Economic Analysis of Natural Gas Pipeline Construction and Electricity Transmission Loss Consideration

The site of electrical power plants has been a subject of interest due to the advent of electricity and the distance between energy sources (mines, oil and gas fields, and water bodies for renewable energy) and distance load (cities and industrial hubs) centers. The quest for sufficient energy infrastructure to propel Nigeria’s huge and growing population of about 190 million and also to power the much-anticipated industrialization and economic growth and development made government embark on unprecedented investment in natural gas and electricity generation, transmission and distribution infrastructure. The Geregu gas turbine project, located in Geregu, Kogi State consist of a FGN 414 MW open cycle gas turbine commissioned in 2007 and a NIPP 444 MW open cycle gas turbine commissioned in 2013. These turbines are fed with atural gas from Oben gas fields in Edo state through 36 inches, 196 km pipeline whose construction cost is $228,317,572.65 and with revenue form current transportation charges of $0.80/MSCF, has a payback period of sixteen years. However, if the power plants were to be sited in Edo State and a 330 KV transmission line constructed from the power plant to Kogi state, the construction cost would have been $123,426,000.00 and with revenue from current tariff charges of $8.76/MWH, the payback period is 12 years. Hence it is cheaper to construct the power plant in Edo state and evacuate the generated energy via 330 kV transmission lines to Kogi state than to construct the plant in Kogi state and supply natural gas to it via pipeline. Nevertheless, the Oben-Geregu pipeline has throughput capacity of about 1.2 billion scf/d of gas and since the maximum gas requirement by the power plants is 210 MMSCF, the pipeline can serve additional installation requiring natural gas feed along its route thereby raking in additional revenue and thus reduction in its payback period.