- bituminous grade occur in about 22

coal field spread in over 13 states of the federation. The power coal reserves so

far in the country are about 639 million tones which inferred reserves are about

2.75 billion tones, consisting approximately of 49% sub – bituminous, 39%

bituminous, and 12% lignitic coal. The federal government altitude towards coal

exploration is due to high market acceptability and profit being accrued from gas

and oil

5 Nuclear

Nuclear energy is one of the major sources of base load electricity

generation in the world today. The technology used for harnessing nuclear energy

demand great responsibility and expertise.

Therefore it requires careful planning of manpower development and material

resources. Crucial to any nuclear programme is the availability of nuclear minerals

such as Uranium and thorium. In 1947 pyrochlore containing uranium was found in

appreciable quantities in Jos Plateau and environs, until late last year (2005) there

have been no plan for commercial extraction of the uranium. About 619,000 km 2 of

land area had been covered by aerial radiometric survey and another 90,000k m 2

had been covered by other survey. Since then no further work has been done.

Uranium ore are complex assemblages of minerals and therefore differ widely in

details of composition and texture. The characterization of the known uranium ore

minerals in the country has been carried out. There is however the need to

develop the extraction processes for each of them, on the basis of which is

commercially viable pilot plant could be established.

 17

In addition to the generation of electricity, nuclear energy is used on medical

applications and other peaceful applications.

6 Hydro Power

Hydropower is one of major sources of base load electricity generation.

Despite its high initial capital cost, hydropower provides one of the cheapest and

cleanest sources of electricity. The country is well endowed with large rivers and

some few natural falls which are together responsible for the high hydropower

potentials of the country. The River Niger and Benue and their several tributaries

constitute the core of the Nigerian river system, which offers a renewable source

of energy for large scale (greater than 100mw) hydropower development. In

addition, several scores of small rivers and streams do exist and can be

harnessed for small scale (less than 10mw) hydropower projects. In Nigeria,

hydropower generation accounts for a substantial part of the total electricity

generation mix. Hydroelectricity represented about 32% of the installed national

grid that is connected to the electricity generation capacity by early 1999.

7 Fuel wood

Over 60% of Nigerian population depends on fuel wood for cooking and

other domestic uses. The consumption of fuel wood is worsened by the

widespread use of inefficient cooking methods, the most common of which is still

an open fire. This system has a very low thermal efficiency and the smoke is also

hazardous to human health especially to women and children who mostly do the

cooking in homes.

The largest sources of fuel wood at present are from open forests communal

woodlots and private farmlands. The rate of consumption of fuel wood far exceeds
 18

the replenishing rate to such an extent that desert encroachment, soil erosion and

loss of soil fertility are now serious problems in the country.

8 Solar Energy

Solar radiation incident on the earth‟s surface varies in intensity with

location, season, day of the month, time of day, instantaneous cloud cover and

other environmental factors. However these require the incorporation of efficient

storage devices.

Nigerian lies within a high sunshine belt and within the country solar radiation is

fairly well distributed. The annual average of total solar radiation varies from about

12.6mj / m2 - day in the far North. There is tremendous potential in solar energy,

although, much work need to be done in the development and popularization of

application equipment and systems. Solar and environmental data acquisition and

development of standards for materials, design and equipment manufacture.

3.2 The Energy Resources and the Economy

Nigeria is one of the world‟s leading oil producing nations, ranking second

after Libya in Africa, and nineth in the world. Athough Nigeria‟s first crude oil

export was in 1959, the commodity has since the 1970‟s become the mainstay of

the nation‟s economy. Currently, oil constitutes over 95% of the national income,

over 88% of Federal Government revenue, and over 92% of the country‟s foreign

exchange earnings. Nigeria has, in recent years, become heavily dependent on oil

revenue to the utter neglect of the agricultural products then, were palm produce in

the East, groundnuts, in the North, and cocoa in the West. Export of these

products amounted to between 70% and 80% of the county‟s foreign exchange

earnings. Added to these were cassava, yam, beans, millet, rice, etc, which
 19

satisfied the domestic requirements. The oil boom, perhaps inadvertently, brought

about the neglect of the production of export crops and domestic agricultural

products, whose market prices are no longer as lucrative as that of oil to the end

that, export crops contribute far less than 5% of the nation‟s foreign earnings. With

this, it becomes obvious that the Nigeria‟s economy is predominantly dependent

on the oil and gas sub sectors. Table below gives the last five year data on the

contribution of oil and gas to exports income. Federal Government revenue and

gross domestic product GDP (at constant 1984 factor cost) the shares of export

(Fob) range from 95% to approximately 99% and federal government revenue

from +71% to 83.5% over 1999-2003. However the range of the share of GDP is

only 9-12% indicating low domestic value added in the sub-sectors. Table 3.2.1

below shows the central bank statistical data of the Federal Government‟s

incomes in the last five years.

Table 3.1.2 Share of oil and Gas in National Incomes

Year 1999 2000 2001 2002 2003 Total value

N bill 2003
Share of Exports (Fob) % 98.4 98.7 98.6 95.0 96.7 2,889.8

Share of total Feb Govt Revenue % 76.3 83.5 76.5 71.1 80.6 2,575.1

Share of GDP 1984 Const. factor 11.1 11.9 12.0 10.0 8.9 136.47

cost %

tce = tones f coal equivalent

Source: CBN statistical Bulletin, Vol 14, Dec 2003.

The other energy resources like the solid energy minerals coal makes very

negligible contributions to the economy while tar sands and Uranium are not being

exploited at all.
 20

The shares of the energy resources in commercial energy consumption, over 1999

– 2003 are shown in the table below

Table 3.2: Shares of commercial Energy consumption

Year 1999 2000 2001 2002 2003 Total consumed

000 tce 2003
Petroleum Products 37.75 37.56 42.38 43.17 43.91 25,644.6

Natural Gas 53.21 54.57 52.35 51.77 51.23 29,925.0

Hydropower 9.00 7.84 5.25 5.04 4.85 2,835.1

Coal 0.004 0.03 0.02 0.02 0.01 8.2

Natural Production 5.86 47.54 57.53 101.98 53.38

bcm

Gas flared % 64.7 53.8 48.5 74.3 42.7

tce = tones of coal equivalent

Source: CBN Annual Report and Statement of Accounts, Dec 2003

CBN Statistical Bulletin, Vol 14, Dec 2003

The greater part of Natural gas consumption goes to production of liquefied

Natural gas which is channeled for export. An unacceptably high proportion of the

Natural gas produced was still being flared (42.7% or 22.79 billion cubic meters )

by 2003. Actual final consumption of commercial energy within the economy

consists mostly of petroleum products. Coal‟s share fell from dominance in the

1960s to negligible value in the post 1970 period, having lost its market in train

transportation, power generation and cement production to oil and gas.

The levels of commercial energy supply to the economy are inadequate thereby

hampering rapid commercial and economic growth. The existing refineries, with a

total installed name plate capacity of 445,000 barrels/day, had until recently, been

running at very low availabilities (as low as 20%). Massive importation of

 21

petroleum products (over 80% of consumption for PMS) had been resorted to, to

alleviate the consequent scarcities and fuel queues. A kerosene retail price in the

rural areas is frequently higher and doubles the official pump price indicating its

scarcity.

Natural gas is available only in some southern cities (Port Harcourt, Aba, Warri,

Lagos and Ajaokuta. This is because of the limited pipeline transmission and

distribution network in the other parts of the country. The large shortfall of

electricity supply (3500mw to 7000mw over 1999 to 2005) against a demand of

about 10000 – 12000mw is not due to energy resource shortage but is due mostly

to inadequate funding for maintenance, refurbishment and capacity expansion.

PERCENTAGE SHARE OF ENERGY CONSUMMED

Illustrated below is the changing pattern of Sources of primary energy consumed in
the country. This chart prepared by the Engineers Committee suggests an optimal
consumption pattern through 2010. Obviously, there is need for more work and greater
refinement in the field.
Fuel wood

hydro

Nat. gas

Crude oil
100

80

60

40

20

0 1980 1982 1985 1990 1995 2000 2005 2010

Optimal domestic primary energy consumption (1980 – 2010)

 22

3.3 Natural Gas reserves in Nigeria

There are no generally definition of natural gas reserves and wide variation both in

terms and principles may be met. The following definitions are the most commonly

used.

(i) Expected Ultimate Recovery:- Is the total volume of hydrocarbon /gas

and/ or oil, which may be expected to be recoverable commercially from a

given area of current or anticipated prices and costs, under existing or

anticipated regulatory practices and with known methods and equipment.

