Biofuels Development in Nigeria

TIONAL P NA LEUM RO ET NIGERIAN OR P O R AT I O N C Biofuels Development in Nigeria A Presentation to International Renewable Conference Abuja, 2007 NIGERIAN OUTLINE  Introduction  Nigerian Biofuels Objectives and Approach  Domestic Bio-fuel Program  National Biofuels Policy TIONAL P NA LEUM RO ET OR P O R AT I O N C  Seeding Program  Expected Benefits and Conclusion 2 TIONAL P NA LEUM RO ET What is Energy?  Energy is the capacity to do work.  The common known sources of energy include: NIGERIAN OR P O R AT I O N C Renewable Biofuels Solar Hydro Geo-thermal Biomass Others Non-renewable Fossil fuels (oil & gas) Coal Tar Sand Others 3 Today Non-Renewable Energy account for about 75% of Energy Supplies (oil, gas & coal) in the world Gas 21% Nuclear 6% Large Hydro 6% Traditional Biomass 11% TIONAL P NA LEUM RO ET NIGERIAN OR P O R AT I O N Coal Oil Other Gas Renewables Nuclear 2% Large Hydro Traditional Biomass Other Renewables C Oil 32% Coal 22% 4 However, these non-renewable energy sources are depleting at a fast rate 1000 1 EJ = 10 18 J TIONAL P NA LEUM RO ET NIGERIAN OR P O R AT I O N C C A FLUID FOSSIL FUEL PRODUCTION / DEMAND IN EJ/yr 100 D 10 E B 1 F LEGEND 0.1 A : World Fluid Fossil Fuel Production B : Nigerian Fluid Fossil Fuel Production C : World Fluid Fossil Fuel Demand Projection D : World Fluid Fossil Fuel Production Projection E : Nigerian Fluid Fossil Fuel Demand Projection F : Nigeria Fluid Fossil Fuel Production Projection Note: 1E = One Exa-juole = 1018 J 1990 2000 2010 2020 2030 2040 YEAR 0.01 1980 2050 2060 2070 2080 2090 5 2100 And are harming the environment – CO2 emissions, increase in the earth’s temperature TIONAL P NA LEUM RO ET NIGERIAN OR P O R AT I O N C 6 In addition the price of crude oil is escalating at incredible rate 140.00 TIONAL P NA LEUM RO ET NIGERIAN OR P O R AT I O N 120.00 Iran (Nuclear issue) – USD 100/bbl 100.00 Currently there is war in Northern Iraq. C Oil Price ( USD/bbl ) 80.00 Lebanon War Militancy in Nigerian Niger Delta 60.00 Invasion of Iraq Iranian Revolution Yom Kippur War Invasion of Kuwait 40.00 20.00 0.00 1970 7 1975 1980 1985 1990 1995 2000 2005 2010 2015 TIONAL P NA LEUM RO ET The Energy Situation in Nigeria  NIGERIAN OR The Energy Resources in Nigeria include: Crude Oil, Natural Gas, Coal, Tar Sand and Renewables (Biomass, Hydro, Solar, Wind, etc.) Current Estimated Oil Reserve in Nigeria is 35.9 billion barrels with daily production capacity of 2.4 million barrels of Crude Oil Natural Gas is estimated at 185 trillion cubic feet of proven reserve as at January 2006 (- OGJ). Coal and Lignite Reserves are estimated at 2.75 billion tons. P O R AT I O N C     The 35.9 billion barrels of oil in reserve will be depleted by 30 – 36 years period.  Renewable Energy (Biofuels) will increase supply and reduce the demand on oil reserve. Source: Oil and Gas Journal, 2007 8 TIONAL P NA LEUM RO ET What is Renewable Energy? NIGERIAN OR P O R AT I O N  “Renewable Energy” is a replenishable energy derived from sources that are not subject to depletion in the human time scale.  It is also defined by various experts as:  “Energy obtained from the continuous or repetitive currents of energy recurring in the natural environment” – Twidell and Weir, 1986  “Energy flows which are replenished at the same rates they are used” – Sorensen, 2000 C 9 TIONAL P NA LEUM RO ET Renewable Energy - Virtuous Cycle…Sustainable…Perpetual? A Case Study NIGERIAN OR P O R AT I O N C 10 NIGERIAN OUTLINE  Introduction  Nigerian Biofuels Objectives and Approach  Domestic Bio-fuel Program  National Biofuels Policy TIONAL P NA LEUM RO ET OR P O R AT I O N C  