Nigeria: Selected Issues and Statistical Appendix
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This Selected Issues and Statistical Appendix paper presents an assessment of Nigeria’s past economic reform efforts—in particular the program supported by the 2000–01 Stand-By Arrangement (SBA). The paper also reviews weaknesses in the current fiscal management framework in Nigeria and proposes reforms to further strengthen the budget process. It describes weaknesses in the current public debt management framework and the government’s reform strategy. It highlights the reform implication and addresses further actions that will be needed to put the government’s domestic debt reform strategy on a solid foundation.

Abstract

This Selected Issues and Statistical Appendix paper presents an assessment of Nigeria’s past economic reform efforts—in particular the program supported by the 2000–01 Stand-By Arrangement (SBA). The paper also reviews weaknesses in the current fiscal management framework in Nigeria and proposes reforms to further strengthen the budget process. It describes weaknesses in the current public debt management framework and the government’s reform strategy. It highlights the reform implication and addresses further actions that will be needed to put the government’s domestic debt reform strategy on a solid foundation.

VIII. Natural Gas Prospects91

A. Introduction

227. Natural gas has seen a rapid rise worldwide as a relatively clean source of energy.92 Developments in major energy consuming countries have changed the perception of gas as a low-value commodity, and efforts to find and produce gas have greatly expanded. This paper gives an overview of the natural gas sector in Nigeria with a focus on the impact on government revenue and the balance of payments from existing and planned gas production. It presents the two existing natural gas export projects in detail, following an overview of reserves and production in section B. Section C describes the economics of the Nigeria Liquefied Natural Gas (NLNG) company, and Section D describes the Escravos project. Section E examines the impact of the gas sector on government revenue and the balance of payments. Section F discusses possibilities for expanding the domestic market for natural gas, and the last section gives concluding remarks.

B. Overview

228. Nigeria has been producing oil for more than thirty years, and has therefore been producing natural gas for an equally long period. It is difficult, however, to gauge the availability of natural gas in the Niger Delta Basin because upstream producers have exerted little effort looking for gas. Gas fields have therefore been largely ignored when they were found, and oil companies have left aside prospects without exploratory drilling when the seismic data suggested ‘gassy’ deposits.

229. Oil and gas reserves worldwide are classified on the basis of marketability. Starting with the category used for resources that can and will be developed profitably with existing technology and prices, proven gas reserves in Nigeria are booked as only 3.2 billion barrels oil equivalent (bn bl/oe), compared with 24 billion barrels of proven oil reserves in 2002.93 Proven and probable reserves of gas are estimated at 32bn bl/oe, and yet-to-be-found gas is calculated as 25bn bl/oe based on a probabilistic method, bringing the total natural gas reserve base to 57bn bl/oe. Proven and probable crude oil reserves are put at 55bn barrels.94 The potential for future gas production could therefore be higher than for oil production, although higher transportation costs for gas mean that the value of oil will be higher than that of natural gas (assuming gas prices continue to follow oil prices).

230. Almost 50 percent of gas produced in 2003 was flared, i.e. burnt at the oil collection point. The flaring of gas carries potential opportunity costs, and high environmental costs. However, the domestic market for natural gas is still very small, and the conditions for investment in the infrastructure for gas export have only recently been established.

231. Total gas production is projected to increase from 4.3bn cubic feet per day (cft/d) in 1999 to 6bn cft/d in 2009. Sales of gas however, are expected to increase from 200 million cft/d to 3.5bn cft/d over the same period (40-760 kb/d oe). Natural gas is now used in three ways, apart from being flared: (i) exported by Nigeria Liquefied Natural Gas (NLNG) from Bonny Island, (ii) gathered and transported to Lagos and beyond in the Escravos project, and (iii) reinjected into oil reservoirs to maintain the pressure needed to lift the oil.

