Recovery of Associated Gas for independent power generation The Kwale – Okpai Project Nigeria

Paolo LINZI Safety, Environment and Quality VP Eni E&P Division

Agenda

•Background: Flaring down in Nigeria

•The Kwale - Okpai Project overview

Eni‘s Action Plan on Kyoto Protocol

• Eni Action Plan for Flaring / Venting reduction • R&D activities: CCS Project and GTL pilot project • Development of a sustainable energy model and definition of the transition path

Flaring Down in Nigeria

View of Nigerian flares as seen from the satellite An unusual brightness in the dark of the African continent Nigeria produces 2.3 M Bopd of oil and 6 BScf/day of associated gas.

About 45% of produced gas is presently flared.

Gas reserves in the country are estimated to be 180 Tcf The government through fiscal incentives has opened new markets The exportation of liquefied natural gas (N-LNG) started in 1999

History of Eni in Nigeria (1)

• 1962 • 1973 • 1976 • 1980 • 1985 • 1989 • 1989 Establishment of “Nigerian Agip Oil Company” NAOC starts exploration activities First jv with Nigerian government (60% NNPC)

Electric power supply to Brass community

Establishment of AENR ltd

Gas re-injection in Obiafu-Obrikon plant

NAOC acquires 5% of the Shell assets (increase of about 60,000 bopd equity)

Establishment of Nigeria LNG ltd (Agip 10.4%)

History of Eni in Nigeria (1)

• 1994 • 1996 • 1997 • 1999 • 2000 • 2001 • 2003 • 2003 • 2005

First NGL supply to Eleme petrochemical

Establishment of NAE Ltd Renewal of NOAC jv OMLs until year 2027 NAOC provides first gas for N-LNG plant

NAOC defines a plan to reach “zero flaring” NAOC signs the first electric power sale agreement for the IPP at Okpai

Start up of Abo field (first off-shore deep water in Nigeria)

Establishment of “Brass LNG Ltd” (Eni 17 %) Start-up of Okpai IPP (first IPP in Nigeria)

IPP project

NAOC Gas Configuration Land & Swamp Area

IRRI/ISOKO KWALE OB/ OB SAMABRI IDU FORCADOS BENIBOYE TUOMO OSHIE OGBAINBIRI SPDC’s ROW (Nun river-Kolo creek Rumuekpe)

Legend: Oil Terminal LNG Terminal Raw Gas Gas Line to Bonny NGL Gas Parallel Line

CLOUGH CREEK

Flowstation Upgrading

TEBIDABA

New pipelines

OBAMA BRASS IPP AKRI EBOCHA ELEME P/ HARCOURT Rumuji TIE-IN POINT NAOC/NLNG GTS BONNY

Agenda

•Background: Flaring down in Nigeria

•The Kwale - Okpai Project overview

The Project Concept

PURPOSE/ACTIVITY Utilization of previously flared associated gas produced in the Kwale Oil-Gas Processing plant • Transportation of the gas through a 14 km long pipeline • Use as fuel in plant and in ad hoc built Combined Cycle Gas Turbine Independent Power Plant

On-grid energy installed capacity in Nigeria

Energy sent out GWh

18 000 16 000 14 000 Residential Commercial Industrial Energy generation 12 000 10 000 8 000 6 000 4 000 2 000 0 1970 1980 1990 Losses currently just over 40% 2000

Project Description

• IPP PROJECT PARTNERS – NNPC (60%); NAOC (20%); PONL (20%) • TECHNOLOGY – Gas dehydration, taking up ullage at the existing Kwale OGPP; – Gas compression – 14 km pipeline inter-connector from the Kwale OGPP to the IPP at Okpai – A 480 MW combined cycle gas turbine power plant

Methodology Overview

Approved Methodology AM0009 version 02 Recovery and utilization of gas from oil wells that would otherwise be flared

Baseline and Monitoring Plan

BASELINE CO 2 equivalent emissions from flaring of associated gas, less: – Volume of dry gas exported from Kwale plant to OB/OB gas plant – Volume of dry gas used for reinjection at OML 60 MONITORING Ex post monitoring of various carbon flows across the gas recovery, processing, export, and emergency relief (flares) systems, plus any accidental releases through plant or pipeline failure

Boundaries and Crediting Period

BOUNDARIES The project boundaries are the Kwale Oil-Gas Processing Plant and the pipeline inter-connector between Kwale OGPP and the IPP CREDITING PERIOD A crediting period of 10 years (2006-2015) has been chosen OVERALL CREDITS 14.97 Miln tones CO 2 eq

Additionality assessment Alternative Option 1: Venting Option 2: Flaring Option 3: Onsite use Option 4: Injection Option 5: Recovery and distribution Legal aspects

Prohibited by law and internal Eni guidelines and policies Prohibited by voluntary agreements and regulations . Deviation is widespread. Not prohibited Not prohibited Not prohibited

Economical attractiveness Capital Risk

Highly attractive No capital risk, cost of capital Highly attractive. Fines for flaring are far lower than the financial risks associated to the other recovery investment options No design, construction and management risks related to the project Already carried out. Significant supply surplus relative to onsite power demand Already carried out. No scope to increase the volume of gas reinjection without prohibitively high financial costs. Gas not used for the market. Simply storage without any benefit for EOR, EGR Unattractive There is limited local market for gas. Investment risks associated with gas infrastructure are high. Limited potential for use in LNG at the level of gas availability from OML60.

Conclusions

Not feasible Current practice Currently practised. No scope to increase onsite use. Currently practised. No scope to increase volumes injected Not feasible. Would require creation of end market with guaranteed revenue stream.

Conclusions

The Clean Development Mechanism A help for the Oil &Gas sector in the economic efforts to: – Cut flaring and venting emission – Deploy Efficient Technologies in developing countries The Kwale – Okpai Project A contribution to sustainable development. Its benefits: – A significant step to Eni "Zero Gas Flaring" Plan – Climate change mitigation – Deployment of sustainable technology in Nigeria – Boosting CDM projects development in Nigeria – New opportunities to implement flaring down projects worldwide