JOHANNESBURG, South Africa, September 16, 2019 – Natural gas can help Africa bring power to the people. It just has to be harnessed appropriately and not wasted or exported.
That is the premise of Chapter 5 of Billions at Play: The Future of African Energy, the new book by leading African energy attorney, NJ Ayuk. And it is a message that Jeff Goodrich, former CEO of OneLNG, supports.
OneLNG was a joint venture between liquified natural gas (LNG) shipping company, Golar LNG, and Schlumberger, the global oilfield services giant. While financing issues hampered OneLNG’s attempts to develop Africa’s first deep-water floating liquid natural gas (FLING) project with London-based Ophir Energy, the project principals, including Goodrich, recognized LNG’s potential to monetize Africa’s offshore natural gas reserves.
“In the chapter entitled Abundant, Accessible, Affordable: The “Golden Age” of Natural Gas Shines in Africa, Ayuk correctly identifies the benefits of natural gas, especially as the world looks for ways to lower CO2 emissions,” Goodrich said. “He also takes aim at some of the issues the African natural gas industry has to confront, namely flaring and the export of product that could be well-used at home.”
Despite advances in electrification, much of Africa is still plunged into darkness each evening. Using natural gas as a reliable source to generate electricity would change that. It would also reduce the reliance on sources like animal dung for cooking—a method that is linked to respiratory diseases.
“It is incredible to think that in this day and age, there are nearly a billion people in sub-Saharan Africa without access to electricity, but that is a reality Ayuk does not shy away from,” Goodrich said. “Rather than running from the problem, he puts forth a number of realistic solutions that anyone who cares about making Africa more self-sufficient will be eager to hear. I think his ideas will resonate especially with readers who agree with Ayuk that an oversaturated global export market makes this the best time to advance intra-African energy trading and focus on regional markets.”
NJ Ayuk is founder and CEO of Pan-African corporate law conglomerate, Centurion Law Group (https://CenturionLG.com) and Executive Chairman of the African Energy Chamber. He is also the co-author of Big Barrels: African Oil and Gas and the Quest for Prosperity (2017).
He is recognized as one of the foremost figures in African business today.
Billions at Play: The Future of African Energy will be published by October 2019. Pre-order your copy here.
ENERGY: Senegal faces key technology decisions in its search for the optimal gas-to-power strategy
Senegal’s domestic gas reserves will be mainly used to produce electricity. Authorities expect that domestic gas infrastructure projects will come online between 2025 and 2026, provided there is no delay. The monetization of these significant energy resources is at the basis of the government’s new gas-to-power ambitions. In this context, the global technology group Wärtsilä conducted in-depth studies that analyse the economic impact of the various gas-to-power strategies available to Senegal. Two very different technologies are competing to meet the country’s gas-to-power ambitions: Combined-cycle gas turbines (CCGT) and Gas engines (ICE).
These studies have revealed very significant system cost differences between the two main gas-to-power technologies the country is currently considering. Contrary to prevailing beliefs, gas engines are in fact much better suited than combined cycle gas turbines to harness power from Senegal’s new gas resources cost-effectively, the study reveals. Total cost differences between the two technologies could reach as much as 480 million USD until 2035 depending on scenarios.
Two competing and very different technologies
The state-of-the-art energy mix models developed by Wärtsilä, which builds customised energy scenarios to identify the cost optimal way to deliver new generation capacity for a specific country, shows that ICE and CCGT technologies present significant cost differences for the gas-to-power newbuild program running to 2035.
Although these two technologies are equally proven and reliable, they are very different in terms of the profiles in which they can operate. CCGT is a technology that has been developed for the interconnected European electricity markets, where it can function at 90% load factor at all times. On the other hand, flexible ICE technology can operate efficiently in all operating profiles, and seamlessly adapt itself to any other generation technologies that will make up the country’s energy mix. In particular our study reveals that when operating in an electricity network of limited size such as Senegal’s 1GW national grid, relying on CCGTs to significantly expand the network capacity would be extremely costly in all possible scenarios.
Cost differences between the technologies are explained by a number of factors. First of all, hot climates negatively impact the output of gas turbines more than it does that of gas engines.
Secondly, thanks to Senegal’s anticipated access to cheap domestic gas, the operating costs become less impactful than the investment costs. In other words, because low gas prices decrease operating costs, it is financially sound for the country to rely on ICE power plants, which are less expensive to build.
Technology modularity also plays a key role. Senegal is expected to require an extra 60-80 MW of generation capacity each year to be able to meet the increasing demand. This is much lower than the capacity of typical CCGTs plants which averages 300-400 MW that must be built in one go, leading to unnecessary expenditure. Engine power plants, on the other hand, are modular, which means they can be built exactly as and when the country needs them, and further extended when required.