The total can be expressed as the sum of the “ultimate Recovery from

Existing field” and the „Expectation from future discoveries.

(ii) Ultimate Recovery from Existing fields:- Is the sum of the “cumulative

production” from such fields and the Reserves from Existing fields

(iii) Reserves from Existing Fields: are the sum of “Proven Reserves”

“Discounted (ie 50% of ) probable Reserves” and Discounted (ie 25% of )

possible Reserves.

(iv) Proven Reserves: This represent the quantities of Crude oil and or natural

gas and natural liquids which geological and engineering data demonstrate

with reasonable certainly to be recoverable in the future from known oil and/

or gas reservoirs. The present strictly technical judgment and are not

knowingly influenced by attitude of conservation or optimum.

(v) Discounted (ie 50% of ): probable reserves are those quantities of crude

oil or and or natural gas and natural gas liquid for which there exists a

probability of 50% that the will materialize such serves are usually allocated
 23

to some conjectural part of a field or reservoir as yet undrilled or

incompletely evaluated where, while characteristics of the production Zone

and fluid content are reasonably favourable, other uncertain features may

have equal chances of being favourable or unfavourable for commercial

production.

(vi) Discounted (ie 25% of): Possible Reserves are those quantities though to

be potentially producible but where the chance of their being realized is

thought to be on the order of 25%. Reserved in this Category are usually

allocated to possible extensions of existing fields where, although

geological data may be favourable, uncertainties as to the characteristics of

the production zone and / or fluid content are such as to preclude a

probability greater than 25%.

Terminology of Reserves
Expected Ultimate Recovery

Ultimate Recovery from existing fields

Expected from
future discoveries
Reserves from existing fields
Cumulative
production
Discounted Discounted
Proven (ie 50% of (ie 25% of
Reserves probable possible
reserves reserves

Gas Reserves position and current allocation

 24

Gas Reserves

Yr 2004 AG NAG TOTAL(TCF)

Ult. Recovery ≈ 143 92 235
Produced 44 4 48
Rem. Reserves ≈ 99 88 187

210
180
150
T 120
C
90
F
60
30
0
92

93

94

95

96

97

98

99

00

01

02

03

04
19

19

19

19

19

19

19

19

20

20

20

20

20
AG NAG

Sources: Nigerian Gas Company, Warri

The proven gas reserve in Nigeria is 187Trillion cubic feet (associated gas and

non-associated gas in the ratio of 9:8) with an estimated 44% being flared).

The constraints that frustrate accurate determination of global natural gas reserves

also apply to Nigerian‟s reserves. The principal one among those constraints is

that proven natural gas reserves are dependent on the level of petroleum

exploitation as most existing reserves are associated gas. Consequently proven

natural gas reserves increase in crude oil output since there is no deliberate effort

to exploit for gas in Nigeria to date. Gas found is incidental to oil exploration

activities.

By 1978/79, Nigeria proven natural gas reserves was in excess of 2130 x 10 9m3,

when crude oil production stood at 818,726, 946 barrels. In 1992, the proven

reserve of gas was 105 Trillion cubic feet (fig 3.3.2) of which 40% was associated

gas and the rest are non-associated gas. In 2000, the proven reserves have risen

to 130 trillion cubic feet representing an increment of almost 10% since 1992. In

2004 it was estimated that the total ultimate gas recoverable stood at 235 trillion
 25

standard cubic feet of which 143 trillion standard cubic feet is associated gas

representing 70% of the total recoverable while 92 trillion standard cubic feet

representing 30% in non-associated gas. Produced gas by 2004 was 48 trillion

standard cubic feet representing 12% of the total recoverable of which 44 trillion of

the produced gas is associated gas and 4 trillion standard cubic feet is non-

associated gas. The proven gas reserve as at 2004 was 187 trillion standard cubic

feet (associated and non-associated in the ratio of 9:8).

With these, Nigeria is ranked the 8th largest in the world in terms of world

Reserves Ranking by OPEC (World Oil, August 2003) and the largest in Africa.

This reserve could sustain the country‟s economic activities far beyond the turn of

this century. However, due to inconsistency in our energy policy and the absence

of sufficient local market utilization most of this reserve is currently being wasted

by flaring.

3.4 Gas Demand and Supply in Nigeria

The level of commercial energy supply to the economy is inadequate although the

phenomenal rise in gas utilization is due to the improvement in the operations of

major users of gas. Gas demand is expected to grow from the current

573mmscf/D to 1,700mmscf/D or more in 2010. This is due to the growing

consciousness towards increased natural gas consumption within the country.

Unlike in the 1970‟s when natural gas consumption was limited to areas

surrounding oil fields. Gas consumption has been diversified with the consumption

of the nations iron and steel industry, the gas powered stations and the fertilizer

companies. The rapid growth of gas demand is primarily dependent on pipeline

infrastructure development. Power generation provides adequate volume for

 26

pipeline infrastructure investment, together with private gas conversion plants

which adds to the demand.

Table 3.4.1 shows the sectional Gas consumptions in Nigeria.

Location Natural Gas cosumers

SAPELE NEPA Power Station Ogorode

ALADJA Ajaokuta Steel Plant

OBIGBO NORTH NEPA Power Station, Afam

ALAKRI National Fertilizer Company (NAFCON)

ALAKRI Aluminum Smelter Plant (ALSCON)

LAGOS NEPA Power Plant Egbin, Escravos – Lagos Pipeline

and Spans to Industrial Estates

IMO – RIVER ABA PZ Industries, Nigerian Breweries, International Equitable

Companies, International Glass Industry

SAPELE Delta Glass Company, Ughelli

The power sector consumes almost 91% of the gas consumption with the rising

gas demand, gas producers are exploiting highly prospective new gas areas to be

drilled. With the analysis of existing discoveries yet to complete, eventual gas

reserve may exceed 300 trillion cubic feet.

 27

3.5 Natural Gas Flaring

The flaring of the nation‟s natural gas reserves despite the loss of value of oil in

the international energy market has attracted much criticism in recent times.

However the growing public concern for natural gas wastage and the harsh

realities of the recent economic recovery measures have moved the government

to give a more serious consideration to natural gas conservation.

The government have put in place measures to reduce gas flaring by oil producing

companies. These measures have not yield the expected result, although 2008

was given as the final date to achieve this.

Gas flaring here reduced considerable from 1999 to 2003 form (figure 3.5.1).

Gas Flaring Reduction Efforts

Gas Produced: Utilised and Flared

2,000 80%

% Flared
70%
1,500 % Gas Flared
BScf

60%

1,000
50%

500
40%

- 30%
1996 1997 1998 1999 2000 2001 2002 2003

GAS FLARED INJECT./LIFT FUEL NGL

GAS SOLD LNG % FLARED

Gas flare ratio reduced by an impressive

20.3% point in 4 years from 1999 to 2003

This figure shows the volume of gas produced, utilized and flared. In 1996, 72% of

the total gas produced was flared and in 1999, the level gradually reduced to 62%

to its present level of 42% in 2003. With this, gas flare ratio reduced by an

impressive 20.3% point in 4 years from 1999 to 2003. Although consideration and

impressive is level of gas being flared reduced to the present ratio of 44.82%
 28

approximate 45% in 2005. It should however be noted that the level of gas still

flared is capable of generating 69W electric power and translating to lost economic

value of $5 billion/year.

3.6 Existing Gas Infrastructure in Nigeria

The various gas facilities existing in the country are mostly own by the Nigerian

gas company which is empowered by the government to handle all related gas

projects in the country. It maintains approximately 1,158km of gas transmission

pipelines providing transportation and sales services. Figure 3.6.1 shows the

Nigerian gas company operated gas pipeline, which transports LNG products from

the Niger Delta to various parts of the country extending to some west African

countries. Some of the pipelines have been operating since 2000 while some are

still in various construction stages.

Show in figure 3.6.1 and 3.6.2 are the eastern and western pipeline system.