Seeding Program  Expected Benefits and Conclusion 11 NNPC Created a Renewable Energy Division following a Presidential directive in August 2005 for the corporation to coordinate a National Biofuels Programme. NIGERIAN OR TIONAL P NA LEUM RO ET N C P O R AT I O Key Elements of The Vision Energy SelfSufficiency Maximize Carbon Credit opportunities Sustainable Development Thriving Homegrown Industry Rural Wealth & Job Creation Integrate Oil & Gas with Agriculture Environmentally Friendly 12 TIONAL P NA LEUM RO ET NNPC Renewable Energy Division (R.E.D.) Vision To drive the creation of wealth for Nigerians through Renewable Energy. NIGERIAN OR P O R AT I O N C Mission Statement R.E.D (Renewable Energy Division) exists to link the agricultural sector with the Oil and Gas industry by the domestic production of Bio-fuels; while fostering the use of other renewable energy sources. Quality Policy R.E.D shall provide consistent, steady supply of alternative fuel to the utmost satisfaction of customers and continuously seek to improve its quality management system 13 The NNPC R.E.D. articulated a three-pronged strategy to realise the vision of a thriving Nigerian Biofuels industry •Detail-out a vision for Nigeria’s bio-fuel industry TIONAL P NA LEUM RO ET NIGERIAN OR P O R AT I O N C Domestic Industry Programme •Establish industry foundation by identifying suitable feedstock in the various states in Nigeria •Design operating and growth model for domestic biofuel industry •Launch a number of initial projects of medium to large scale sizes • Develop policies, incentives and regulatory environment necessary Biofuels Policy for the emergence of a strong bio-fuel industry in Nigeria, incorporating lessons from other countries •Introduce use of fuel ethanol and the creation of a biofuel Seeding Programme market in Nigeria •Facilitate development of infrastructure needed to market fuel ethanol 14 The NNPC R.E.D. also developed a three-stage approach for the industry creation Planning Nigeria Bio-Fuels Industry •Develop vision for industry •Carry out economic, social, environmental & regulatory assessment •Develop financial approach •Develop partnership strategy and partner options •Develop implementation plan - Medium scale farms - Plantation Development - Distillery Development •Plan Ethanol import program TIONAL P NA LEUM RO ET NIGERIAN OR P O R AT I O N C Building Foundation •Build growth model with selected partners: Convert existing acreage Build new infrastructure Develop skills •Develop industry capacity •Adapt regulatory environment •Expand infrastructure ability to supply Ethanol •Run Ethanol import test programme •Develop customer acceptance for E10 fuels Growing •Replicate model •Improve continuously 2005 2007 2009 15 NIGERIAN OUTLINE  Introduction  Nigerian Biofuels Objectives and Approach  Domestic Bio-fuel Program  National Biofuels Policy TIONAL P NA LEUM RO ET OR P O R AT I O N C  Seeding Program  Expected Benefits and Conclusion 16 Completed feasibility studies: 3 sugar cane sites in Benue and Gombe States 2 cassava sites in Ondo and Anambra States. Studies for 3 oil palm for biodiesel sites to commence in 4Q 2007 NIGERIAN C TIONAL P NA LEUM RO ET OR P O R AT I O N S ot ok o Kebbi Z ara amf Katsina Kano Jigawa Yobe Bor no Kaduna Niger Kwara Ekit i Ondo Edo D a elt I mo Enugu Anambra Bauchi Gombe Adamawa Oyo FCT N awa asar Benue Plat eau Taraba Ogun Lagos Osun Kogi - Every state has potential for biofuels project using various crops Ebonyi Cross River Sugar cane Cassava Bio-diesel Abia Balyesa Rivers A I kwa bom - Engaging state governments to lead biofuels initiatives in their 17 states The sugarcane and