C. Nigeria Liquefied Natural Gas Company (NLNG)

Plant size and investment costs

232. After a long period of planning and numerous failed attempts to get the project started, NLNG was created as a joint venture between Shell Nigeria (25.6 percent equity), Elf (15 percent), Agip (10.4 percent), and NNPC (49 percent). Liquefaction of natural gas started in September 1999, in two production streams (so-called trains) with a capacity of 2.7 million tons (mt) each annually. The construction of the plant cost US$3 billion spread over more than three years. In 2002, the plant was expanded by another train which increased capacity by 50 percent at a cost of US$1.3 billion, and currently 9 million tons of LNG are exported mainly to Europe. The plant liquefies 1.2bn cft/d of natural gas, and exports the equivalent of 210 kbd of oil.95

233. Financing arrangements for another expansion by trains four and five have been put in place in December 2002. Project financing from international banks of US$1 billion was secured for a total investment of US$2.1 billion. This was the first time in sub-Saharan Africa that a project of this magnitude was found strong enough by international banks to justify such a financing arrangement.96 A sixth train is at the planning stage at a projected cost of $1.8 billion.97 It is estimated that production will reach a new maximum of 450 kb/d oil equivalent in 2006, equivalent to 17 percent of the oil production projected for that year. Expansion of LNG capacity beyond 2006 is possible at a different location (Bass river). The Bonny island shipping channel is projected to be used to capacity by the six trains’ exports.

Revenue and cost statement

234. To illustrate the importance of the liquefaction plant for government revenue and the balance of payments, we present here the financial details of the project. As most of the operational financial data were not available, assumptions had to be made for sales prices and operating costs. To illuminate the calculations and assumptions, we take simulated revenues and costs for the year 2003 as an example.

235. The liquefaction plant produced 9 million tons of LNG in 2003 from three trains of production, which have been built with an investment of US$4.3 billion provided entirely by the shareholders. In 2003, the company also invested into trains four and five (and into maintaining production in the existing trains), mostly provided by the project financing from international banks. Capital costs are depreciated over a period of five years. Recurrent costs consist of operating costs and costs for the purchase of natural gas from upstream producers, which are the joint ventures between the NNPC and the private shareholders of NLNG.98 The LNG is sold in Europe, on the basis of long-term take-or-pay contracts, based on a pricing formula that links the sales price for liquefied gas to international oil prices. Export revenue for the company is estimated as US$1.9 billion (see Table VIII-1).99 Despite ongoing investments in expansions, income should have exceeded costs by more than $400 million in 2003.100 The projected profit for 2004 reaches $940 million.

Table VIII-1.

Nigeria - Physical and Financial Data for Nigeria Liquefied Natural Gas (NLNG)

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Source: Nigerian authorities; and staff estimates and projections.

236. Over the medium term, the company is expected to produce a steady stream of income for both the government and the private partners. Export revenue is projected to reach US$5 billion in 2009, and profits are estimated at US$2.2 billion for the same year, with more than $1 billion for NNPC.101 Note that the company is exempt from corporate income tax for ten years.

D. The Escravos Gas Project

237. Since mid-1997, gas from oil production in the Western delta is collected and processed near the town of Escravos. Natural gas liquids and condensates are extracted for export and domestic consumption, and gas is transported to domestic customers, mainly in Lagos. The first phase of the project processed 165 million cft/d at an investment of $550million. The second phase expanded processing capacity to 285 million cft/d (50 kbd oe) at an additional $82 million and came on stream in late 2000 (Table III-2).

Table VIII-2.

Nigeria - Physical and Financial Data for the Escravos Gas Project, Phases I-III, and the West Africa Gas Pipeline

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Source: Nigerian authorities; and staff estimates and projections.

238. In the third phase, one of the world’s first commercial gas-to-liquids facilities will be constructed. Still at the planning stage, the third phase would increase processing capacity to nearly 600 million cft/d, to produce 50 kbd of highquality motor fuel for domestic use and exports. Production is projected to commence in 2005 after an investment of $2 billion. The next step could be the extension of the Escravos pipeline system to allow exports of 200 million cft/d to countries to the West of Nigeria in the West Africa Gas Pipeline project (WAGP). This project is at the design stage, although purchase and financing arrangements still need to be finalized. Start of production is projected for 2006.

239. With production in the Escravos complex estimated to bring revenue of $300 million, profits of $59 million are estimated for 2003. According to the NNPC, the Escravos project pays upstream gas producers on a net-back basis, which means the gas is not sold at any specified price to the processing plant, but rather, profits are paid as dividends to the producers.

E. Macroeconomic Impact of the Gas Sector

240. The gas sector generates government revenue, requires public expenditure in the form of NNPC cash calls, and has an impact on the balance of payments through imports of goods and services for operating and investment costs, foreign direct investment by joint venture companies, and profit remittances by the same companies.

Government Revenue and Cash Calls

241. Government revenue related to the gas sector—along with other information—is shown in Table VIII-3. It increases from $350 million to $1.4 billion between 2002 and 2006. In the early years, this depends almost entirely on revenue from the penalty imposed on oil operators for the flaring of gas. This has been set at naira 10 per thousand cft in 1999, and government revenue from the flaring penalty decreases from $33 million in 2002 to $21 million in 2006 as flares are replaced by exports, domestic gas use, and reinjection.

