Scoring points in the O&G clan

AroOkigbo:
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You are right to an extent- but note the following:
Unlike in Qatar,
1. EGTL is built on a reclaimed land (you don't want to know how many cubic feet of sand was used)
2. The modules were fabricated in Qatar, Korea, etc and shipped to Nigeria. A new wharf had to be built to take these heavy modules. Moreover, the low water depth meant the sea had to be dredged to take heavy ships.
3. Location. Escravos is only accessible by air or water. A lot of money was spent on flying staff and contactors from Warri and Lagos. Aero contractors, Arik and other airlines made a lot of money. Logistics took a good chunk of the cost of the project.
4. Converting gas to liquid is a whole new technology owned by Sasol. Chevron spent a lot to train operators in SA, US and Qatar. Over 200 people were trained at a point...with some trainees spending over 3yrs in SA.
5. Power supply. A brand new power plant had to be built to take care of energy requirements. And believe me, the energy requirement is high.
6. etc...etc. I don't want to talk about money spent to settle communities, ...and govt. big boys to keep the project going. Uduagha must be commended though. ..without him, the project would have been cancelled by the senate midway.


The GT Diesel and naphtha produced will be exported...100%. Our trucks cannot run on that quality of diesel. So don't expect the price of diesel ever coming down as a result of this project.

guy, you are very smart and intelligent, becuase of people like you, I am proud to be a nigerian.... i am 80% sure that you work with one of the oil majors, becuase your intelligent and deep analytical ability speaks volume

AroOkigbo:
.
You are right to an extent- but note the following:
Unlike in Qatar,
1. EGTL is built on a reclaimed land (you don't want to know how many cubic feet of sand was used)
2. The modules were fabricated in Qatar, Korea, etc and shipped to Nigeria. A new wharf had to be built to take these heavy modules. Moreover, the low water depth meant the sea had to be dredged to take heavy ships.
3. Location. Escravos is only accessible by air or water. A lot of money was spent on flying staff and contactors from Warri and Lagos. Aero contractors, Arik and other airlines made a lot of money. Logistics took a good chunk of the cost of the project.
4. Converting gas to liquid is a whole new technology owned by Sasol. Chevron spent a lot to train operators in SA, US and Qatar. Over 200 people were trained at a point...with some trainees spending over 3yrs in SA.
5. Power supply. A brand new power plant had to be built to take care of energy requirements. And believe me, the energy requirement is high.
6. etc...etc. I don't want to talk about money spent to settle communities, ...and govt. big boys to keep the project going. Uduagha must be commended though. ..without him, the project would have been cancelled by the senate midway.


The GT Diesel and naphtha produced will be exported...100%. Our trucks cannot run on that quality of diesel. So don't expect the price of diesel ever coming down as a result of this project.

Thanks for your insight, a lot of people don't know the construction industry and how just a simple variation in conditions can shoot up the cost of a project. but please can you explain what you meant by our trucks cant run on this type of fuel. Cant we get the ones that use this fuel.

cheers

rabzy:

Thanks for your insight, a lot of people don't know the construction industry and how just a simple variation in conditions can shoot up the cost of a project. but please can you explain what you meant by our trucks cant run on this type of fuel. Cant we get the ones that use this fuel.

cheers

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The GT Diesel is lighter. ..shorter carbon chain and will burn faster. Longer carbon chain diesel (that can power our domestic diesel cars and trucks) can actually be produced by tweaking the distillation process but such a diesel will be too expensive for owners of diesel engines to use it "as is".
The main advantage of this type of diesel is that it is almost sulphur free...too clean. European customers use it to blend the regular (high sulphur) diesel and bring the sulphur levels to acceptable spec. Unlike Nigeria, the sulphur level in fuels is well regulated in Europe and other western world.

anyaekekehinde:

guy, you are very smart and intelligent, becuase of people like you, I am proud to be a nigerian.... i am 80% sure that you work with one of the oil majors, becuase your intelligent and deep analytical ability speaks volume

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Thanks bro.
I actually trained as a chemist in the GTL process.

atlwireles: Nigeria has joined a small group of nations including Qatar, South Africa, Malaysia and Australia that operate hi-tech Gas to Liquid (GTL) plants, as the Chevron owned Escravos GTL has produced its first liquids, after being behind schedule for several years.

The plant would allow Nigeria to perform a leading role in an advanced sector of the energy and fuel market.