cassava ethanol projects’ models Sugarcane  Integrated operation:  Farm size: >=15,000-20,000 ha u Cane production: 1.8 million t/year u Irrigated  Plant characteristics: u Ethanol: >=75 million l/year u Refined Sugar: >=110,000 t/year u Self-powered: bagasse u Cogeneration   Out-grower scheme: <=1,000 ha (initially) Qualified for carbon credits   TIONAL P NA LEUM RO ET NIGERIAN OR P O R AT I O N C Cassava Integrated operation:  Farm size: >=15,000 ha u Cassava production: 3-4 million t/year u Not Irrigated  Plant characteristics: u Ethanol: >=40-60 million l/year Out-grower scheme: <=1,000 ha (initially) Ethanol guaranteed off-take by NNPC 18   Ethanol guaranteed off-take by NNPC TIONAL P NA LEUM RO ET A Collaborative Model to Develop Local Capacity Collaboration with Local Research Institutes in Feasibility Studies National Cereals Research Institute (NCRI) National Root Crops Research Institute (NRCRI) National Institute for Oil Palm Research Fed. Universities of Agriculture, Abeokuta & Makurdi International Institute for Tropical Agriculture (IITA) Institute for Agricultural Research (IAR) NIGERIAN OR P O R AT I O N Collaboration with Government Agencies and Parastatals in Biofuels Policy Development Ministry of Agriculture Ministry of Petroleum Department of Petroleum Resources Ministry of Science and Technology Ministry of Commerce National Biotechnology Agency C 19 TIONAL P NA LEUM RO ET Integration of Communities for Sustainable Development NIGERIAN OR P O R AT I O N C  Outgrowers Scheme  Equity Participation by Communities  Environmental and Social Impact Assessment 20 We have defined initial terms for deal structure and partner profiles for the ethanol JVs to be created. TIONAL P NA LEUM RO ET NIGERIAN OR P O R AT I O N  Equity funding would range between 30% and 50% and long term debt will be 50% to 70%.  JV ownership structure to support the following objectives:  Ensure operational control of plantation and plant  Majority shareholder to demonstrate balance of technical and financial balance to operate the JV  Guarantee supply and commercial security for the plant to ensure maximum utilization and minimum risk  Ensure buy-in by State and local communities  Active participation of competent Nigerian entrepreneurs  Due diligence on capabilities and profile of JV partners 21 C NIGERIAN OUTLINE  Introduction  Nigerian Biofuels Objectives and Approach  Domestic Bio-fuel Program  National Biofuels Policy TIONAL P NA LEUM RO ET OR P O R AT I O N C  Seeding Program  Expected Benefits and Conclusion 22 The Nigerian Biofuel Policies involved extensive collaboration from various stakeholders under the supervision of an Inter-Ministerial Committee Inter-Ministerial Steering Committee (IMSC) TIONAL P NA LEUM RO ET NIGERIAN OR P O R AT I O N Resource Experts Technical Sub-Committee (TSC) Key Activities • Examine foreign countries biofuels policies • Define and Identify industry model • Identify and recommend policy and incentives • Identify and review current legislations • Develop and define legislative process • Design and draft legislation IMSC Members: • Minister of Petroleum (Chair) • Minister of Agriculture • Minister of Finance • Minister of Industry • Minister of Environment, Science & Technology • Minister of Commerce • NNPC GMD • National Institute for Technology Development and Acquisition (NITDA) DG • DPR Director TSC Members: Selected members of above-mentioned Ministries, agencies and departments, Energy Commission, Special Adviser to the President on Energy Matters • Policy was approved in March by Federal Executive Council and gazetted on June 20th, 2007 C 23 TIONAL P NA LEUM RO ET Recommended set of policy and incentives for the Nigerian Bio-fuel Industry is focused on providing accelerated, yet long term support through an integrated approach. NIGERIAN OR P O R AT I O N 1. Approval of blending of Gasoline with 10% fuel ethanol by composition and diesel with 20% bio-diesel by composition to create demand for biofuels in Nigeria. 