Financial Costs and Benefits Analysis of Gas Development Projects in Nigeria

Abstract

Natural Gas possesses huge potential to addressing energy and petrochemical needs of Nigeria. Despite the abundance of this resource, inadequacy and relative expensiveness of power and energy fuels/feeds pose threat to the economic prosperity of the country. To address these challenges and to harness the potentials of gas in Nigeria, there is need for increased investment for gas development to meet latent energy demand in the country. Therefore, this research explored the viability of two important gas development projects to provide a case for investors to invest in the gas sector of the country. As a result, costs and benefits of two gas development projects (CCGT and GTL plants) were analysed using net present value, internal rate of return and payback period accounting methods, and CCGT project was found to be viable and GTL project not viable in the country. Even though GTL project was found to be unviable at the market scenarios in the country, incentives are recommended to attract investment for this important gas development project.

Keywords: CCGT, GTL, NPV, IRR, Payback Period, Nigeria, Natural Gas, Economic Growth