west african gas pipeline project (wagp) _________________ 11th africa oil and gas trade and finance...
TRANSCRIPT
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
11th Africa Oil and gas trade and finance conference
23-25 May, Nairobi, Kenya
Developing transborder infrastructures :
West African Gas Pipeline Project: A case Study
Débo-K’mba A. BARANDAO
West African Gas Pipeline Authority Coordinator
NOT AN OFFICIAL UNCTAD RECORD
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
I. Overview
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
• The WAGP
New high pressure natural gas pipeline to transport Nigerian produced natural gas to commercially viable markets in Benin, Ghana and Togo
• The WAGPTakoradi
Tema
Escravos
Cotonou
GHANA
TOGO
NIGERIA
Lomé
Lagos
Niger
Burkina Faso
Mali
BENIN
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
• Pipeline System
680 km of mainly 20” pipeline from Nigeria to Ghana; delivery points in Benin, Togo and Ghana (8”, 10” & 18” lateral lines); extension to Cote d’Ivoire possible
Compressor Station on Lagos Beach: 2 x 12,500 HP (one stand-by) in initial phase
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
• Pipeline System (Cont’d)
Expansion Stages: Initial Capacity 160 MMBtu / day; Final Capacity of 474 MMBtu/day, i.e. potential for 2,500-3000 MW on combined cycle power plants); expansion by increasing compression capacity
Initially, 85% of gas to power plants; 15% to heat-using industries
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
• Project Objectives► New markets for Nigerian gas (Reduce gas
flaring)
Access to cleaner & cheaper fuel and greater energy security for Benin, Togo and Ghana
Regional economic integration (ECOWAS)
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
• Developed by the West African gas pipeline Company (WAPCo):
Chevron (36.7%) Managing PartnerNigerian National Petroleum Corp. (NNPC, 25%)Shell (18%)The Volta River Authority of Ghana (VRA, 16.3%)BenGaz SA (2%)Société Togolaise de Gaz SA (2%)
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
• Project Milestones►Pre-Feasibility Study 1993 States Agreement 1995 MOU States-Developer 1999 Intergovernmental Agreement (IGA) Feb 2000 Shareholders Agreement (May 2003) Treaty Jan 2003; IPA May 2003 Enabling Legislation 2004 Final Investment Decision Dec 2004 Construction March 2005 – Q2 2008 First Gas Jan 2008 (Free Flow)
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
• Pipeline Financing
Estimated (and fixed) Initial Cost: $614 million
Financed by equity contributions from Company Shareholders
CAPEX amount in Escrow Account at FID
Longer term Guarantees from the Governments backed up by World Bank Group (MIGA, OPIC)
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
• Participating Countries
English speaking• Common Law
GhanaNigeria
TogoBenin
French speaking• Civil law
Two French speakingTwo English speakingDifferent legal systemsThree of four countries without pipeline experience
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
II. Enabling Environment
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
· Harmonized fiscal, regulatory, legal and investment regime
3 mechanisms to achieve regime standardization– WAGP Treaty – International Project Agreement – Enabling Legislations passed in all countries
Regulatory Documents– Access Code – WAGP Technical Regulations – Pipeline Licenses – Pipeline Development Plan – Environmental Impact Assessment & Management
Plan
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
• WAGP Treaty
Establishes WAGPA as the Regulatory Authority Establishes Bodies for Legal & Fiscal appeals Joint Commitment to implement the IPA Agreement for sharing of fiscal
commitments/revenues among countries No Transit Royalties:
a)Unnecessary cost additions and administrative process: countries get fiscal income from taxes on Revenue
b)ECOWAS Treaty stipulates free transit of goods
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
• International Project Agreement (IPA)
Establishes the Commercial and Regulatory terms of the WAGP Business
Comprehensive and harmonized investment Regime to enable WAPCo to operate as a single business entity across the four countries
WAPCo to Build, Own, Operate & Maintain Pipeline System
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
· IPA (Cont’d)
Tariff Methodology principles
Pipeline Development Plan outline
Pipeline Access Code principles
Environmental Impact Assessment & Management Plan
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
• WAGP Authority – WAGPA
Established as an international institution by the WAGP Treaty. WAGPA’s powers and functions are:
a) Representing the States;
b) Facilitation between Project Stakeholders; and
c) Regulatory (enforces Regulations,
Access Code)
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
• WAGPA (Cont’d)
This includes Approving conceptual design package & FEED Agreeing upon & Enforcing Terms of Pipeline
Development Plan Reviewing EIA & EMP Coordinating and facilitating all necessary
approvals Conflict Resolution
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
• Enabling Legislation Single law adopted by the four countries, validates
the Regime established for the Project in the IPA (including Fiscal & Regulatory Regime)
Authorizes Company to own & carry out Project Establishes Licensing procedures & introduces
Pipeline Regulations
Validate Guarantees by Governments Confirms Tax Sharing by Countries
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
• Fiscal Regime
Single Fiscal Regime across the entire region (only applicable to WAGP Activity)– 35% income tax rate – 25% reducing balance method of depreciation – 5 year tax holiday – No import / customs duties or VAT on import of capital
goods – No Transit Royalties – Single tax filing & country assessment process – Minor taxes aggregated & capped – Exchange control rules harmonized
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
• Tax Sharing Between Countries International Practice: Income Tax shared in proportion to
Distance or Investment amount in Countries – Some States required Sales volume & Country Development
Costs to be considered –
A combined formula is applied for WAGP:
APs (%) = 45 x (( LS ÷ LT ) + ( RCS ÷ RCT )) + 2.5 APs: Apportionment Percentage for a State LS: Length in State RCS: Reserved Capacity by State LT: Total length of Pipeline RCT: Total Reserved Capacity
Formula also valid for sharing of Project costs incurred collectively by the States
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
III. Commercial Environment
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
• Tariff Methodology Tariff Model Discounted Cash Flow at FID date 12% Rate of Return (ROR) on Foundation Market (20
years) 15% ROR on Overall Market after 20 years ROR is real, after Tax (to attract Investors) 3 Tariff Classes: Foundation, Standard & Industrial
Development 10c/MMBtu premium for Foundation Customers Based on Reserved Capacity – Ship or Pay (not on
volume transported)
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
• Delivered Gas Price: Sum of
1. Gas Commodity 2. ELPS Transportation 3. Shipper delivery fee 4. Compression Fuel Gas 5. Take or Pay Commodity / Ship or Pay ELPS 6. WAGP Reservation Charges 7. WAGP Authority Charge 8. Credit Security Charge
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
IV. Project Benefits
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
Savings against Oil: $700 M – $2,500 M, range over 20 years
Fiscal revenues: $650-$700 M, shared between four countries
Access to sustainable energy for Benin, Togo & Ghana Promote economic development Create gas industry in Benin, Togo & Ghana
Reduce GHG emissions by 52% IRR between 25% - 58%, depending on specific
country
West African Gas pipeline ProjectWest African Gas pipeline Project (WAGP) _________________ (WAGP) _________________
THANK YOU
FOR
YOUR ATTENTION !