APPLICATION OF THE FISCHER-TROPSCH SYNTHESIS (FTS)-GAS-TO-LIQUIDS (GTL) PROCESS TO THE ECONOMIC EVALUATION OF NATURAL GAS: THE CASE OF NIGERIA

摘要

Gas utilization in Nigeria has over time witnessed a very slow growth as the primary objectivefor oil exploration was mainly for oil discovery. Hence, there was no impetus, such as attractivefiscal incentives or realistic gas price, to stimulate gas demand, either for the domestic or theexport markets. Neither was there any legal framework for natural gas. Consequently, intenseflaring marked the evolution of gas utilization in Nigeria as about 55% of the natural gasproduced is being flared whilst, the remaining 45% is geared towards meeting energy needs inthe areas of Power generation, Domestic market and Export projects. The recent drive by theFederal Government of Nigeria to fully monetize natural gas resources and ensure properutilization of natural gas to reduce greenhouse gas (GHG) emission for a cleaner,environmentally friendly fuel has necessitated the choice of a Gas-To-Liquid (GTL) Technologybasedproject, which employs Fischer-Tropsch Synthesis (FTS). This paper examines theeconomic viability of the first Gas-To-Liquid (GTL) Plant in Nigeria - the Escravos Gas –To-Liquid (EGTL) Plant.In this paper, we evaluated the economic feasibility of the GTL plant, using the Net PresentValue (NPV) and Discounted Cash Flow Rate of Return (DCFROR) techniques with sensitivityon product prices and CAPEX; and, in this case, from the point of view of capital and operatingcosts as well as gas feedstock and crude oil prices. This was done with a view to determiningthe profitability of the projects whilst focusing on the impact of cost escalation on the projecteconomics.The results obtained show that the EGTL Project returns a positive NPV10 at the hurdle rate of10% and an acceptable (DCFROR). However, it was observed that the cost of the project keepescalating whilst the inefficiencies observed in the project is being absorbed through additionalincentives granted and generous existing fiscal regime. The impact of Sensitivities of ProductPrices less 25% and increasing the CAPEX by 25% on Project Net CashFlow and GovernmentRevenue (or Government Take) also revealed negative cost impact in both cases, whichcorroborates our observation above.The paper provides yet another opportunity to proper utilization of the vast gas resources inNigeria. In addition to the technological advantage of FTS-GTL Technology, the economics oflow gas priced feedstock, adequate infrastructures, market accessibility and supportivecommercial levers are some of the key drivers that have informed this choice.