Table VIII-3.

Nigeria - Physical and Financial Data for the Gas Sector, and Macroeconomic Impact, 2002-2006

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Source: Nigerian authorities; and staff estimates and projections.

242. Government revenue comes increasingly from the 40–49 percent equity share the NNPC holds in the gas joint ventures. This of course raises the question of the pass-through of profits from the NNPC to government accounts. The NNPC has so far only produced government revenue from the proceeds of the sales of crude oil, and upstream gas sales to NLNG and the Escravos project. The NNPC has to carry investment costs for gas projects in accordance with its equity share (cash calls). 2003 was a year with heavy investment requirements in the gas sector, for the two-train expansion of NLNG and the onset of investment into Phase III of the Escravos project. Some investment expenditure is financed from retained earnings, as shown in the tables.102

Balance of payments

243. The gas sector depends to a large extent (we assume 80 percent) on imported goods and services for both operating and investment costs. Imports follow closely the investment profile, and are projected to peak in 2005 at about $1.6 billion. The portion of investment that is paid for by the foreign joint venture companies is financed by foreign direct investment, which also peaks in 2005. Foreign operators remit profits from their participation in the Nigerian gas sector, and $940 million is estimated to have been transferred in 2003.

F. Outlook for the Domestic Gas Market

244. As described in the background section to this paper, the reserve base of natural gas in Nigeria is likely to be sufficient to expand gas production significantly beyond the LNG and Escravos projects described here. Apart from the additional LNG and pipeline export projects under discussion, the domestic market could in the future provide an outlet for gas that would benefit both producers and the Nigerian economy. This section looks at the potential market, and at institutional and legal changes needed to make the market attractive to investors.

Domestic Market Potential

245. Nigeria suffers from a chronic shortage of electricity, mainly because of shortages in generation capacity. Gas-fired electricity generation alongside major investments in electricity distribution infrastructure could alleviate this shortage, and create the minimum demand necessary to build an extensive gas distribution pipeline system across Nigeria. Currently, the National Electric Power Agency (NEPA) uses gas for 41 percent of its 6,000 Megawatt (MW) power plant capacity. Assuming that electric power consumption grows at 6 percent per year, Exxon Mobil estimates that 77,000 MW installed capacity will be needed by 2020. Over the medium-term, the company estimates that new power stations will be based in Kaduna, Enugu, Ibadan, and Lagos with a total capacity of 4,400 MW by 2010.

246. Gas demand from existing and new power generation would be about 1,000 million cft/d by 2010 from 400 million cft/d today. Cement, fertilizer, steel, and aluminum industries could add another 100–200 million cft/d. Residential and small industry demand is more uncertain, and depends critically on the extent of any future gas distribution network. Shell estimates demand to be in the range of 50-500 million cft/d annually (Table VIII-4). The domestic market for gas over the medium term is therefore likely to be equivalent to the current NLNG gas use. Investment requirements for the domestic gas market are large. Because they are likely to be too large for the public purse, private investment will have to be attracted.

Table VIII-4.

Nigeria: Domestic Gas Demand, 2003-10

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Source: Nigerian authorities; and staff estimates and projections.

Regulatory framework for a domestic gas market

247. The framework for attracting private investment in domestic gas infrastructure is currently not in place. The government is working on two fronts to change this: first, the revival of the power sector should follow from efforts under way to restructure NEPA, unbundle its activities, and privatize most of its operations. The authorities are hoping to attract private investment, including foreign direct investment, through possibilities for build-operate-transfer schemes. Second, the government is working on a gas sector strategy, with the help of the World Bank.

248. A technical team and two stakeholder workshops produced a proposal to draft a Gas Act that would create a new and separate legal and regulatory regime for downstream gas.103 The proposal also contains suggestions for a combined gas and electricity regulatory agency staffed with relevant personnel from the Department of Petroleum Resources. The Act would define a licensing regime, and distinguish between the roles of a transportation network operator, transporters, and distributors and gas suppliers. A National Gas Transportation Company (NGTC) would be created separate from the NNPC. The Gas Act would allow certain gas users and distributors third party access to the pipeline network to enable them to contract directly with upstream producers.