“We recently achieved a major milestone at our Escravos gas to liquids plant with the production of GTL diesel and naphtha. We anticipate continued ramp-up in first product lifting later this year,” said George Kirkland, Vice Chairman and Executive Vice President-Upstream and Gas, at Chevron Corp., during the company’s Q2 Earnings conference call.

Chevron partnered with the Nigerian National Petroleum Corporation (NNPC) to build the GTL plant designed to convert 325 million cubic feet of natural gas per day, into 33,000 barrels of liquids—principally synthetic diesel.

When completed, the plant is expected to supply clean-burning, low-sulphur diesel fuel for cars and trucks.

The key component of the gas-to-liquids conversion is the Fischer-Tropsch reaction, pioneered by German scientists Franz Fischer and Hans Tropsch almost a century ago.

The Escravos GTL project had been severally delayed and capital expenditure on it is approaching $10 billion, according to Chevron.

This compares with the $1.2 billion that was spent on the 34,000 bpd Oryx GTL in Qatar, a similar project in terms of technology and capacity, which was inaugurated in 2006.

The Slurry Phase Distillate technology developed by Sasol and utilised at the Oryx project is also in use at the Escravos GTL project.

The Escravos GTL project will also produce kerosene and LPG – with the kerosene providing the nation with premium transportation fuel to produce jet fuel for aviation.

The products are expected to offset some oil product imports.

Nigeria spent N192 billion ($1.18 billion) to import refined petroleum products in the first quarter of 2014, according to data from the National Bureau of Statistics (NBS).

The business rationale behind the GTL project is based on the wide differential between gas and liquids (crude oil) pricing, which Chevron believes will persist over the long-term.

Global GTL production has the potential to deliver the equivalent of 32 billion barrels of liquids, or about a year’s worth of global oil demand, Bernstein analysts wrote in a November report titled “What if Small-Scale Gas to Liquids Was the Next Shale Gas? Are We on the Verge Of Another Energy Revolution?”

A pre-feasibility study of Escravos GTL was conducted in April 1998, followed by an engineering feasibility study.

The Front-End Engineering and Design (FEED) were completed in 2002.

The same year, agreements between Chevron Corporation, Sasol, and NNPC were signed.

The construction contract was awarded in April 2005 to a consortium of JGC, KBR and Snamprogetti.

Chevron Nigeria Limited has a 75 percent stake in the GTL projects, the NNPC 15 percent and Sasol 10 percent, while there are plans to expand the EGTL capacity to 120,000 b/d within 10 years.

PATRICK ATUANYA

http://businessdayonline.com/2014/08/10bn-chevron-escravos-gtl-produces-first-liquids

Its been long this has been waited for,its here at last......i v been so happy since i heared this. A boost for the economy though

davidif:

I am guessing that based on your comments that you don't have a fundamental knowledge of how businesses operate. There is something called risk and reward. what that means is that If you are going to bear the risk of something then the reward have to be able to compensate for it.

For example, exploration and production could be considered risks because you could explore and not find anything thereby losing all your money. So you do a risk reward analysis to find out if the potential reward you could get from that oil field is going to be big enough to offset your cost and be enough for you to make a lot of money. In other words, are the benefits or profits going to be worth it.

NNPC (the company that claims to represent Nigerians) doesn't really bear any risk that I know of they just show up when you find oil or any natural resources and demand a share. Yet this same companies still have to pay taxes on the money they make (or so i think). What a horrible practice.
At times I feel bad for foreign investors who come to do business in Nigeria because of what they have to go through. I mean the cost of doing business is so bad then you have all the other unnecessary wahala that you have to go through. Chei!!! No wonder a lot of investors find it really risky to invest in Nigeria and even Africa as a whole.

Your guesses are imaginary. You are not in a position to educate me on risk and reward.
When two individual legal entities go into a Joint Venture the party with the higher stake has more say in the investment laws which is about the most significant aspect of the operations.
In this case; the investment law will decide;
The expertise contribution from Chevron (most of which will be made up of expatriates who will be paid in hundreds of thousands of dollars.)

Source of Funding (Chevron will most likely borrow from the big American banks and pay interest back to the financiers (America))

Reinvestment of revenue from the operations….Chevron will have a higher say on what happens with the revenue from Operations…(This is why Shell can get away with massive environmental pollution because the investment laws it signed off with Nigeria in the '60's allows it to)

The list is endless!!! Chevron must have done its research and found that the project will be viable so there's no risk of dry wells.