Fig 3.6.1

Eastern Pipelines
A Aba
Eleme
O
Imo River

R
Obigbo North
F Onne
NAFCON

Alakiri

LEGEND N
Afam
Pipelines : Customers :
Existing N NEPA
On - going
A Aba Industries (IGIL)
Planned
O RSEB Gas Turbine, Eleme ALSCON
Gas Sources : R PHRC (Refinery) Ikot Abasi
NAG Gas Plant F NAFCON Fertilizer Plant
AG Compressor Station ALSCON Plant, Ikot Abasi
 29

Fig 3.6.2

Western Pipelines
To Abuja/Kaduna

Ajaokuta
Ewekoro ASCL
W Shagamu
W Okpella
Cement
TO ECOWAS

N Oben
L Egbin
Ikeja Sapele
N
LEGEND Sapele
Makaraba Eriemu
Pipelines : Customers : Jones Creek
Existing N
N NEPA S
On-going Escravos
Planned W WAPCO Beach
L Lagos Industry Odidi
Gas source : WRPC Ughelli East
S SPDC Estates
NAG Gas Plant
DSC
AG Compressor Station Utorogu
Aladja

This is necessary because 90% of the various gas consumers are from these

parts of the country. This is because of its proximity to the delta region. The

eastern system currently requires no compression equipment because of the

excess of pressure from Nigeria Agip Gas supplies.

Other existing gas facilities in Nigeria owned by Nigerian Gas Company includes

1) Fourteen (14) compressor stations of which 12 compressor stations are

presently leased to shell petroleum, of which five(5) are currently functional.

The five compressor stations are located at Erimu, Utorogu, Afiesere, Oben

and Sapele. The Nine(9) other compressors station are now been

refurbished.

2) Eighteen (18) metering stations located to various parts of the delta region

3) 1,115km of pipelines with 2.04 billion cubic feet per day (2.04 bcf/d)

installed capacity at a present demand of approximately 570mmscf/d. This

 30

translate to about $930m invested in assets (Table 3.6.1) shows the

existing Gas supply system

Table 3.6.1

Existing Gas Supply Systems

S/N PIPELINE Length Diameter Capacity Installed Year of Consumer
SYSTEM (KM) (Inch) mmscf/d Cost Compltn
(US$'M)

1 Sapele System 44 10&18 200 51.08 1977 NEPA

2 Oben - Ajaokuta 198 24 200 54.35 1983 ASCL

3 Aladja System 130 6,8,14&16 70 101.84 1984 DSCL

4 Obigbo N - Afam 19 14 90 20.26 1986 NEPA

5 Alakiri - Onne 17 14 138 27.57 1987 NAFCON

6 Imo River System 28 12 35 14.14 1988 Aba Industries

7 Escravos-Lagos 514 30&36 1,100 521.21 1992 NEPA, WAPCO

System W RPC, PZ & Kew
Metals

8 ALSCON System 117 14, 16 & 24 160 124.07 1996 ALSCON

9 Ibafo-Ikeja City 48 24 50 22.95 1999 Gaslink and SNG,

Gate System for Lagos &
environs

TOTAL 1,115 2,043 937.46

Source: Nigerian Gas Company Report, 2004

3.7 Domestic Gas Market

Most of the gases supplied to the domestic markets come from Shell

Petroleum Developing Company gas stations. Other sources of gas

supplies are Chevron and Agip Companies in the Escravos part of the Niger

Delta. Although some of these gas stations are producing at their full

installed capacity, which is capable of supplying most of the gas

requirement needed to satisfy the domestic market but inadequate supply

channel becomes the major hitch in gas supply.

 31

Table 3.7.1

SOURCES OF GAS SUPPLY TO DOMESTIC

MARKET

JV SUPPLY SOURCE GAS VOLUME (MMscf/d)

Current Design
availability availability
SPDC -Utorogu Plant (NAG) 209 270
(West/East) - Sapele (NAG) 37 90
- Oben (NAG) 99 100
- Ughelli East ( NAG) 63 63
- Odidi (AGG) 40 40
- Obgibgo Node (AGG) 50 80
-Obibgo (NAG) 63 90
- Afam NAG 75 75
CNL Escravos 160 200
*
* TOTAL 796 1,008
*

The table above gives a detailed gas by volume supplied by Shell Petroleum

Development Company (SPDC) to the domestic market. The table also classifies

the volume of gas currently available compared to its designed availability. Shown

in figure 3.7.2 is the list of gas consumers in Nigeria.

Location Natural Gas cosumers

SAPELE NEPA Power Station Ogorode

ALADJA Ajaokuta Steel Plant

OBIGBO NORTH NEPA Power Station, Afam

ALAKRI National Fertilizer Company (NAFCON)

ALAKRI Aluminum Smelter Plant (ALSCON)

LAGOS NEPA Power Plant Egbin, Escravos – Lagos Pipeline

and Spans to Industrial Estates

IMO – RIVER ABA PZ Industries, Nigerian Breweries, International Equitable

 32

Companies, International Glass Industry

SAPELE Delta Glass Company, Ughelli

Other gas consumers include, Portharcourt and Refineries, Aba textile mills,

Nigerian breweries plc, Delta glass company Ughelli, PHCN Elesa, International

glass company Aba, Lever brothers Aba, Associated industries ltd. etc

The demand has increased the volume of gas consumed in Nigeria. In 1990 the

volume of gas consumed stood at 80bscf and this has increased to about 170bscf

in 2003. Figure 3.7.2 is the sales of gas in volume by category in bscf of gas in

Nigeria.

Fig 3.7.2

Sales Volumes by Category,

Bscf
200

150
Bscf

100

50

0
1990 1995 2000 2001 2002 2003
Year
quasi-Paras Parastatals Commercial

Source; Nigerian Gas Company’s report, July 2004

Figure 3.7.3 shows the graph of domestic gas utilization trend from 1992 to 2004
 33

Fig 3.7.3

DOMESTIC GAS UTILISATION HISTORICAL TREND

Utilisa tion (Pow e r + Loca l Industry)
700

600

500
Tota l Ga s Utilise d
mmsdf/d

400

300

200

100 Pow e r Consumption

0
1992 1994 1996 1998 2000 2002 2004

Sharp increase from 2000

Source; Nigerian Gas Company’s report, July 2004

From the graph, over 72% of gas consumed presently is for electricity generation

and it will be greater if the 14 new power stations the federation government and

independent power operators are embarking on are completed. It is also

conceivable that despite the quantities of natural gas already committed to

fertilizer plant, industries and NLNG project, a large portion of the reserves may

remain available in the medium and long-term. Table 3.7.2 is the proposed and

existing potential demand on gas.

Table 3.7.2

EXISTING AND POTENTIAL DEMAND ON NGC SYSTEMS

POWER
2010-
Consumer Name/Location 2001 2002 2003 2004 2005 2006 2007 2008 2009 2012
PHCN Egbin* 183 310 365 420 420 420 420 420 420 420
PHCN Sapele 46 175 200 210 225 225 225 225 225 225
PHCN Delta IV 50 50 90 120 140 140 140 140 140 140
PHCN Geregu 0 0 0 0 0 90 110 210 210 210
SPDC/PHCN Abuja 0 0 0 0 0 0 0 0 90 200
PHCN Omotosho 0 0 0 0 0 25 110 170 170 170
PHCN Papalanto 0 0 0 0 0 25 110 170 170 170
PHCN Alaoji 0 0 0 0 0 60 60 60 60 60
PHCN Afam 10 0 69 69 138 138 138 138 138 138
RSMP Elesa-Eleme 2 2 3 3 4 4 4 4 4 4
LYK (IBOM
Power) Ikot Abasi 0 0 0 0 40 130 156 156 156 156
 34

Phase II
LYK (IBOM
Power)
Phase I Ikot Abasi 0 0 0 20 40 40 40 40 40 40
TOTAL (MW) 291 537 727 842 1007 1297 1513 1733 1823 1933

NON
POWER

WAPCO Shagamu 16 17 17 17 17 17 17 17 17 17
WAPCO Ewekoro 11 8 8 14 14 14 14 14 14 14
WRPC Warri 4 4 4 4 4 4 4 4 4 4
ASC Utilities Ajaokuta 0 1 1 1 1 1 1 1 1 1
DSC Utilities Aladja 0 0 0 0 0 0 0 0 0 0
ALSCON
Utilities Ikot Abasi 8 8 8 8 8 8 8 8 8 8
NAFCON I
Utilities Onne 4 4 4 4 4 4 4 4 4 4
ALSCON
Process Ikot Abasi 0 0 0 0 30 80 94 94 94 94
SNG
(Agbara/Otta) Agbara/Otta 0 2 5 10 10 15 15 15 15 15
Ikorodu
Industries
(Phase I & II) Lagos 0 1 2 3 5 10 10 10 10 10
Edjeba Edjeba 3 5 5 5 5 5 5 5 5 5
GasLink
Lagos
Market Ikeja/Apapa 3 5 5 10 15 15 15 15 15 15
NAFCON I
Process Onne 0 0 0 41 49 49 49 49 49 49

PHRC Port Harcourt 0 0 0 4 4 4 4 4 4 4

B.E.T
(PPMC) Bonny 0 0 0 1 1 1 1 1 1 1
TOTAL (MW) 49 55 59 122 167 227 241 241 241 241

3.8 Liquefied Natural Gas Project in Nigeria

The need to develop an export – oriented liquefied natural gas project as a

complimentary source of revenue to crude oil cannot be over emphasized.