G. Concluding Remarks

249. The objective of this chapter was to provide basic information about the natural gas sector in Nigeria. The chapter has shown a very promising development potential for a sector that is very much in its infancy. Export projects are moving well ahead, although it remains to be seen how the government will share in their expected high profitability. A domestic market does not yet exist, but has a good potential to develop together with an alleviation of the chronic electricity shortages that still plague Nigeria.

250. Natural gas deserves attention by the government, as it could provide several benefits to Nigeria. First, the development of profitable outlets for natural gas could reduce the flaring of this resource, with immediate environmental as well as financial benefits. Second, expansion of profitable gas use is not constrained by Nigeria’s OPEC quota. This includes the production of natural gas liquids and condensates, which command higher prices than crude oil. Third, natural gas could be used to eliminate electricity shortages, and provide a clean, stable source of energy to industry and households.

251. A number of concerns follow from our description. There is a shortage of information on the gas sector in its current form; in particular, (i) the current upstream fiscal regime is not clear, and the pass through of profits from the government’s participation in NLNG has yet to occur; (ii) although some private gas-fired power stations are already under construction, the legal and regulatory framework may change considerably; it is not clear what the current agreements are with the sponsors of the projects under construction, and how they would be affected by an eventual Gas Act; the preparation of the Gas Act should therefore proceed without delay.

STATISTICAL APPENDIX

Table 1.

Nigeria: Revised Gross Domestic Product by Sector of Origin at Current Prices, 1999-2003

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Sources: Federal Office of Statistics; National Planning Commission; and staff estimates.
Table 2.

Nigeria: Revised Gross Domestic Product by Sector of Origin at Constant 1990 Prices, 1999-2003

(In millions of naira)

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Sources: Federal Office of Statistics; National Planning Commission; and staff estimates.
Table 3.

Nigeria: Revised Gross Domestic Product by Expenditure Category at Current Prices, 1999-2003

(In millions of naira)

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Sources: Federal Office of Statistics; National Planning Commission; and staff estimates.

National disposable income less aggregate consumption.

Domestic disposable income less aggregate consumption.

Table 4.

Nigeria: Revised Gross Domestic Product by Expenditure at Constant 1990 Prices, 1999-2003

(In millions of naira)

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Sources: Federal Office of Statistics; National Planning Commission; and staff estimates.

National disposable income less aggregate consumption.

Domestic disposable income less aggeragate consumption.

Table 5.

Nigeria: Selected Petroleum Statistics, 1998–2003

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Sources: Central Bank of Nigeria; Nigerian National Petroleum Corporation; and Fund staff estimates.

Includes condensates.

Balance of payments basis, including exports of condensate.

U.K. Brent, light-blend 38 API, f.o.b. United Kingdom.

For 2003, simple averages for the year.

Table 6.

Nigeria: Selected Indicators of Agricultural Production and Prices, 1999-2003

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Sources: Federal Office of Statistics; Federal Ministry of Agriculture; and Central Bank of Nigeria.
Table 7.

Nigeria: Index of Industrial Production, 1999-2003

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Source: Central Bank of Nigeria.
Table 8.

Nigeria: National Consumer Price Indices, 1999-2003

(May 2003 = 100)

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Sources: Central Bank of Nigeria; and Federal Office of Statistics.
Table 9.

Nigeria: Urban Consumer Price Indices, 1999 - 2003

(May 20030 = 100)

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Sources: Central Bank of Nigeria; and Federal Office of Statistics.
Table 10.

Nigeria: Rural Consumer Price Indices, 1999 -2003

(May 2003 = 100)

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Sources: Central Bank of Nigeria; and Federal Office of Statistics.
Table 11.

Nigeria: Consolidated Government Revenue, 1998-2003 1/

(In millions of naira)

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Sources: Federal Ministry of Finance; and staff estimates.

Includes the Federal, state and local governments.

Mainly company income tax collected by the Federal Inland Revenue Service Revenue.

Consists of personal income tax, other taxes and fees collected by state governments. The Federal Inland Revenue Service also collects a small amount of personal income tax from armed forces personnel and inhabitants of the Federal Capital Territory.

Consists of import duties, excise duties, and fees that go directly to the Federation account.

Consists mainly of earmarked import levies of a 5 percent port development surcharge, a 1 percent Nigerian Shippers Council surcharge, and a 1 percent Raw Materials Research and Development Council surcharge.

Proceeds fom the sale of crude oil to domestic refineries.

Consists of dividends from public enterprises, directors’ fees and loan recoveries.

Table 12.