It's sad that you would say NNPC does not represent Nigeria in this case.
Would you rather Chevron be allowed to come into Nigeria, tap your resources, and pay you a pittance for something that is naturally yours?
Or you believe Chevron will act in the best interest of Nigeria if left to operate this project alone?

Go and take a cold shower….something is wrong!!!

atlwireles:

Are you really serious?

I am serious…and i'll tell you why. The post i've quoted below is a response to a young man who wants to educate me on risk and reward. Certain contexts of the post don not apply to you so please do not take offence

735i:
Your guesses are imaginary. You are not in a position to educate me on risk and reward.
When two individual legal entities go into a Joint Venture the party with the higher stake has more say in the investment laws which is about the most significant aspect of the operations.
In this case; the investment law will decide;
The expertise contribution from Chevron (most of which will be made up of expatriates who will be paid in hundreds of thousands of dollars.)
Source of Funding (Chevron will most likely borrow from the big American banks and pay interest back to the financiers (America))
Reinvestment of revenue from the operations….Chevron will have a higher say on what happens with the revenue from Operations…(This is why Shell can get away with massive environmental pollution because the investment laws it signed off with Nigeria in the '60's allows it to)
The list is endless!!! Chevron must have done its research and found that the project will be viable so there's no risk of dry wells.
It's sad that you would say NNPC does not represent Nigeria in this case.
Would you rather Chevron be allowed to come into Nigeria, tap your resources, and pay you a pittance for something that is naturally yours?
Or you believe Chevron will act in the best interest of Nigeria if left to operate this project alone?
Go and take a cold shower….something is wrong!!!

I understand that NNPC does not have the expertise to run the project. But i am 100% sure it has the finances. So why can't we finance the project and outsource the construction and operations? My worry is on what will happen to the revenue from this operations…. will it be reinvested in Nigeria? or will it be sent back to the U.S?
Remember..Chevron or NNPC…the natural resource belongs to Nigeria...

735i:

The list is endless!!! Chevron must have done its research and found that the project will be viable so there's no risk of dry wells.

It's sad that you would say NNPC does not represent Nigeria in this case.
Would you rather Chevron be allowed to come into Nigeria, tap your resources, and pay you a pittance for something that is naturally yours?

First of all, risk is anything that jeopardizes the success of a project or of achieving a goal. It can come from political instability, natural disasters, attacks from militants and other forms man made attacks, uncertainty in financial markets, project failure, accidents, credit risks, lawsuits etc
As you can see from the definition, risk is much more all encompassing than not finding oil where they explore. So saying that chevron bears no risk in this venture simply means that you don't have a good understanding of what risk is.
That's why I said it was a bad business practice for an investor who hardly bears any risk like NNPC in this case to just come in and just demand a share.

Also, Chevron is a private company and I expect it to do what is in its interest which is to maximize its shareholder value. Unlike the so called NNPC.

735i:

I understand that NNPC does not have the expertise to run the project. But i am 100% sure it has the finances. So why can't we finance the project and outsource the construction and operations? My worry is on what will happen to the revenue from this operations…. will it be reinvested in Nigeria? or will it be sent back to the U.S?
Remember..Chevron or NNPC…the natural resource belongs to Nigeria...

What?? NNPC has what money?? Guy, we are not talking of a couple of hundred millions here, we are talking of billions. Projects like this are very capital intensive. This is not a road construction project we are dealing with here. You can't just "outsource" the project like that bro.

davidif:

First of all, risk is anything that jeopardizes the success of a project or of achieving a goal. It can come from political instability, natural disasters, attacks from militants and other forms man made attacks, uncertainty in financial markets, project failure, accidents, credit risks, lawsuits etc
As you can see from the definition, risk is much more all encompassing than not finding oil where they explore. So saying that chevron bears no risk simply means that you don't have the full knowledge of what risk is.
That's why I said it was a bad business practice for an investor who bears a lot of risk to just come in and just demand a share.

Also, Chevron is a private company and I expect it to do what is in its interest which is to maximize its shareholder value. Unlike the so called NNPC.

Good… i see we are getting to the same wave length.

Now read carefully; There is no risk without reward. The higher the risk…the higher the reward (theoretically). There are several methods to avoid, transfer or mitigate risks so that there are no extreme measures. All the risk factors you have listed above can be managed either through Insurance, outsourcing or derivatives trading.
I only listed dry wells because that was the major risk you stated in your initial post.
@ the bolded… That is why they will seek to make maximum profit irrespective of negative externalities…you eventually contradicted yourself.

