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Reference ID	Created	Released	Classification	Origin
08ABUJA1930	2008-10-01 15:10	2011-08-30 01:44	UNCLASSIFIED//FOR OFFICIAL USE ONLY	Embassy Abuja

VZCZCXRO6156
PP RUEHMA RUEHPA
DE RUEHUJA #1930/01 2751510
ZNR UUUUU ZZH
P 011510Z OCT 08
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 4056
INFO RUEHOS/AMCONSUL LAGOS PRIORITY 0002
RUEHZK/ECOWAS COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 ABUJA 001930 
 
SENSITIVE 
SIPDIS 
 
DEPT PASS TO USTR FOR AGAMA AND USTDA FOR FITTS/MARIN 
DEPT OF ENERGY FOR CAROLYN HAYLOCK AND GEORGE PERSON 
DOC 3317/ITA/OA/BURRESS/3130/USFC/OIO/ANESA/DHARR IS 
TREASURY FOR PETERS AND HALL 
 
E.O. 12598: N/A 
TAGS: EPET ENRG ECON PGOV EAID PREL NI
SUBJECT: NIGERIA ORDERS JOINT VENTURES TO PROVIDE NATURAL GAS TO 
BOOST POWER SUPPLY 
 
REF: A. ABUJA 1563 
      ¶B. ABUJA 1311 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR DISTRIBUTION OUTSIDE USG 
 
¶1. (SBU) SUMMARY:  Unmet demand for electricity is pushing the Gas 
Ministry to price and deliver gas to specific power plants, as 
outlined in the Strategic Plan for the Sustainability of the Power 
Sector (Refs A and B), to achieve 6,700 average MW by December 2009. 
 In February 2008, the Federal Executive Council approved the Gas 
Master Plan which groups the country's gas demand into three 
categories, namely domestic, industrial, and commercial sectors. On 
August 21, 2008 the government gave the order to execute mandatory 
allocations of gas to demand centers, namely power plants and the 
industrial sector.  The order also gave support to the Ministry to 
advertise for expression of interest in three midstream franchise 
areas and a pipeline.  MOS for Gas is interested in obtaining U.S. 
expert advice on the domestic allocation scheme and other natural 
gas policies.  Septels will report on the ensuing dialogue between 
the GON and gas producers on the domestic allocations.  END 
SUMMARY. 
 
¶2. (SBU) In meetings with the Ministry of Energy (Gas), Econoff was 
told that Nigeria's Federal Executive Council authorized the 
execution of a domestic gas supply obligation (DGSO) on August 21, 
2008 and a letter of notification was sent to Joint Ventures (JVs)by 
the Honorable Minister of State for Energy (Gas) Emmanuel Olatunde 
Odusina.  The letter outlines the details of obligations which will 
contractually bind the JVs to deliver specified gas volumes to 
specific customers.  The action item given to the JVs is to prepare 
implementation plans, an associated budget for the 2009 business 
plan, and be ready to execute no later than October 15, 2008. 
 
¶3. (SBU) The letter also informs the JVs that gas for power pricing 
is the same $0.1/thousand cubic feed (mcf) in 2008 rising to $1/mcf, 
plus transmission of $0.30, by January 2012 (Note: the original 
approved plan in February 2008 was to reach $1/mcf by 2010.  End 
note) as well as a payment guarantee letter from the Minister of 
Finance stating that the Government of Nigeria (GON) has adopted the 
World Bank's Partial Risk Guarantee (PRG) Scheme to cover the 
security of revenues for gas supplied to the power sector. Still to 
be provided by to the JVs from the GON, in concert with oil majors 
under the Aegis of the Oil Producers Trade Section (OPTS), is the 
final Gas Sale and Purchase Agreement (GSPA) template.  Reftel A 
describes the gas supply pipeline sources, budgeted through the 
strategic plan for the power sector. 
 