In fact, the earliest effort at a major LNG project was made in 1966, when the

British Gas cooperation indicated its intention to buy LNG from Nigeria.

Unfortunately, the discovery of natural gas in the North Sea Sealed the fate of that
 35

project initiative. The next effort was made in 1973, following the onset of the

energy crisis. The plan was to sell LNG to the United States. Though, lengthily and

elaborate negotiations were carried out, the subsequent discovery of enormous

quantities of natural gas in nearby Mexico as well as Alaska, and the change in

policy by Canada to supply more gas to the United States than it had earlier

agreed on frustrated that effort.

The LNG in Nigeria was finally established in 1991, and the first export was

recorded in 1999 of which there was not a single gas export programme before

then. Train 1, 2, 3, 4 and 5 of the LNG plant are running. In Figure 3.8.1 Train 1

and 2 of the NLG programme are currently producing for export 700mmcffd. Other

liquefied natural gas export project in Nigeria include 1bef/d from NLNG train 3

while train 4 and 5 produces 1,340mmcf/d. Private owned companies participating

in the Liquefied gas projects outside Nigeria Liquefied Natural gas company

include Elf EGp2/WAGP which presently produces 350mmcf/d and is expected to

reach a peak of 450mmcfd from 2007. EAGP NGC produces 630mmcfd, while

Exxon mobile LNG is in excess of 10million tons per annum. Chevron‟s 34,000

metric tons gas to liquid (GTL) Escravos project is on stream and the 20 million

tons per annum Olokola LNG programme as well. Other on going liquefied Gas

projects include EGP3/GTC, EGP2/WACP expansion are expected to produce

12.9Tcf per annum.

Fig 3.8.1

Export Gas Volume

8.0

Source: NIPIAM Bulletin Dec.2005

6.0

4.0
An approximately analysis of expected long term natural gas usage for the
Bcfd

2.0
power sector, industries and export from now to 2012 is given below.
0.0
2000 2005 2010 2015 2020

NLNG (T1&2) NGL's/LPG's (East/W est)

NLNG (T3) EGP2/W AGP
 36

(A) POWER SECTOR;

Total gas requirement till 2012 -----------------------1.165 Trillion cubic feet

(B) INDUSTRIAL SECTOR;

South East Zone ---------------------------------------0.500 Trillion Cubic feet

South West Zone ------------------------------------0.605 Trillion Cubic feet

North Zone ---------------------------------------------0.34 Trillion Cubic feet

Total = 1.474 Trillion cubic feet per year.

(C) EXPORT SECTOR ;

NLNG Plants ---------------------------------------------1.57 Trillion Cubic feet

Private sector participation ----------------------------1.43 Trillion Cubic feet

Total Projected for export = 3Trillion Cubic feet

Then, the Total cumulative for the Power sector, Industrial sector and the export

sector =5.639 Trillion cubic feet

3.9 Constraints and Barriers of Gas demand and Supply

1) Transportation

The absence of a natural gas transportation grid to link supply points with potential

demand centers. Natural gas transportation either by methane carriers or pipeline

is more expensive than oil transportation by oil tankers. A 610mm diameter

pipeline has a transportation capability three times larger for conveying oil than for

natural gas. A methane carrier capable of transporting 10,000tons of liquefied

natural gas requires the same overall dimensions as an oil tanker having a

transport capacity of 25,000 tons. Therefore, where the delivered price of oil and

natural gas are substantially in parity, the return to natural gas producer is less at

a result of increased transportation cost. The high cost of natural gas

transportation is due to advanced technical skill and sophisticated equipment that

are required (1 bid p 59)

 37

Unlike crude oil which could be transported in its raw state, natural gas

transportation take place only after it has been processed, compressed and at

times liquefied. Raw natural gas contains high degree of impurities like carbon

dioxide hydrogen sulphide, water vapour and nitrogen. Most of these substances,

especially, water vapour would condense at high pressure, thus obstructing

smooth gas flow while others like hydrogen sulphide are toxic and corrosive. After

processing, the gas is compressed at high pressure and feed into the pipeline.

When the distance of transmission is considerable long, the gas is liquefied by

cryogenics during which about 600m3 of natural gas shrinks to 1m3 at 600oC.

Thus, large quantities of gas could be transported at an instant. Beside

intermediate compression stations might be required to restore gas pressure in a

pipeline to the original inlet pressure. These additional handling increases the

transportation cost of natural gas.

Furthermore, natural gas unlike crude oil requires leakage proof pipes capable of

with standing high pressures, and corrosion. Besides, the pipes must possess high

reliability. Natural gas export contracts, usually spans between 25 to 30years. The

reliability of the pipeline system either submarine or otherwise should be such as

to cover the duration of the contract. The cost of these transmission systems is

discouraging

2) The downstream private sector financing of gas exploitation infrastructures are

limited by lack of fund because of the huge investment requirement that is very

high.

3) Also, a major barrier in the gas sector is the social, community and

environmental issues that have created a potential open-ended liability for

private participation and investment.

 38

4) The problem of indebt ness by end users contributes immensely to the

underdevelopment of the gas industry.

 39

CHAPTER FOUR

THE ECONOMIC PARAMETERS THAT EFFECT ECONOMIC DEVELOPMENT

The impact of Natural Gas development ultimately must be assessed in

economic terms; given performance, we need methods for making economic

evaluation. Several economic criteria have been proposed and used for evaluating

and optimizing various energy resources. Though, the increasing size of

government expenditure and lack of competitive pressure, for the more efficient

use of government resources calls for an increased need to understand the

economic desirability of using these resources.

The general decision problem is to use the available resources for

meaningful development and to maximize the general welfare of the ordinary

citizen. To accomplish this objective, a measure of the benefits occurring from

each resource is desirable.

4.1 COST BENEFITS ANALYSIS; This is one of the most widely used methods of

evaluation.When applying cost benefit analysis, the measure of a resource

contribution towards the general welfare is normally stated in terms of the benefits

to whom so ever they may accrue and the cost to be incurred.

In order for a resource to be considered desirable the benefits must exceed

the cost or the ratio of benefits to cost must be larger than one. Other wise, the

government unit concerned would be lacking in its responsibility by applying public

resources in a manner that would be counter productive and revert to a net

decrease in the general welfare of the people.

 40

i) Considering Alternative Resources

it is crucial that any alternative being considered be analyzed from proper

point of view, otherwise the description of the alternative will fail to represent all of

the significant effects associated with that alternative.

Thus, the general rule is to assume a point of view that includes all the

important consequence of the resource being considered.

This point of view can be any aspect of the economy, geographical location

or its may be restricted class of people or organization.

Usually, this easiest method for determining the appropriate point of view is

to identify the sector that will benefit and from which resources that will pay for it.

Point of View Resources

Industrial Natural gas

Power Generation Natural Gas

Revenue Generation Natural Gas

When an alternative is been considered it is important to develop a basis for

reference for identifying the impact of the resources on the nation or any other sub

– unit involved. Thus, for any resource it is important to observe what the state of

the nation or sub-unit would be with or without the project. This base of reference

provides the frame work for identifying all the important benefit and cost

associated with resources

Benefit/cost ratio is normally defined as follows

Bc(i) = Equivalent Benefit

Equivalent Cost
 41

Cost = All the disbursement less any savings to the sponsor in order to better

understand the implications of the definition, equivalent cost can be split into

components thus:

I = Equivalent Capital invested by the sponsor

C = Net Equivalent annual costs by the Sponsor

B = Net equivalent benefit to the user

then B = BC(i)
1 + C

For any resources to remain under consideration its benefit / cost ratio must

exceed 1. Therefore the first test for the project is to determine if it is minimally

acceptable by observing whether or not the equivalent benefits exceed the

equivalent cost. It is seen below that using such a criterion will eliminate all those

resources whose net equivalent amount is less than zero.