The numbers at play are significant. The model shows that If Senegal chooses to favour CCGT plants at the expense of ICE-gas, it will lead to as much as 240 million dollars of extra cost for the system by 2035. The cost difference between the technologies can even increase to 350 million USD in favor of ICE technology if Senegal also chooses to build new renewable energy capacity within the next decade.
Risk-managing potential gas infrastructure delays
The development of gas infrastructure is a complex and lengthy endeavour. Program delays are not uncommon, causing gas supply disruptions that will have a huge financial impact on the operation of CCGT plants. Nigeria knows something about that. Only last year, significant gas supply issues have caused shutdowns at some of the country’s largest gas turbine power plants. Because Gas turbines operate on a continuous combustion process, they require a constant supply of gas and a stable dispatched load to generate consistent power output. If the supply is disrupted, shutdowns occur, putting a great strain on the overall system. ICE-Gas plants on the other hand, are designed to adjust their operational profile over time and increase system flexibility. Because of their flexible operating profile, they were able to maintain a much higher level of availability.
The study took a deep dive to analyse the financial impact of 2 years delay in the gas infrastructure program. It demonstrates that if the country decides to invest into gas engines, the cost of gas delay would be 550 million dollars, whereas a system dominated by CCGTs would lead to a staggering 770 million dollars in extra cost. Whichever way you look at it, new ICE-Gas generation capacity will minimize the total cost of electricity in Senegal in all possible scenarios. If Senegal is to meet electricity demand growth in a cost-optimal way, at least 300 MW of new ICE-Gas capacity will be required by 2026.
Nicolas Mathon: Unlocking successful independent power projects in Nigeria
Nicolas Mathon, Director, Project Development, Africa and Europe, Wärtsilä Energy (Article & Image: Nicolas Mathon)
The successful completion of the Azura Edo 450 MW gas-fired power project in 2016 was hailed at the time as setting the blueprint for future independent power projects in Nigeria. The $900 million plant, which gathered 20 international banks and equity financing partners from more than nine countries, took over six years of project development and construction. It was intended to provide a pathway for others to enter into similar agreements and unlock financing for power sector investment. But five years on, no new independent power projects have come to fruition.
Today, grid generating potential is just over 12 GW in Nigeria. More than 40% of the population lack access to electricity, and those with access, suffer regular power cuts and outages. This is not due to a lack of projects or ambition. With its Vision 30:30:30 the government is committed to deliver 30GW of electricity with 30% renewable energy mix by 2030.
As the largest economy in Africa, with huge gas reserves and high solar energy potential, Nigeria has all the natural resources necessary to meet these targets. However, there are three major and interconnected challenges to overcome to complete successful IPP projects, namely the fragile energy transportation and distribution infrastructures, the ambitious yet incomplete energy reforms, and finally, securing access to long-term international project financing.
The fragility of the existing energy infrastructures, the relative immaturity of the power sector reforms, combined with security and currency risks, create enormous barriers to entry for IPP projects in Nigeria. While there is no simple answer to resolve this, our experience is that an holistic approach to cover all project parameters is crucial and that demonstrating flexibility and resilience over the long term is of paramount importance.
An improving, but still complex regulatory environment
Nigeria’s power sector reforms began around ten years ago when the government launched an ambitious privatization and unbundling of the vertically integrated historical utility. Power generation plants were transferred to privately held GENCOs, the distribution network went to partially privately owned DISCOs, while the transmission network was kept under government ownership, managed for some time by the private sector.
The resulting regulatory environment is complex and still evolving today, creating significant uncertainty for project developers. Despite a strong legal framework and the many government efforts to implement reforms, project developers and sponsors need to navigate multiple agencies and government organizations with sometimes conflicting or unaligned processes.
To cope with this uncertainty, information must be checked and rechecked at various levels to safeguard a project ecosystem that requires constant monitoring and validation. Keeping abreast of developments requires continuous contact and resilience, mobilizing full time resources to stay in the game.
Mitigating project development risk with a 360° approach
Major energy infrastructure projects are multi-million-dollar transactions that require long cycles to develop and even longer to payback. Having a reliable turnkey solution provider, with the experience of international project development, can make a significant difference for future IPP projects.
Independent Power Producers must also beyond the capability to mobilize technical resources, such as engineering, engine manufacturing, construction, and service teams, work with consultants and advisors to bring expertise on environmental and social topics, on connecting infrastructures, primary fuel supply legal matters and accordingly to contribute to internal and external project development costs.
From engineering, procurement and construction (EPC) through to operation and maintenance (O&M), successful project finance relies upon complex back-to-back contractual agreement structures to secure access to the gas, the grid, and the offtake of the generated power. Once a bankable model has been designed, only then can projects raise finance from international development finance institutions (DFIs), international and local commercial banks and other accessible funds.
In addition to coordinating project finance, and to mobilizing internal and external resources, the ability of the IPP to share the development risk by taking minority equity stakes in projects is also paramount.