GAS SUPPLY OBLIGATIONS BY JOINT VENTURE 
--------------------------------------- 
 
¶4. (SBU) The Gas Producers Domestic Gas Supply Obligation is 
measured in Million Standard cubic feet per day of gas (MMScfd) 
beginning in 2008 and increasing annually to 2013 is as follows: 
 
-- Nigerian AGIP Oil Company: 2008 is 245; by 2013 is 608. Dedicated 
Power to NAOC Independent Power Producer (IPP), Okpal, Kwale, Delta 
State; Omoku, NIPP, Rivers State. Shared Power to Delta IV Power 
Holding Company of Nigeria (PHCN) Power Plant, Delta State; Omotosho 
PHCN Plant, Ondo State; Kano Power Plant, and up to 163 MMScfd to 
the industrial sector. 
 
-- Nigerian Petroleum Development Company: 2008 is 45; by 2013 is 
¶120. Dedicated Power to Egbema NIPP in Imo State; Ihovbor (Eyaen) 
National Integrated Power Project (NIPP), Edo State; and the 
industrial sector. 
 
-- ELF JV (EPNL JV): 2008 is 217; 2013 is 452. Shared Power to 
Sapele PHCN Power Plant, Delta State; Geregu PHCN, Kogi State; 
Rivers IPP, Rivers State; Kano Power Plant; and the industrial 
sector. 
 
--Mobil Producing Nigeria: 2008 is 459; by 2013 is 915.  Dedicated 
Power to Calabar NIPP, Cross Rivers State. Shared Power to Egbin AES 
Power Plant, Lagos; Delta IV PHCN Power Plant, Delta State; Sapele 
PHCN Power Plant, Delta State; Papalanto PHCN Plant, Ogun State; 
Geregu PHCN Plant, Kogi State; Korean IPP, Abuja; Korean IPP, Kaduna 
State. 
 
--PAN OCEAN JV: 2008 is 65; by 2013 is 65.  Dedicated Power to 
Egbema NIPP, Imo State; Ihovbor NIPP, Edo State; and industrial 
sector. 
 
 
ABUJA 00001930  002 OF 002 
 
 
--Chevron JV (CNL): 2008 is 351; BY 2013 is 805. Dedicated Power to 
Ihovbor (Eyaen) NIPP, Edo State. Shared Power TO Egbin PHCN, Lagos; 
Egbin AES Planat, Lagos; Papalanto PHCN, Ogun State; Omotosho PHCN, 
Ondo State; Korean IPP, Abuja; the industrial sector. 
 
--Shell Petroleum Development Company (SPDC JV): 2008 is 849; 2013 
is 1,948. We understand that SPDC JV is expected to provide 849 
MMScfd in 2008 up to 1948 MMScfd by 2013.  Dedicated Power to Sapele 
NIPP, Delta State; Gbaran NIPP, Bayelsa State; Afam V, VI, Rivers 
State; Alaoji PHCN, Abia State; Shared Power to Egbin PHCN, Lagos 
State; Sapele PHCN, Delta State; Korean Abuja IPP; Korean Kaduna IPP 
and the industrial sector. 
 
--Addax PSC: 2008 is 0; 2013 is 160.  Dedicated Power to Egbema 
NIPP, Imo State; Calabar NIPP Plant, Cross Rivers Sate. 
 
¶14. (SBU) COMMENT: The Minister of Gas welcomes technical support 
from the U.S., on moving forward with domestic allocations for power 
and industrial use, pricing, and other issues (See septel for report 
of Ambassador's September 25 meeting with MOS Odisina).  The gas 
section of the present overall energy ministry has a relatively 
small staff and is being supported, in part, by the Nigerian 
National Petroleum Corporation (NNPC).  This is a problem in that 
the Minister has no transparency in the work and model(s) being 
developed as well as the fact the NNPC is scheduled to begin 
reorganization at the end of this calendar year.  The Minister would 
like independent support in gas and environment (impact mitigation 
on flaring), gas economics, pipeline distribution, exploration, the 
next step in implementing the liquefied petroleum gas (LPG) sector 
policy and regulatory framework (USTDA project) for the domestic 
market to reduce wood fires and kerosene, and policy framework with 
the GON's Department of Petroleum Resources. The Power Ministry has 
listened to and implemented many suggestions from the Mission and 
USG in the development and ongoing repair of their electricity 
sector and the MOS for Gas is eager to formulate and put in play 
more rational and effective policies for his sub-sector.  END 
COMMENT. 
 
SANDERS

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Viewing cable 08ABUJA1930, NIGERIA ORDERS JOINT VENTURES TO PROVIDE NATURAL GAS TO