Ejiofor Alike
13 October 2008
Lagos — President Umaru Musa Yar'Adua may have made good his threat to suspend all export-oriented gas projects.
THISDAY can reveal that the President has refused to grant approval for the production and shipment of Liquefied Natural Gas (LNG) cargoes from the Train 6 of the Nigeria LNG plant in Bonny Island, 10 months after the project was completed.
TSKJ, a joint venture of Technip of France, Snamprogetti of Italy, KBR and JGC, completed the construction and inauguration of Train 6 of the NLNG on Bonny Island in December 2007.
Bonny Island plant, the third world's largest, supplies gas to mostly European customers including Gas Natural of Spain, BOTAS of Turkey, Gaz de France and TRANSGAS of Portugal, with the biggest being the Italian electric power giant ENEL, which agreed to buy 3.5 billion cubic metres (bcm) per year of LNG for over 22 years.
The company is jointly owned by the Nigerian National Petroleum Corporation (NNPC) (49 per cent), Shell (25.6 per cent), Total LNG Nigeria Limited (15 per cent) and Italy's Eni (10.4 per cent).
The company runs five LNG production lines, the fifth of which was started in February 2006 while the sixth was scheduled to start in 2007.
With the completion of Train 6, the NLNG Plant has an overall capacity of some 22 million tonnes of LNG yearly and 4 million tonnes of Liquefied Petroleum Gas (LPG), otherwise known as cooking gas.
THISDAY also gathered that the plant will utilise about 3.5 billion cubic feet per day (bcf/d) feedgas intake at full production.
It was also gathered that Shell, ConocoPhilips and ExxonMobil are among the companies that supply gas to the plant.
Shareholders in the project also plan to build Train 7 that will lift the total production capacity to over 30 million tonnes per annum (MTPA) LNG by 2011, as part of the efforts by the government to ensure that revenue from gas equals that of oil.
It was also envisaged that the rapid expansion of the LNG plants would ensure that the country assumes the world's second largest LNG producer after Qatar by 2011.
But THISDAY gathered that 10 months after Train 6 was completed and inaugurated, no single LNG cargo has been shipped for export either to Europe, America or other parts of the world.
A Presidency source told THISDAY last night that President Yar'Adua had refused to grant licence for the production of LNG for export from the plant because the promoters of the project are not interested in the development of the Nigerian economy.
"Train 6 has been completed in terms of construction but without approving licence from the President, it cannot produce LNG for export. Mr President is not in a hurry to give them licence because they are here to take away our gas without doing anything to improve our economy. Why is a company like Shell not in the Nigerian Stock Exchange?
"They are not here to improve our economy but to take our resources for the good of their economies," he said.
The source, who spoke on condition of anonymity, stated that the President is more interested in making gas available for domestic use than export.
"The feeling in the Presidency is that they have not shown serious willingness to make gas available for power plants and other domestic uses in the country. They only come here to take away our resources and turn back to accuse our government of corruption," he added.
The President is also said to be worried that gas supply to the LNG plants is not made at internationally competitive prices.
THISDAY gathered that selling gas to LNG at low price was part of the incentives government employed 13 years ago to woo Shell and partners to build Bonny LNG.
THISDAY checks reveal that government used all sorts of incentives to invite the investors and at the time the fiscal regime was given to them, gas was of little value.
The government has been in a long-running battle with the international oil companies (IOCs) over the issue of making gas available for domestic purposes.
President Yar'Adua is concerned that most of the power plants in the country do not have enough gas while millions of metric tonnes of liquefied gas are exported yearly.
The government had directed these IOCs to make gas available for domestic use but most of the operators are insisting that the new directive was not contained in the Final Investment Decision (FID) of the projects.
Speaking in Lagos recently on behalf of the operators, Chairman of the Oil Producing Trade Section (OPTS), Mr Basil Omiyi, insisted that the government should learn how to respect long term agreements, irrespective of the personality who signed them.
Omiyi, who is also the Chairman of Shell Companies in Nigeria, said gas contracts were long-term in nature because adequate guarantee had to be given to the gas buyers that they would continue to have uninterrupted supply for at least 25 years.
"Imagine when someone comes later and say he wants to change the basis under which you invested. You will be in trouble with yourself and with your customers. You can't reverse the contract when someone has borrowed money to invest. You should take away the personality that signed the agreement. The agreement should be respected no matter the person that signed it; but that needs a lot of integrity," Omiyi explained.
But the government is no longer keen in supporting export -oriented gas projects and had unveiled policy review on gas utilisation which placed priority on meeting domestic gas demand before any consideration can be given to exports.
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MR OMIYI WHO DEFENDS THE GAS COMPANIES SHOULD KNOW that NATIONAL INTEREST OVERIDES ALL OTHER CONSIDERATIONS,AND THAT CHARITY BEGINS AT HOME.IF WE NEED GAS TO OPERATE OUR PLANTS,INORDER TO HAVE UNINTERUPTED SUPPLY OF ELECTRICITY,THAT DOMESTIC NEED HAS TO BE MET FIRST FIRST BEFORE EXPORTING GAS OVERSEAS.THIS PRIORITY HAS TO BE MET FIRST,BEFORE EXPORT OF GAS TO EUROPE,AND ASIA,NO MATTER WHO SIGNS THE CONTRACT I AM SURE THAT THOSE WHO OPERATE those COMPANIES HAVE REGULAR SUPPLY IN THEIR HOMELAND,AND ALSO IN THEIR FACILITIES IN NIGERIA.LET US CALL A SPADE A SPADE.
This is one of the best news i,ve heard in recent days.The investors don,t care about our economy but are only interested in making profits because those who initiated and processed and eventually signed these contracts did,nt have the interest of ordinary Nigerians, who stand to gain the most from steady power supply to readily available gas for cooking, at heart.A new contract has to be drawn that,ll place high emphasis on the domestic economy first before other considerations.