If BC(i) > 1

Then B > 1, Given B – (1 + C) > 0

1+C implies that the resources is viable

But if BC(i) = B <1

1+C

Then the resources is not viable

4.2 LIFE CYCLE COST;

This is the total cost associated with energy delivery system over its life

time or over a selected period of analysis in today currency and take into account

the time value of money. The basic idea of life cycle cost is that anticipated future

costs are brought back to present cost (discounted) by calculating how much

would be invested at a market discount rate which is the rate of return on the best

alternative investment and to make fund available in the future when the will be in

need and to meet anticipated expenses. The figure of merit includes inflation when
 42

estimating future expenses. It includes only major cost items or as many details as

may be significant. This is selected as the most cost effective. This method of

analysis is most dependent on accurate prediction of future cost and is a method

of economic evaluation that is generally appropriate for evaluating an investment

whose principal benefits occur in the form of cost saving.

INFLATION;

The most complete approach to Natural Gas economics is to use life cycle

cost method that take into account all future expenses. This method provides a

means of comparison of future cost with today‟s cost. This is done by discounting

all anticipated costs to the common basis of present worth (or present value), that

would have to be invested today, at the best alternative investment rate, to have

the fund available in the future to meet all of the anticipated expenses. The fact

that cash flow (net payment) must be discounted lies in the “time value of money”.

The relationship for determining present worth of ₦1 (lets use naira which is

Nigerian currency here) needed Y periods (usually in years) in the future, with a

market discount rate of dc in percentage (fraction per time period) is

Present Worth PW = 1 ----------- (10)

(1 + d c)r

Therefore an estimated expense of ₦1 for 5years will be equivalent to a present

worth of N0.681 today at a market discount rate of percent

PW = 1 = 1
(1 + 8/ 100)5 (1.08)5

= 1/ 1..469328
≈ N0.681
 43

With this to have ₦1000 available in 5years it would be necessary to make an

investment of ₦681 today at an annual rate of return of 8 percent (%).

Another thing to be considered is that many recurring costs can be

assumed to inflate (or deflate) at a fixed percentage each period. Therefore an

expense of ₦1.00 when inflated at a rate (r), will be ( 1 + r) at the end of end time

period, (1 + r)2 at the end of an additional time period, etc

If a cost A is incurred as of the end of the first time period (example a

energy bill to be paid at the end of the month or year) that recurring cost of the Y

the period is

CN = A (1 + r)Y-1

Example

Cost (A) = ₦1.00

Inflation rater per year = 6%

Period = 5 years

Therefore,

CY = 1 (1 +6/100 )5-1

CN = 1 (1 +0.06 )4

= 1.26

ADVANTAGES AND DISAVANTAGES

It is useful for determining analysis of an accurate return on each energy

source, making provision for inflation. If the total life-cycle costs are lower with a

natural gas energy system than with other energy systems, then natural gas

energy is cost-effective.
 44

The life-cycle cost method however is not always effective for evaluating

investment in gas relative to competing investment because the method does not

lend itself on ranking competing investment in terms of other economic efficiency.

4.3 UNCERTAINTY ANALYSIS

Many assumption and uncertainties are involved in the use of economic analysis

method. The analyst must make estimates of many economic parameters, with

varying degrees of uncertainly; like in projection of future energy cost is difficult.

Therefore it is necessary to determine the effect of uncertainties on life calculated

life cycle saving.

4.4 ANNUALIZED LIFE CYCLE COST

This is the average yearly out flow of money (cash flow). The actual flow

varies with year, but the sum over the period of an economic analysis can be

converted to a series of equal payment in today‟s money (Naira) that are

equivalent to the varying series.

This is also the average yearly out flow of money (cash flow). Annualized

life cycle savings following the same idea with the annualized life cycle cost.

This method has the advantage of indicating the relative efficiencies of

alternative investments. It therefore may be useful in comparing natural gas as a

source of energy with investment on other energy options.

Major disadvantages arise in using the internal rate return method to determine

the economically efficient natural gas energy source. As an investment is

expanded, the rate of return on the overall investment may fall but the rate of

return of addition investment may nevertheless be above the minimum attractive

return. As in the other case, however this problem can be overcome by using the

internal rate of return method to analyses incremental changes in the investment

rather than the total investment.

 45

4.5 PAYBACK TIME

This is the period of time required for profit or other benefit of an investment

to equal the cost of the investment.

Pay back method is a straight calculation of the term in years which will

elapse before the total saving equate to the capital sum invested in the

profit.

The period is computed as follows:-

Payback period = Cost of project

Annual saving

4.6 Return on Investment:

This method is more accurate than payback method and

comparative cost which is the measure of capital cost on a resources and

the income over the life of the project. Return of investment allows for

measurement of the return over the useful life of the project. The formula

allows for a series of percentage to be calculated as follows

Total net income

Less depreciation Average net annual income for n
= years per N of average
Life (in years) x average working investment over n years in both
capital + half initial outlay fixed and net current assets

4.7 Export Diversification: The economic development of Nigeria is also

determined by the volume of its export. Nigerian gas reserve is rank as the 10th

largest gas in the world. The Nigerian Liquidfield natural gas company now

exports liquid natural gas African countries and other western countries. This

has increased the nations export base to large extent and generates billions of

dollars as revenue to the country.

 46

4.8 Human Development: This is the most aspect of economic development,

because a country‟s human resources is its greatest assets. The gas sector

have trained and employed large number of Nigerian thereby developing the

nations human resources

The sector has contributed immensely to the development of our

educational sector by offering the highest percentage of scholarship in various

fields to students thereby investing in human resources training.

To summarize briefly the main steps that would be taken to evaluated the

cost effectiveness of energy sources are the following

1 Select a method of economic evaluation, taking into account the nature

of the choice and any special investment consideration.

2 Decide on the basic assumptions and select values for key economic

parameters such as economic lifetime, loan interest rates, discount rate

and present and future energy prices.

3 Carry out the evaluation method for each alternative to obtain

comparative measures, of economic performance for each alternative.

4 Select alternative with the highest economic performance.

 47

CHAPTER FIVE

APPLICATIONS OF NATURAL GAS

5.1 Industrial application of natural gas

(1) Natural gas as a fuel for power generation

Natural gas is used extensively in steam and gas turbines as a fuel for power

generation. The gas turbines is designed to extract as much as possible the

energy released by the combustion of natural gas and to deliver it in a useable

form of a rotating output shaft. But in the case of the steam turbines, natural gas

serves as boiler fuel for stesam generation. The arrangement of a simple gas and

steam turbines are shown.

The Gas Turbine

Air intake into the compressor rotor is controlled by a row of meet guide vanes

fixed to the casing. Thereafter, each row of rotating blades is followed by a row of

stationary vanes which serves to convert part of the velocity energy imparted to

the air by the rotating assembly into pressure and to re-direct the air to meet the

next row of rotating blades at the correct angle of incidence. The cycle is repeated

in each stage until the final pressure is attained.

The air passes into the combustion chamber which usually consists of a number of

flame tubes into which fuel is sprayed at high pressure. The burner nozzle atomize

the fuel to ensure intimate contact with the oxygen in the air which is already

heated by compression while the flame tube localize the hot flame to ensure

complete combustion. The heat generated by the burning fuel expands the air,

thus, increasing its velocity further before it passes to the turbine.

The turbine acts in reverse sense to the compressor each row of rotating blades is

preceded by a row of stators that direct the already high velocity gaseous products
 48

of combustion to impinge on the rotating blades. Both pressure and velocity are

converted to shaft power. The loss of pressure as the fluid releases its energy to

the turbine is akin to the voltage drop across the electric motor. Part of the shaft

power is used to drive the compressor while the rest sustains the cycle of

operation. The compressor and its driving turbines are designed to operate at the

same rotational speed and are directly coupled on the same shaft resulting in an

extreme compact device in which maximum pressure in the cycle is determined by

the conditions at the compressor delivery. Most modern gas turbines operate on a

dual fuel system (Peter, B.C, Mechanical prime movers): Mechanical engineering

series, New York: Macmillan Press Ltd., 1971, Pg 73)

Steam Turbine

The steam turbines operate on the same principle as the gas turbine, the only

difference being that the driving fluid is water instead of air. Natural gas serves as

combustion fuel for the boiler, where the pressurized water leaving the pump is

converted into steam. The pressurized steam expands through the turbine-doing

some work in the process.

Part of the energy released by the steam is used to drive the pump while the rest

drives the alternator. The fall in pressure as the fluid flows through the turbine is

equivalent to the voltage drop across the electric motor.

Other Applications of Steam Turbines

The gas turbine characteristics of high reliability long running life and its dual fuel

system (Gas to Oil), have made it very useful prime mover for the petroleum

industry, into the oil fields and in processing plants. In oil fields gas turbines are

used to generate electricity drive gas compressors, or oil pumps. It is equally used

in gas and oil pipeline transmission and distribution networks. They are applied at

terminals installations are unmanned and are automatically controlled. Some gas
 49

turbines are used as auxiliary power units in air craft. Gas turbines have

successfully been adapted to drive water pumps for fire – fighting equipments.

