Second phase of Escravos gas project comes onstream

Chevron Corp. recently announced that the second phase of the $1 billion Escravos associated gas utilization project in Nigeria will come on stream later this month. The Escravos project was prompted by Chevron's desire to commercialize gas instead of flaring it.


LAGOS�Chevron Corp. recently announced that the second phase of the $1 billion Escravos associated gas utilization project in Nigeria will come on stream later this month. The Escravos project was prompted by Chevron's desire to commercialize gas instead of flaring it.

Phase 1 of the Escravos project involved producing 130 MMcfd of dry gas, more than 8,000 b/d of LPG and NGL, and 2,000 b/d of condensate. Phase 2 has an additional capacity of 110 MMcfd of gas and about 6,700 b/d of liquids.

Chevron Nigeria Ltd. is operator of the project and holds a 40% interest; Nigerian National Petroleum Corp. holds the remaining 60%.

When the second phase goes into production, Chevron expects both phases to curb gas flaring in its Nigerian fields by more than 60%. The company is expected to reach the zero-flaring stage in 2005, when the third phase of the project should be completed. (Originally this phase was expected to come on stream 3 months ago.)

This phase is expected to conserve more energy by gathering an additional 120 MMcfd of associated gas currently being flared in Chevron�s offshore fields. Company sources said that all the associated gas produced in this phase will come from the Olero Creek, Debi, and Abitoye fields.

Although all the exploration and production firms operating in Nigeria aim to end flaring by 2008, as stipulated by the Nigerian government, the low price and demand for gas in the region loom as drawbacks for building capital-intensive gas projects.

Marketing options
Chevron started exporting LPG from Nigeria in September 1997 at the request of Nigeria Gas Co.'s Houston-based subsidiary, NGC Global Liquids Inc. So far, however, NGC has remained Chevron's only LPG customer. (NGC buys only 40 MMcfd, an amount considered small, given that NGC pays a price for the gas that is almost equivalent to production costs.)

In a recent interview with Nigeria�s Oil and Gas Monthly, Chevron Nigeria Managing Director George Kirkland said Chevron has lowered its price several times, but the offers made by NGC haven't been great.

With the completion of Escravos' second phase, Chevron is looking for new markets for its gas. One possible option is the West African Gas Pipeline (WAGP) project.

Chevron, a major stakeholder in WAGP, hopes to pipe some of its gas to consumers in the West Africa sub-region. The project, which will require about 120 MMcfd of gas in the first year of production, will depend largely on production from the Escravos project.

According to World Bank and studies by Italian firm Bains, Cuneo, & Associates, demand for Nigerian gas in the West Africa sub-region is expected to rise from 50 MMcfd of gas to 160 MMcfd by 2018.

While Chevron said gas is a clean-burning and efficient fuel, gas commands such a low price in Nigeria that it is difficult to economically justify gas projects. Therefore, markets that support higher gas prices must be developed.

Jackson Gaius-Obaseki, a former managing director of NGC and current group managing director of NNPC, said the fact that Nigeria is a significant exporter and consumer of petroleum products gives Nigeria "major influence" on the oil industry of not just its immediate neighbors but the entire West Africa sub-region.

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