20 March 2017

Nigeria: Multi-Billion Dollar Gas Projects Linger On

It is now 12 years since former President Olusegun Obasanjo conceived the Brass Liquefied Natural Gas (Brass LNG) project, designed to produce 10 million metric tonnes of Liquefied Natural Gas (LNG) per annum. It was to be built by the Nigerian National Petroleum Corporation (NNPC), Total, ConocoPhillips and Eni Group, and delivered in 2009 but that didn't happen.

In April 2007, Obasanjo also held the ground breaking ceremony for the multi-billion dollar Olokola Liquefied Natural Gas (OKLNG), to produce 20 million tonnes of LNG and earn over $10 billion for the country. The company was to be a joint venture between the NNPC, Chevron, British Gas and Shell. It was expected to come on stream in 2012 but never did.

Nigeria is the 12th largest oil producer in the world, with the largest natural gas reserves in Africa and is currently second largest producer of natural gas after Algeria, according to the US Energy Information Administration (EIA). The country is also ranked seventh in terms of proven natural gas reserves in the world. Oil experts say there is a lot more gas in Nigeria than oil.

The NLNG, jointly owned by NNPC 49%, Shell Gas B.V. 25.6%, Total LNG 15% and Eni International 10.4%, was incorporated in 1989 to produce LNG and natural gas liquids (NGL) for export. Its facility located in Bonny, Rivers State, didn't start production until 1999.

The NLNG's latest Facts and Figures publication showed that the company has since 1999 generated $95 billion for its shareholders with $15 billion paid to the Nigerian government as dividend for its 49 per cent stake. It has also paid company income and education tax worth $4.1 billion, $12.5 billion earned in feed gas sales revenue, and over $5 billion expenditure in local economy on goods, services and salaries of thousands of its staff. It has also paid $9 billion as state and local government taxes among others.

The OKLNG project has been stalled since the international oil companies (IOCs) partners withdrew from it due to what the shareholders called "varying constraints", with only the NNPC left. Likewise, the Brass LNG project, suffered setback since ConocoPhillips withdrew from the project in 2013.

Delay in launching the NLNG's Train 7 is said to be costing the country around $25 billion in foreign investment.

Why projects suffered delays-Stakeholders

A former Group Managing Director (GMD) of the NNPC and Chairman of Brass LNG, Mr. Jackson Gaius-Obaseki, and other industry stakeholders in an interview monitored on the Nigerian Television Authority (NTA, said the decision by government to undertake the three LNG projects led to the failure to complete any of them.

"In my view, at the best of time for Nigeria, we do not have the resources, human and financial, to pursue three LNG projects at the same time. That is where the problem came from," he said.

Also, an oil and gas consultant and former chairman of the Board of the Society of Petroleum Explorationists (SPE) Mr. Alex Neyin, faulted government for taking up many LNG projects at the same time.

On his part NNPC GMD Mr. Maikanti Baru, who was also among the NTA discussants agreed that political will was a significant factor in the development of LNGs. "At the earlier part of the NLNG the shareholding was twisted in favour of NNPC with about 60 per cent. One of the conditions that the IOC shareholders insisted on was the bringing down of NNPC's shareholding to 49 per cent.

"The PIB has created uncertainties, passage or non-passage. In fact to make a decision that we are not going to make any changes to the law is better than the situation we are in," the NNPC GMD said.

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