Apart from power generation, the exhaust gases could be of secondary utility in

boilers (Steam raising, brewing (Steam), ceramics (Kiln drying), building services

(steam and air conditioning) cattle food production (Crop drying), industrial building

complexes (steam), refinery services (steam), sewage treatment (blower drive),

sulphur minning and sowing machine manufacturing plant (steam), tile making

(product drying), tobacco (steam and air conditioning), glass making (annealing

ovens), gypsum plant (product drying) (Harman, C., Gas Turbine Engineering,

London: Macmillan Press Ltd, 1981, P. 26).

Advantages of Natural Gas as the main fuel for Boilers and Combustion

Chambers in Power Stations

The use of natural gas as the main fuel for power stations offers many advantages

both on technical and economic grounds. Among these advantages are: The

elimination of expensive fuel stocking facilities in the station layout, absence of

combustion waste such as ash, and soot and the apparatus or plant for their

removal such as soot blowers, and ash precipitators, with resultant savings in

operating and capital cost. The absence of pollutants like carbon dioxide and

hydrogen sulphide in the gas stream is another advantage. Other advantages

include the elimination of soot and other fouling deposits on the boiler heat transfer

surfaces, thereby guaranteeing uptimum boiler performance and efficiency, more

exact measurement of fuel used and finer control of combustion air, reduced

combustion chamber and boiler size and the elimination of sulphurdous

compounds (SO2, SO3) and the associated corrosion danger (Francies, W., et al,

fuel and fuel Technology New York: Perganon Press, 1980, P. 354)
 50

5.1.2 Natural Gas in the Steel Industry

Natural gas is used in large quantities in several branches of the steel industry.

The several methods of making steels includes Bessemer process, the open-

hearth process and the electric furnace process. The use of natural gas is

favoured by its advantageous burning characteristics such as high purity, absence

of sulphur and ashes, high combustion efficiency, and ease of control of

combustion processes. Theoretical flame temperature of natural gas is dependent

on the combustion air temperature. Therefore, since the theoretical flame

temperature of natural gas, with no preheated air is nearly 1920 o c, it is possible to

carry out many metal heating processes with natural gas.

The whole range of iron and steel heat treatment processes such as annealing,

normalizing, brazing, carburizing, hardening and nitriding could be more

conveniently performed with natural gas. In carburizing, for instance, which is a

surface hardening phenomenon, the steel component is heated in an atmosphere

of methane 900oc. The methane dissociates and the carbon atom diffused into the

steel surface. Thus, there could radial differential carbon content in the steel

component with the core having the least carbon concentration. Consequently,

there would be greater hardness at the surface than at the core. The reaction is

terminated when the required carburized depth for the desires surface hardness is

obtained. The carburizing process is governed by the following relation. (Dieter,

G.E., Mechanical Metallurgy, New York. Macmillan Press Ltd, 1983, Pg. 128)

Cx = Co (1 – erf) x/ √4df

Where x = carburized depth

Co = Surface concentration

Cx = Concentration at carburized depth

t = Carburizing time
 51

erf = error function

The methane/carbon diffusion equation is given as

Fe + cH4 900oc (fe + c) + 2H2

Similarly, in nitriding of steel parts, the required atmosphere is ammonia at

500 – 6000oc. But in this case, Nitrogen diffuses into the steel surface,

thereby increasing its hardness according to the following equation.

2fe = 2NH3 (500 – 6000oc) 2(N + fe) + 3H2

Examples of carburizing and nitrided parts are die blocks, spindles, pumps,

shafts, moulds, for plastics, crankshafts, bearings, valves and couplings.

Besides, the carbon monoxide produced from incomplete combustion of

methane is a powerful reducing agent in steel industries.

CH4 + ¾ O2 Co + H2o
(Carbon monoxides)

Fe O + Co Fe + Co2
(Iron ore) (Reduction reaction)

5.1.3 Natural Gas in the Cement Industry

Kilns used in cement industries are refractory timed rotary cylinders which are

installed with the kiln longitudinal axis slightly inclined to the horizontal. This kiln

inclination facilitates the downward flow of cement material. The rotational velocity

of the kiln is of the order of 0.5 to 2 rev/min and the peripheral speed is 0.12 to

0.2m/s kiln diameter varies from 2.60 to 4.0m and length from 45 to 150m.

Operating zones are as follows:

1. “A drying kiln zone” which is located near the mixture inlet. It‟s task is to

evaporate the water contained in the raw material (cement mixture).

 52

2. “A preheating Zone” where dissociation process of calcareous materials

stars.

3. A “ Decombonation of line carbonate is achieved (the dissociation

temperature is nearly 765oc for magnesium carbonate and 815oc for calcium

carbonate)

4. A “Clinkersiation belt”. In this zone temperature as high as 1350 to 1500oc

are attained. Cement constituents are agglomerated into small units

5. A “Cooling kiln Zone”. Here the temperature is quickly lowered by

surrounding the clinker formed by a cooler air steam. A large part of it‟s heat

content is released. Sintering of the product occurs at temperature of the

order of 1450oc then clinker is formed. It is essential to ensure adequate

control of kiln temperature to prevent the formation of too much sintered

clinker which is difficult to mill. Fuel burners and combustion processes have

to be accurately governed to ensure reasonable kiln temperature control.

These conditions listed above can best be met with natural gas (MEDICI, M., the

Natural Gas Industry, London: Butterworth & co publishers Ltd).

 53

5.1.4 Natural Gas in the Glass Industry

Glass manufacturing techniques include three successive thermal process

namely, glass melting, glass reining and glass cooling. Natural glass firing for the

melting process instead of fuel oil or wood has brought about many advantages

such as consistency of glass composition, easier control of both melting and

manufacturing process and the absence of impurities in worked glass ware.

Manufacturers of fluorescent tubes make use of natural gas firing. In different

mixtures, natural gas serves to provide a variety of tube colours for various uses.

Natural gas is also used to make glass support for filaments and glass stream for

electrical filaments.

5.2 Domestic Application of Natural Gas

Natural gas could be distributed through pipelines to domestic and commercial

consumers like schools, hotels, and hospitals. Even for small consumers located

in remote areas, natural gas could be transported and supplied in bottles. In either

case, the gas pressure must be stepped down to the consumer level by passing it

through some expansion devices.

Natural Gas that is free of components containing sulphur has practically no

odour. Gas odorization before supply to consumers is essential to give the gas an

odour similar to that of manufactured town gas. Odorization gives an immediate

warning of the presence of natural gas in all distribution lines of a town‟s network

and in all distribution lines of a town‟s network and thus helps in locating leakages

either at some point in the distribution system or near the consumers premises.

Therefore, sulphur – containing compounds are usually added to natural gas in

trace quantities at gas stations.

 54

Odorant for natural gas must have adequate chemical stability, distinctive odour,

non toxic and non-irritating. The following compounds could serve as odorants.

Disulphide, thioethers, carbon-sulphur ring and mercaptans takes first place

followed by disulphide.

The gas thus supplied could be used in domestic boilers, cookers, and air

conditioning especially in temperate regions. The general combustion equation for

hydro carbon fuels could be expressed as

CxHy + (x + y/4) O2 XCo2 + y/2 H2o

(General equations for the combustion of hydrocarbons) when the gas stream

consists mostly of methane, the general expression reduces to where the general

expression for methane is CH4 from the equation (i) above

€= x = 1
Y=4
C1H4 + (1 + 4/4) O2 1 Co2 + 4/2 H2o

CH4 + 202 Co2 + 2 H2o

Furthermore, ethane and propane could be extracts form natural gas and supplied

to consumers in cylinders. Natural gas used in this manner are commonly called

liquefied petroleum gas (LPG). The constituents of LPG (ethane and propane)

could be mixed or unmixed. An unmixed LPG is one that consists of either ethane

or propane only, while a mixed LPG may have these constituents in varying

proportions. For an unmixed LPG, the combustion equation are as follows:

2C2H6 + 702 4Co2 + 6H2o + Heat

C3H8 + 502 3Co2 + 4H2o + Heat

 55

5.3 Natural Gas for the Petrochemical Industry

Natural gas varies widely in composition. But generally, it consists mainly of

methane (CH4) and may contain small amounts of higher parafinic hydrocarbons

such as ethane, propane and butane. The derivatives of these hydrocarbons,

constitute greater percentage of industrial petrochemicals. But since raw natural

gas is toxic and corrosive due to the presence of hydrogen sulphide mercaptans

and carbon dioxide, it is normally treated to eliminate them.