2. Official designation of Bio-fuels as an agro-allied industry sector. 3. Commercial off-take will be guaranteed by NNPC for bio-fuels produced within Nigeria. 4. Designation of bio-fuel industry sector as a pioneer sector, which provides the basis for a package of tailored fiscal incentives, e.g. total tax, tariff and VAT exemption for 10 years. 5. Creation of a Bio-fuel Energy Commission to govern the industry in relationship with established ministries and agencies. C 24 TIONAL P NA LEUM RO ET The recommended set of policy and incentives for the Nigerian Bio-fuel Industry ……contd. NIGERIAN OR P O R AT I O N C 6. Market entry shall be through registration of Bio-fuel plants/projects by the Bio-fuel Energy Commission. 7. Creation of mechanisms designed to promote integrated agro-industrial operations, out-grower schemes and research, e.g. through subsidized loans, issuance of licenses, private-public partnership, etc. 8. Creation of a Bio-fuels Research Agency to coordinate and promote the long term development of improved varieties, techniques and processes across existing Agencies  For more information, please visit our website: 25 www.nnpcred.com NIGERIAN OUTLINE  Introduction  Nigerian Biofuels Objectives and Approach  Domestic Bio-fuel Program  National Biofuels Policy TIONAL P NA LEUM RO ET OR P O R AT I O N C  Seeding Program  Expected Benefits and Conclusion 26 Numerous initiatives have been undertaken to ensure the introduction of E10 into the Nigerian Market by end Q4, 2007/Q1, 2008 Infrastructure Modification Program at Atlas Cove and Mosimi Depot TIONAL P NA LEUM RO ET NIGERIAN OR P O R AT I O N  Completed Modification of PPMC facilities at Atlas cove and Mosimi Depot to handle Fuel Ethanol  Other PPMC facilities nationwide may need to be upgraded to handle Fuel Ethanol C Capabilities Improvement  Initial training for PPMC/RED staff trained by Petrobras on the handling of fuel ethanol in the area of quality assurance Marketing and Import Program  Fuel ethanol and E10 specifications approved by Standards Organisation of Nigeria [SON]  Marketing plan developed for ethanol blends – phased launch/penetration  E10 Implementation Working Group comprising DPR, Major Oil Marketers, and  Permit to import Fuel Ethanol secured from NAFDAC  Public awareness campaign at advanced stage 27 NIGERIAN OUTLINE  Introduction  Nigerian Biofuels Objectives and Approach  Domestic Bio-fuel Program  National Biofuels Policy TIONAL P NA LEUM RO ET OR P O R AT I O N C  Seeding Program  Expected Benefits and Conclusion 28 The Biofuels industry presents vast social, economic and environmental benefits for Nigeria. NIGERIAN OR TIONAL P NA LEUM RO ET N C P O R AT I O • Good returns on invested capital • Lower acquisition costs for fuel Economic Benefits • Increased local production of sugar and power complement efforts at filling existing supply gaps in Nigeria (for sugarcane to ethanol) • Increased ability to hedge supply risk (either domestic or through imports) by offering additional source of fuel • Environmentally friendly fuels / less pollution Environmental Benefits • CO2 emission reduction • Rural wealth and job creation Social Benefits • Sustainable development 29 TIONAL P NA LEUM RO ET Biofuels Development in Nigeria NIGERIAN OR P O R AT I O N C THANK YOU FOR LISTENING 30