Nigeria: Consolidated Government Expenditure, 1998-2003 1/

(In millions of naira)

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Sources: Federal Ministry of Finance and staff estimates.

Consists of the Federal, state and local governments.

Table 13.

Nigeria: Federation Account Operations, 1998-2003

(In millions of naira)

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Sources: Federal Ministry of Finance; and staff estimates.

The allocation formula of Federation account revenue as of 2003 was 48.5 percent for the Federal government, 24.9 percent for state governments, 20.6 percent for local governments, and 6 percent for special funds.

Table 14.

Nigeria: Summary Federal Government Fiscal Operations, 1998-2003 1/

(In millions of naira, unless otherwise indicated)

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Source: Federal Ministry of Finance; and staff estimates.

Consists of the Federal government and the Petroleum Special Trust Fund (PSTF).

Consists of dividends from public enterprises, directors’ fees and loan recoveries from public enterprises.

Miscellaneous revenues.

Consists of interest earned on PSTF balances held as deposits and treasury bills.

To state governments.

Includes adjustment for PSTF deposits held in the commercial and merchant banking system, which are classified as private deposits.

Primary balance is defined as total revenue less total expenditure, excluding interest payments due.

Table 15.

Nigeria: Total Expenditure of the Federal Government by Functional Classification, 1998-2003 1/

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Source: Annual reports of the Central Bank of Nigeria and staff estimates of the interest due.
Table 16.

Nigeria: Recurrent Expenditure of the Federal Government by Functional Classification, 1998-2003 1/

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Sources: Annual reports of the Central Bank of Nigeria, except for interest due estimated by the staff.

The figures are based on budgetary data and exclude extrabudgetary expenditures.

Includes pensions, gratuities and contingencies.

Table 17.

Nigeria: Capital Expenditure of the Federal Government by Functional Classification, 1998-2003 1/

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Source: Annual reports of the Central Bank of Nigeria.

The figures are based on budgetary data and exclude extrabudgetary expenditure.

Table 18.

Nigeria: Federal Government Outstanding Domestic Debt, 1998-2003

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Sources: Annual reports of the Central Bank of Nigeria; and staff estimates.
Table 19.

Nigeria: Summary of Budgetary Operations of State and Local Governments and special funds, 1998-2003 1/

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Source: Central Bank of Nigeria (Annual reports).

These data, obtained through annual surveys undertaken by the Central Bank of Nigeria, are only illustrative.

This revenue is on gross basis (ie. before deductions for payments of various commitments made by the sub national governm

Mainly personal income tax collected by state governments.

Total spending is underestimated because only a sample of local governments are covered and deductions at source may not have been included.

Table 20.

Nigeria: Monetary Survey, 1999–2003 1/

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Sources: Central Bank of Nigeria; and Fund staff estimates.

Consolidated accounts of the Central Bank of Nigeria, commercial banks, and merchant banks.

Quarterly data for 2002 reflects growth since the end of 2001.

Quarterly data for 2002 reflects contribution to M2 growth since the end of 2001.

Capital accounts and bonds and money market instruments.

Table 21.

Nigeria: Consolidated Accounts of the Central Bank, 1999–2003

(In millions of naira; end of period)

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Source: Central Bank of Nigeria.

Includes both merchant and commercial bank deposits deposited at the CBN branches.

Data for 2002 Q1 and Q2 are preliminary. Several problems emerged when the CBN shifted commercial bank accounts from its Lagos branch to its Abuja branch.

Non-financial public sector demand deposits.

Table 22.

Nigeria: Consolidated Accounts of the Commercial Banks, 1999-2003 1/

(In millions of naira; end of period)

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Source: Central Bank of Nigeria.

Starting in April 2001, due to regulatory changes merchant banks are being treated as commercial banks.

Includes deposits of state and local governments.

Table 23.

Nigeria: Liquidity of Commercial Banks, 1999-2003

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Source: Central Bank of Nigeria.

As reported by the commercial banks.

Comprising certificates of deposit, and bills discounted.

Total liquid assets less penalty and cash reserve requirements as a percent of total deposit liabilities.

The base to calculate the reserve requirement comprises banks’ total deposit liabilities (i.e., demand, savings, and time deposits) except foreign currency deposits; certificate of deposits; promissory notes held by the non-bank public; bankers’ acceptances and since January 2002, VAT and customs dutires collected by banks on behalf of the federal government held more than for seven days. Starting in 2002, the CRR’s maintenance period was changed from 30 to 15 days. Cash must be held in a separate account with the CBN. Vault cash is not an eligible asset.