Not that it's important; I admit that i do not know all about risk…but i hold a masters degree in risk management from a top university in the UK and i have solid work experience in risk management roles…. You are not in a position to educate me about risk.
Thank you.

davidif:

What?? NNPC has what money?? Guy, we are not talking of a couple of hundred millions here, we are talking of billions. Projects like this are very capital intensive. This is not a road construction project we are dealing with here. You can't just "outsource" the project like that bro.

Belive me when i say that NNPC can finance this project. How much did they say was missing from NNPC account? Is it not over $10Billion? And it wasn't even spotted immediately…
The project can be outsourced bro…thats what Multinational Oil servicing Firms like Schlumberger are there for….

735i:

Good… i see we are getting to the same wave length.

Now read carefully; There is no risk without reward. The higher the risk…the higher the reward (theoretically). There are several methods to avoid, transfer or mitigate risks so that there are no extreme measures. All the risk factors you have listed above can be managed either through Insurance, outsourcing or derivatives trading.
I only listed dry wells because that was the major risk you stated in your initial post.
@ the bolded… That is why they will seek to make maximum profit irrespective of negative externalities…you eventually contradicted yourself.

Not that it's important; I admit that i do not know all about risk…but i hold a masters degree in risk management from a top university in the UK and i have solid work experience in risk management roles…. You are not in a position to educate me about risk.
Thank you.

Sorry I made a mistake in my earlier post that is why it looks like I contradicted myself.

735i:

Good… i see we are getting to the same wave length.

Now read carefully; There is no risk without reward. The higher the risk…the higher the reward (theoretically). There are several methods to avoid, transfer or mitigate risks so that there are no extreme measures. All the risk factors you have listed above can be managed either through Insurance, outsourcing or derivatives trading.
I only listed dry wells because that was the major risk you stated in your initial post.
@ the bolded… That is why they will seek to make maximum profit irrespective of negative externalities…you eventually contradicted yourself.

Not that it's important; I admit that i do not know all about risk…but i hold a masters degree in risk management from a top university in the UK and i have solid work experience in risk management roles…. You are not in a position to educate me about risk.
Thank you.

Sorry I made a mistake in my earlier post that is why it looks like I contradicted myself.

Also, I don't see how derivatives trading is going to help Chevron mitigate risk after all they are not buyers of the product, they produce and sell.
they can't fix the price at which they sell there product, it is governed by the free market.

735i:

Good… i see we are getting to the same wave length.

Now read carefully; There is no risk without reward. The higher the risk…the higher the reward (theoretically). There are several methods to avoid, transfer or mitigate risks so that there are no extreme measures. All the risk factors you have listed above can be managed either through Insurance, outsourcing or derivatives trading.
I only listed dry wells because that was the major risk you stated in your initial post.
@ the bolded… That is why they will seek to make maximum profit irrespective of negative externalities…you eventually contradicted yourself.

Not that it's important; I admit that i do not know all about risk…but i hold a masters degree in risk management from a top university in the UK and i have solid work experience in risk management roles…. You are not in a position to educate me about risk.
Thank you.

Sorry I made a mistake in my earlier post that is why it looks like I contradicted myself.

Also, I don't see how derivatives trading is going to help Chevron mitigate risk after all they are not buyers of the product, they produce and sell.
they can't fix the price at which they sell there product, it is governed by the free market.
So besides insurance I really can't see how to effectively hedge against risk in this venture.

davidif:

Sorry I made a mistake in my earlier post that is why it looks like I contradicted myself.

Also, I don't see how derivatives trading is going to help Chevron mitigate risk after all they are not buyers of the product, they produce and sell.
they can't fix the price at which they sell there product, it is governed by the free market.

I would sincerely love to explain… but it will be a long post…
It would basically be a combination of futures and options… But..yes they can mitigate with derivatives. They might not be able to hedge out completely… but a significant proportion of the risks can be hedged such that variations in outcomes can be controlled such that it becomes worthwhile to proceed with the venture.

735i:

I would sincerely love to explain… but it will be a long post…
It would basically be a combination of futures and options… But..yes they can mitigate with derivatives.

Sorry for the triple post, my Internet is just slow man. But I hope you saw my last post?

735i:

I would sincerely love to explain… but it will be a long post…
It would basically be a combination of futures and options… But..yes they can mitigate with derivatives.