Otherwise there impurities could cause catalytic contamination in the process of

obtaining the required petrochemicals from natural gas.

The rapid growth of petrochemicals is mainly due to an increasing world

availability of natural gas, crude oil, as well as advances in technology, improved

research techniques and increased market demand. At present, about 80% of

organic chemicals are supplied by natural gas and crude oil. Through processes

like thermal and catalytic cracking, dehydrogenation, polymerization, large number

of industrial petrochemicals like ammonia, ethylene, propylene, methanol could be

obtained from natural gas. Progressive widening of world market for fertilizers has

led to a great increase in the demand for ammonia, ammonium salts and urea.

Natural gas is also the main source of methanol, hydrogen cyanide, acetylene and

various chloromethanes carbon black is also another derived product, which is

suitable for synthetic rubber production. These petrochemicals and many others

are of much importance in industries.

5.3.1 Methane, Ethane, Propane, and Butane

The major constituents of natural gas are methane, ethane propane and butane,.

At normal temperature and pressure methane, ethane, propane, and butanes are

gases. But the condense at increased temperature and pressure.

 56

Methane (CH4) in its pure state is odourless practically insoluble in water but

moderately combustion in air. Methane burns with pale blue and semilumnous

flame. It‟s combustion products are carbon dioxide and steam according to the

following reactions:

CH4 + 202 Co2 + 2H2o (Steam)

But with a deficit of combustion air, carbon monoxide and steam are produced

CH4 + 3/2 o2 Co + 2H2o

Methane is move reactive at high temperature.

Table 5.3.1 shows a list of petrochemicals that could be derived from methane

OUTLET FOR ETHYLENE DERIVATIVES

S/No DERIVATIVES APPLICATIONS

1 Polyethylene Films, moulding pipes cable coverings,

plastics and mettings

2 Ethylene Oxide Intermediate for ethylene glycol used as

antifreeze, and raw material for polyester
fibres, detergents, textile assistant and
solvents

3 Styrene Polystyrene plastics, synthetic rubber

making

4 Ethyl alcohol Industrial solvent and chemical

intermediate

5 Acetaldehyde Converted to acetic acid for cellulose

acetate fibre, plastics, adhesives and
emulsion paints, plasticers, alcohols and
resins.

6 Ethylene dichloride Converted to vinyl chloride, and polyvinyl

chloride for plastics, leather, piping and
guttering
 57

OUTLETS FOR ACETYLENE DERIVATIVES

S/No DERIVATIVES APPLICATIONS

1 Vinyl chloride Polyvinyl chloride (PVC) – Plastics

2 Acetaldehyde Adhesives, and emulsion paints

3 Trichloroethylene Dry cleaning and grease removing

solvent

4 Vinyl acetate Emulsion paints and adhesives

5 Chloroprene Special resistant rubbers

6 Acrylonitride Basics for acrylic fibres and intermediate

for adiponitrite a material for nylon

OUTLET FOR PROPYLENE DERIVATIVES

S/No DERIVATIVES APPLICATIONS

1 Propylacohol Converted to acetone which is used as a

solvent and a chemical intermediate

2 Butanol Solvent and chemical intermediate

3 Ethyl hexanol Plasticisers

4 Propylene Tetramer Reacted with benzene to give dedecyl

benzene used for detergents

5 Cumene Raw material for simultaneous production

of acetone and phenol and intermediate
for plastic and nylon

6 Propylene oxide Intermediate for the manufacture of

plastic foams

7 Poly propylene Films, fibres and plastic moulding

 58

8 Glycerol Pharmaceuticals and raw material for

resin manufacture

9 Acrylonitride Basis for acrylic fibres and intermediate

for adiponitrite – a raw material for nylon

OUTLETS FOR C4 OLEFINS

N – Butane Solvent

1 Methyl ethyl ketene Solvent and tube-Oil dewaxing agent

2 Heplenes Plastiaser alcohol intermediate

3 Chloro form Anesthetic in surgical operations

4 But

Iso-Butteres

1 Butyl Rubber Liner tube and special rubbers

2 Poyllso butane Lube – oil additions and sealing

compounds

3 Di-isobutene Plasticiser alcohol intermediate

Buta diene

1 Copolymer with strgrene Synthetic rubber, shoe soling compounds

2 Poly butadiene Synthetic rubber

3 Copolymer with acrlonitrile Special rubber

4 Chloroprene Speciality oil resistant rubber

5 Adiponitrile Raw material for nylons

Similarly, thermal cracking of ethane results in dehydrogenation during which

ethylene and or acetylene could be formed according to the following reactions.

-H2 -H2
C2H6 C2H4 C2H2 (acetylene)

Ethane (ethylene)

Also, propane undergoes dehydrogenation to yield propylene.

 59

C3H8 -H2 C3 –H6 (propylene)

Propane

The derivatives ethylene, acetylene sand propylene have wide industrial

application as shown in Table 6.3-1

5.3.2 Natural gas in ammonia and fertilizer production

Ammonia: Meltare is orderly used in ammonia manufacturing processes when

meltare reacts with steams it decomposes forming carbon monoxide and hydrogen

according to the equation:-

CH4 + H20 CO + 3H2

The carbon monoxide is oxidized to carbon dioxide at 4000C

CO + H20 CO2 + H2

The carbon dioxide is washed our by crater under pressure while the hydrogen

combines with atmospheric nitrogen to form ammonia.

N2 + 3H2 2NH3.

Ammonia has wide industrial\al applications especially in the production of ammonia

fertilizers.

FERTILIZER

The ammonia which is readily obtained from natural gas is a basic raw material in

the fertilizer industrial. Modern fertilizer industries employs analysis ammonia in

three major categories first it is used as a raw material for the manufacturing of

nutria rice acid which is an intermediate raw material for nitrate fertilizers such as

ammonurim nitrate and calcium nitrate. In the second category, an hydrous

ammonia is used to neutralize acid materials like acid salts of superphosphate to

form ammonium salts which are useful fertilizer material. Lastly, ammonia could be
 60

converted to synthetic area – an organic nitrogen compound which also has fertilizer

application (JACOB, K. D; (ed) fertilizer Technology and resources, new for k :)

Academic press inc. 1953 P. 87).

These relationships are shown in Table 5.3.2 below

Na2 CO3 Sodium nitrate

Caco3

H2 SO4

Ammonium sulphate

Ammonium Phosphate

N3 PO4

CO2 Urea

Superphosphate An ammoniated

Urea H20 Superphosphate Superphosphate

AH4 NO3 H20 Superphosphate

Nitric acid

A considerable portion of ammonia produced from natural gas is change into nitric

acid by catalytic oxidation the main steps of the process consists of the burning of

ammonia to nitric acid, oxidation of nitric oxide to nitrogen dioxide and absorption

of the later in water to form nitric acid as indicated in the following equations.

2NH2 +502 4NO +6H20 X heat

2NO + 02 2NO2 +heat

(Nitric oxide)

3N02 + H20 HNO3 + N0 + heat

 61

Nitrate fertilizers

The process of manufacturing ammonium nitrate consist of neutralizing nitric acid

with ammonia and isolating the product in a solid form suitable for use as fertilizer.

Chemistry of the reaction is as follows similarly Urea is obtained when

carbondoixide reacts with ammonia in liquid phase at accelerated temperature and

pressure. Ammonium – carbonate is formed as an intermediate compound which

subsequently dehydrates to give Urea.

2NH3 + C02 NH2 COONH4 NH CONH2 + H20

(Ammonium carbonate) Urea

furthermore, ammonia reacts with superphosphate to produce super ammoniated

phosphate fertilizer as shown below

NH3+ H3PO4 NH4 H2PO4 (mono ammonium phosphate)

NH3 + CAH4 (PO4)2 NH4 H2 PO4 + CAHPO4 (bicalcium phosphate)

2NH3 + 2CAHPO4 + CASO4 CA3 (PO4)2 + NH4)2 S04 tricalicum phosphate)

5.3.3 NATURAL GAS IN METHAMOL PRODUCTION

Methanol could be obtained from natural gas, especially, methane when methane

reacts with steam at fairly high temperature and pressure carbon – monoxide and

hydrogen are produced. These products combine at a definite ratio to yield

methanol under the catalytic actions of chromium oxide and zinc oxide at 4000C.

The chemistry of the reaction is as shown below.