Selecting the right technologies in a challenging environment
Gas fuels more than 80% of the nation’s power generation capacity in Nigeria. But in order to generate reliable power from gas in a challenging environment, not all technologies are equal.
For instance, the challenging conditions of gas transportation and distribution, combined with the fluctuating electricity loads, makes it difficult for traditional large gas-turbine based power plant projects to operate efficiently.
Gas turbines operate on a continuous combustion process, requiring a constant supply of gas and a stable dispatched load to generate consistent power output. Supply from the Escravos-Lagos Pipeline System (ELPS), which forms the backbone of Nigeria’s gas transportation system, is subject to disruptions due to a number of upstream constraints and its own operational challenges. This makes it challenging to respond to the daily variations in customer demand. The result is stranded generation assets and transmission bottlenecks causing shutdowns at some of the country’s largest power plants.
Power plants with reciprocating gas engines, however, can run with lower gas pressures and provide high efficiency at Nigerian site conditions with high temperatures and humidity. Medium-sized projects of 250 MW can make a significant contribution to meeting the country’s energy demand as they are able to operate with a large spectrum of gas qualities and other liquid fuels provided through other supply infrastructures. More importantly, they can provide the flexibility and resilience required to accommodate varying loads either due to consumption patterns or to challenged transmission and distribution infrastructures. As renewable projects are progressively integrated into the mix of Nigerian grid connected power plants, the need for flexibility and agility to adapt to intermittent sources of electricity such as solar and wind will increase.
Enabling the “Decade of Gas” vision
Whilst there is no single solution or quick fix to solve the challenges of Nigeria’s power sector, the ability to deploy the appropriate power production technologies combined with proven project management know-how will go a long way to overcome these barriers and take advantage of the government’s “Decade of Gas” vision. High-quality IPP projects based on gas engine technology will contribute to meeting the country’s unserved energy demand, whilst reducing dependence on expensive diesel generators and drastically reducing CO2 emissions.
OPINION: Nicolas Mathon, Director, Project Development, Africa and Europe, Wärtsilä Energy
Wärtsilä renews O&M contract for the 100MW Lafarge Ewekoro power plant in Nigeria
Wärtsilä to operate and maintain Lafarge Ewekoro captive power plant (Image: Lafarge Africa Plc)
Wärtsilä, a technology group has signed a 5-year long-term Operation & Maintenance (O&M) agreement with Lafarge Africa Plc, one of Nigeria’s leading building material producers. The agreement covers the 100 MW Lafarge Ewekoro power plant, which provides a dedicated supply of electricity to the company’s concrete and cement manufacturing processes. Signing of the O&M agreement took place in July 2021, and is an extension of a previous 10-year agreement.
The captive Ewekoro plant was supplied and commissioned by Wärtsilä in 2011. It consists of six Wärtsilä 50DF dual-fuel engines, operating primarily on gas, but with the flexibility to automatically switch to liquid fuel in case of a disruption to the gas supply. Similarly, should the quality of the gas supply be disrupted, the Wärtsilä engines will continue to operate efficiently, delivering an assured and reliable power supply to the facility. Unlike gas turbine plants, the engines will also function efficiently with a low-pressure gas supply, thus providing a huge advantage given the region’s vulnerability to such interruptions.
The captive power plant provides the cement production facilities steady supply of electricity and an efficient use of available natural gas as primary fuel. By having Wärtsilä operate and maintain the power plant, the customer can focus on its core business to deliver construction materials to Nigeria.
“We have benefited significantly from the efficient way by which Wärtsilä has operated and maintained this plant for the past ten years, and we had no hesitation in extending the agreement for a further five years. An uninterrupted reliable supply of electricity is essential to our production, and having our own power plant, built, operated and maintained by Wärtsilä, gives us this assurance,” said Lanre Opakunle, Strategic Sourcing Director, Power & Gas, Middle East & Africa, Lafarge – a member of Holcim Group.
“Lafarge has been a customer with whom we have built a strong relationship over a number of years. Their readiness to renew this O&M agreement is a clear indication of satisfaction with our performance, and of how it supports the achievement of their business goals,” commented Marc Thiriet, Energy Business Director, Africa West, Wärtsilä Energy.
The scope of the agreement includes the operating crew, performance guarantees, plant availability, and spare parts.
Wärtsilä has also supplied Lafarge with another 100 MW power plant located in Mfamosing, Nigeria. With a total of 200 MW of generating capacity to the same customer, Wärtsilä has established a high level of trust that validates the efficiency of the company’s flexible and reliable technology.
Since 2010, Wärtsilä has had a strong presence in Nigeria with a total installed capacity of 667 MW. The company locally employs approximately 90 people. In Africa, Wärtsilä has an installed footprint of more than 7000 MW.