I know what futures contracts are, I just didn't know much about its application by oil and gas producers but looking at it now it makes sense.

derivatives don't properly mitigate against the full range of risks associated with the project like another Niger delta insurgency, sabotage, lawsuits and all the other ridiculous risks that come with doing business in naija and we are not even talking about natural disasters here.
So like I said earlier, insurance is the only way I see them hedging there bets in this project.

iamord:

You are right but this below is the main reason why such happens

www.nairaland.com/attachments/1658678_black20supreme_jpeg19c05943fd55ae359ee7f12b6cbf5fec

You are still talking about racism in the 21st century when black people can't organized themselves. Keep blaming racism for all your failure while you seat down contributing nothing to humanity. With time nobody is going to pay attention to your racism cry. Please, make use of your time for something worthwhile.

all4naija: You are still talking about racism in the 1st century when black people can't organized themselves. Keep blaming racism for all your failure while you seat down contributing nothing to humanity. With time nobody is going to pay attention to your racism cry. Please, make use of your time for something worthwhile.

If you understood my reply considering where he was coming from, your comment will be the other way round! I was not even making emphasis to racism but the picture I posted actually covers a lot. But I was particular on the fact that blacks do not plan. Research etc referring To the same thing as u mentioned so don't get me wrong

iamord:


If you understood my reply considering where he was coming from, your comment will be the other way round! I was not even making emphasis to racism but the picture I posted actually covers a lot. But I was particular on the fact that blacks do not plan. Research etc referring To the same thing as u mentioned so don't get me wrong

Okay. My apologies, sir!

all4naija:
Okay. My apologies, sir!

Alright! No p

AroOkigbo:
.
You are right to an extent- but note the following:
Unlike in Qatar,
1. EGTL is built on a reclaimed land (you don't want to know how many cubic feet of sand was used)
2. The modules were fabricated in Qatar, Korea, etc and shipped to Nigeria. A new wharf had to be built to take these heavy modules. Moreover, the low water depth meant the sea had to be dredged to take heavy ships.
3. Location. Escravos is only accessible by air or water. A lot of money was spent on flying staff and contactors from Warri and Lagos. Aero contractors, Arik and other airlines made a lot of money. Logistics took a good chunk of the cost of the project.
4. Converting gas to liquid is a whole new technology owned by Sasol. Chevron spent a lot to train operators in SA, US and Qatar. Over 200 people were trained at a point...with some trainees spending over 3yrs in SA.
5. Power supply. A brand new power plant had to be built to take care of energy requirements. And believe me, the energy requirement is high.
6. etc...etc. I don't want to talk about money spent to settle communities, ...and govt. big boys to keep the project going. Uduagha must be commended though. ..without him, the project would have been cancelled by the senate midway.


The GT Diesel and naphtha produced will be exported...100%. Our trucks cannot run on that quality of diesel. So don't expect the price of diesel ever coming down as a result of this project.

Valid post, I can do a synopsis of each of the above points to show that the cost of the project would not have exceeded about $3bn, even with the highlighted differences with the Oryx plant. The last point (No 6) is the sore thumb, many "peasants" ended up as billionaires with obscenely inflated contracts that spanned over 7 years; and there were several of those contracts.

The project was more political than economic and Uduaghan had to make sure it goes ahead to have peace in Delta state. Will it make money? Maybe, but it will take several years to break even.

igbonla:

Valid post, I can do a synopsis of each of the above points to show that the cost of the project would not have exceeded about $3bn, even with the highlighted differences with the Oryx plant. The last point (No 6) is the sore thumb, many "peasants" ended up as billionaires with obscenely inflated contracts that spanned over 7 years; and there were several of those contracts.

The project was more political than economic and Uduaghan had to make sure it goes ahead to have peace in Delta state. Will it make money? Maybe, but it will take several years to break even.

.
It depends on your definition of "several years"- in reference to breaking even.
1. Diesel, Naphtha and HC Condensate are pure products and sell at a much higher price than crude oil. Aside the HC Condensate (about a million barrels per month) which is like a byproduct, the plant has 34000 barrel per day capacity.
2. The main raw material is natural gas. This is the same gas that would have been flared. (environmental consideration is key). Lesser tax will be paid by Chevron as less gas is flared (cost savings).
3. More oil wells (with associated gas, hitherto capped) will be opened up. This will boost crude oil production. More gas- methane is also made available to NGC for power generation.
4. Profit is not all about money, think of the jobs this opened up- direct and indirect. At at time during construction, there were over 4000 personnel on side at any given time (even running on "shift". The "egg supplier" made sure he supplied 10000 eggs per day!
.
There are a whole lot of economic benefits.

[quote author=AroOkigbo]
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