CH4 + H20 CO+ 3H2

CO + 2H2 CR2 O3 /2NO CG30H

4000C (methanol)

The formation of the product involves a reduction in volume in the system and a

high pressure is required to maintain equilibrium (1 bid, P. 59)

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CHAPTER SIX

DEVELOPMENT OF A MODEL FOR EVALUATING THE ECONOMIC

DEVELOPMENT OF NATURAL GAS IN NIGERIA

(1) In terms of Effectiveness of use

Natural gas has played and continue to play an important role in the various

sectors of the economy. In terms of effectiveness of use, gas have impacted

positively in the following areas of economic development:-

Industrial Development

In the area of industrial development, petrochemical industries have done

reasonable well. Nigeria‟s petrochemical project is presently in three different

phases in three different location. Phase I of the petrochemical project is attached

to both Warri and Kaduna refineries. The aim is to use the bye-products of these

refineries namely liquefied petroleum gas (LPG) and gasoline for the production of

plastics, fibres, carbon black for tyres detergents and solvents for paints. About

35,000 metric tons of propylene, 25,000 metric tons of berizene 15,000 metric tons

of solvent would be produced annually. Phase II of the petrochemical project – the

olefin based complex, derives its raw materials mainly from natural gas and other

petroleum products. The olefin complex produces about 300,000 metric tons of

ethylene, 145,000 metric tons of vinyl chloride 100,000 metric tons of soda and

30,000 metric tons of ethylene oxide and ellylene glycol per year. Phase III - the

aromatic based complex produces mainly aromatic petrochemical such as

benzene, toluene, xylenes, paraxylene, phenol and styrene

Petrochemical production in Nigeria have not only enhanced industrial

development, but also manufacturing and communication sectors.

Power generation
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The gas sectors have enhanced electricity generation in Nigeria. The existing

power stations in Nigeria presently supplies 4000mw of electricity to the national

greed. The proposed power station is estimated to increase electricity generation

to more than 12,000mw by 2010.

Electricity is backbone of any economic development. This is because the role of

electricity cannot be overstated because

(i) Reliable electricity supply is vital to Nigerian economic growth

(ii) It is vital to sectors driving that growth e.g energy manufacturing series

Export diversification

The nations proven gas reserves rank as the 10th largest gas producers in the

world. Most of this gas should be conserved as a complimentary national energy

resource to crude oil. Gas export has diversified our export to a large extent. The

development of liquefied natural gas project has impacted positively to the

economy of Nigeria. Gas and oil export contributes over 96% of the entire

government revenue and accounts for more than 75% of our total export.

Improved Agricultural Production

Agricultural production have improved by the use of Nitrogenous fertilizer,

herbidides and fungicides, to irrigation piping, mulching with plastic films,

packaging and storage of food items. It is estimated for instance that the irrigation

scheme in the Benue basin would require additional 26,000 metric tons of polyrinyl

chloride (pvc). The flour mills in Nigeria consume several millions of plastic bags

per year to deliver their products to customers.

Polyethylene sacks have completely replaced jute for rice bags. It is more

aesthetic and hygienic to wrap bread in polyethylene films instead of new print

materials.
 64

2 In terms of efficiency of operation

In the area of operations, the sector has recorded a substantial improvement in

these areas.

Minimization of waste

The sectors have recorded a measurable success in the area of gas flaring.

Approximately 40% of gas produce are presently flared while plans are in place to

achieve a zero gas flaring by the ending of 2008.

Natural Disaster

Gas being one of the cleanest sources of energy available is environmental

friendly. Although gas flaring constitutes environmental pollution and this in effect

increases the global warming thereby endangering man. The current reduction gas

flaring has reduced pollution to its very minimal.

Price

The price of gas in the domestic market is presently the lowest because of the

various government subsidies to encourage foreign investors and to further bust

the domestic market.

3 Welfare

Nigerian gas sector have improved the welfare of Nigerian in the following ways:

Employment

The establishments of petrochemical industries have created both direct and

indirect job opportunities. Though the number of the direct jobs created vis-avis

the capital invested in small, many jobs would still be created in other sectors that

drive their raw materials from petrochemicals.

With the new government Directive that from 2006, all materials needed in the

fabrication works. In the oil and gas industries should be done in Nigeria and the

materials produced in the country including all front engineering and design works.
 65

The present engineering man hour of 200,000 hr is estimated to increase to 5

million per year. To deliver these 3,000 additional jobs will be needed over the

next 15 years to bridge the current engineering manpower gap.

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RECOMMENDATION AND CONCLUSION

Having considered the fast glowing global awareness of natural gas as an

important energy resource; the development of Nigerian gas potentials in relation

to the world‟s proven reserves, the various industrial and domestic applications of

natural gas and its abundant economic benefits. The following recommendations

are made;

1) At the current production and utilization level, Nigerian gas reserves could

last for more than 100years. These follows from researches, from available

data from the ultimate recoverable gas of 235 trillion standard cubic feet.

2) Although at present, the domestic gas market is low; there is high potential

for increased capacity utilization because of the federal government various

economic reforms. i.e. the on going independent power projects.

3) The growth of natural gas in Nigeria has facilitated the springing of more

industries. This is due to its low cost and its availability as raw material in

producing other chemicals.

4) Due to increasing energy demand in the global market, Nigerian economy

is now heavily dependent on gas in both domestic and export market and

thereby generating as much revenue as oil within the decade.

5) Gas being cheap and a clean source of energy have found its way in the

domestic market through pipeline distribution networks.

The work concludes that lack of national macro-economic planning and

management, stable energy policy, corruption, and backed by an unavailing

peace environment for more gas production have significantly implication

for the overall performance of natural gas in the economic development of

Nigeria.
 67

REFERENCES

Brandemuehl, M. J., and W. A. Beckman, Solar Energy, 23, 1(1979),

“Economic Evaluation and Optimization of Solar heating

Energy Concussion of Nigeria Natural energy pleat April 2003

Energy issues in Nigeria: “Today and Tomorrow”, Report from the Nigerian
Natural Committee of the world energy council(conference
proceeding) 1999

Essien, N. “Nigeria LNG may be needed in Europe”, Business Concord,

Giggs, J. L, Economic Decision Models, McGraw-Hill, New York (1968)

Harman, C. Gas Turbine Engineering, London Macmillan‟s press Ltd,

1991.26
March 22, P.15.1988

Nwachuknn J. C., Introduction to Engineering Economics and

Administration: Human Resource, Time and Money Ambik press, Benin
1999. pg 436 – 440, 398 – 402

Nwachukwu, J. C, Introduction to Engineering Economics and

Administration ; Human Resources, Time and Money;
Anbik Press.Benin. 1999

Nwokedi, J. “Gas: issues of the moment” Gordian Newspaper, March 19,

2004.

Petroleum Development and Exploitation in Nigeria” (A magazine Published by

NNPC) PP.34 –39

Rostow .W.W. , The stages of Economic growth A non – Communist manifest

Cambridge University Press 1960.
Systems”.

The Paradox of Jumbo Budget and Nigerian Living Standard”, The Guardian
Newspaper, Wednesday March 22, 2006.

White, J. A. M. H. Agee, and K. E. Case, Principles of Engineering

Economic Analysis, Wiley, New York (1977)
 68

Appendix 1

TABLE OF CONVERSION

Units of Energy

1 Kcal = 100cal = 4180 joules

1thermie = 4000 Kcal
1mm BTLI = 1.053 Giga joules
1 T.E.O =10.5mmKcal (HHV) =10mm Kcal (LHV)
1m3 Gas = 8900Kcal (HHV)

Conversion of Fuel Electricity

1 T.O.E = 3254 Kwh

1 Kwh = 3073 Kcal (LHV)
1 Gwh = 307.3 T.O.E

Weight and Measures

1 ton = 1000kg
1 ton = 2005 lb
1m3 Gas (15ºC, 1atm) = 35.315 scf
1 barrel = 42 gallons (U.S) = 0.159m3

Capacity

1mm Scfd = 1033mm3/year

1 bbl/ day crude oil = 50ton/ year.
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Appendix 2

(i) A Gas Station at Forcados, Warri

(ii) Sanding BR ig lasting of pipeline used for Gas supply.

(iii) 71, An oil drilling rig owned by Shell Petroleum.

(iv) Gas Flaring in Shell Flowstation, Tunu, Bayelsa State

A Gas Station at Forcados, Warri

 70

Sanding Blasting of pipeline used for Gas supply

Rig 71, An oil drilling rig owned by Shell Petroleum.

 71

Gas Flaring in Shell Flowstation, Tunu, Bayelsa State