Table 24.

Nigeria: Balance of Payments, 1999-2003

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Sources: Nigerian authorities; and staff estimates and projections.

In 2000–01, reflects the Paris Club rescheduling agreement of December 13, 2000.

For 2003, actual recovered funds received by CBN.

Three-year moving average of exports.

Table 25.

Nigeria: Selected Interest Rates, 1999–2003

(In percent; end of period)

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Source: Central Bank of Nigeria.
Table 26.

Nigeria: Imports, 1999–2003 1/

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Source: IMF, Direction of Trade statistics, and staff estimates.

c.i.f. basis, based on partner-country data.

Table 27.

Nigeria: Exports, 1999–2003 1/

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Source: IMF, Direction of Trade statistics, and staff estimates.

f.o.b. basis, based on partner country data.

Table 28.

Nigeria: External Public Debt Stock, 1999–2003 1/

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Sources: Nigerian authorities; Paris Club; and Fund staff estimates.

As reported by creditors. These figures are tentative pending the reconciliation of Nigeria’s obligations with

Excluding late interest in 1999. In 2000, including late interest as reported by the Paris Club and capitalized moratorium interest as estimated by Fund staff.

Table 29.

Nigeria: External Debt Service 1999–2003

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Source: Central Bank of Nigeria; Debt Management Office; Creditors; and Fund staff estimates.

Nigeria: Tax Summary

(As of February 2004)

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Sources: Ministry of Finance, various tax legislation; Nigerian Tax Companion, 2001; and International Bureau of Fiscal Documentation.

H. References

  • Bartsch, U., 1998, Financial Risks and Rewards in LNG Projects: Qatar, Oman, and Yemen, Oxford Institute for Energy Studies NG3, Oxford, UK.

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  • BP, 2003, BP Statistical Review of World Energy, June, London.

  • IPA Energy Consulting, 2003, Nigeria Natural Gas Strategy Consultation Paper, http://www.ipaenergy.co.uk.

  • Nigeria Liquefied Natural Gas website http://www.nigerialng.com.

  • Nigeria National Petroleum Company, several years, Annual Report, Abuja, Nigeria.

  • World Bank, 2004, Strategic Gas Plan for Nigeria, ESMAP Report 279/04, Washington, DC.

91

Prepared by Ulrich Bartsch.

92

Natural gas is dissolved in crude oil under the high pressure that exists in hydrocarbon reservoirs, and is freed once the pressure is released. It is therefore not possible to produce oil entirely without having to deal with some associated natural gas. Most crude oil reservoirs also have a gas cap. In some reservoirs there is more gas than oil, although there are no reservoirs without any liquids.

93

“Proved reserves of natural gas - generally taken to be those quantities that geological and engineering information indicates with reasonable certainty can be recovered in the future from known reservoirs under existing economic and operating conditions” (BP Statistical Review of World Energy June 2003). The Nigerian authorities put current proven oil reserves at 33 bn bl.

95

In the liquefaction process, all by-products other than methane are filtered out of the LNG. Heavier hydrocarbon compounds are sold as condensates and LPG.

96

Project financing means that repayment of the loan will come from project revenue only, and banks cannot have recourse to the project shareholders’ capital in case of adverse developments.

97

The trend in the industry is to build ever larger trains. While the first two trains had a capacity of 2.7mt each annually, the third had 3.4mt, trains four and five will have 3.7mt, and train number six is estimated to reach more than 4mt. Investment figures have been provided by NNPC.

98

The first two trains of NLNG use gas from designated gas fields. Increasingly, expansions of the plant will use gas associated with oil production and contribute to the reduction of flaring.

99

Operating costs are estimated at US$0.40 per 1000 cft or a total of US$175 million. The LNG venture purchases 440bn cft (1.2bn cft per day) of natural gas at US$0.76 per 1000 cft, at a cost of US$333 million. Operating costs, the upstream gas price, and the LNG sales price in Europe are assumed to be the same as for the Oman LNG project described in Bartsch (1998).

100

Company results for 2003 are not yet available. One of the joint venture partners indicated however, that a ‘small dividend’ would be paid by NLNG.

101

Assumes that two more LNG trains come on stream in 2008–09.

102

Note that profits are different from cash flow in that they are calculated as gross revenue minus maintenance, capital depreciation, debt service, and operating costs, so they do not depend on the financing of investment activities.

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