Nigeria: $2.8bn Akk Gas Project Won't Fail Like Others - NNPC

12 August 2020

The Nigerian National Petroleum Corporation (NNPC) yesterday assured stakeholders that the $2.8 billion Ajaokuta-Kaduna-Kano (AKK) gas pipeline project will not go the way of other such mega infrastructure in the country that failed in the past.

Speaking yesterday during a web conference tagged: "Economic and Investment Opportunities of the AKK Gas Pipeline," the Managing Director of the Nigerian Gas Company (NGC), a subsidiary of the NNPC, Mr. Seyi Omotowa, noted that all stakeholders involved in the project had put in place measures to ensure its completion on schedule.

President Muhammadu Buhari had officially launched the construction of the project, which is a section of the Trans-Nigeria Gas Pipeline (TNGP) with a capacity to transport about 2.2 billion cubic feet of gas per day.

It is being financed through an 85 per cent debt and 15 percent equity with a loan facility from the China Export & Credit Insurance Corporation (Sinosure) with a 12-year repayment plan and completion period of 24 months.

Omotowa added that the corporation was considering increasing its 15 per cent equity share of the project so as to reduce the loan burden.

He said from experience, all the factors responsible for failure of such projects in the past, including poor scope definition, optimistic scheduling, issues around changes that occur during execution and poor contractor selection processes had been resolved.

Omotowa said: "We believe that from the experience we will bring along with other partners in construction technologies of the consortium, it will help in achieving the timeline for completion.

"Things are being done differently on the AKK project, by the application of the transparency, accountability and performance excellence initiative. There's AKK project governance in place at the moment.

"This is the first time an NNPC project is having a steering committee led by the GMD, comprising top management of NNPC and key external stakeholders from the office of the chief of staff, representatives of Ministries of Justice, Finance and National Planning, CBN, Debt Management Office as well as NEITI."

Omotowa stated that the presence of all the agencies and parastatals of government on the committee overseeing the project would ensure transparency and compliance with rules and regulations.

"So, the steering committee oversees the overall delivery of this project, a monthly meeting is being held with the aim of having full visibility so that issues are promptly resolved, challenges are sorted out to ensure we keep to schedule," he added.

On the funding of the project, he said: "For financing, it's not the federal government that is taking the loan, it's NNPC that is taking the facility. "Government is only providing a sovereign guarantee in the event of any failure.

"The NNPC is even considering increasing its equity contribution to reduce the loan burden. So, ultimately there is a plan to repay this loan and it's not the federal government that is paying."

In his remarks, the Technical Adviser to the Minister of Petroleum on Regulation, Mr. Umar Gwandu, said with about 203 cubic feet of gas and potential for about 600 cubic feet in the future, the need to develop the gas market in the country had become imperative.

"The AKK project is meant to create a gas hub and that's a domestic segment of the master plan. There is a pricing issue, domestic supply issues because there is a contraction of companies due to supply issues.

"It is meant to spur development all over the country. The industries in Kano are moribund because of a lack of energy. The AKK is an enabler of development. The plan is to supply to local and international markets.

"To build infrastructure, you need financing. The government doesn't have that kind of fund. The Chinese have processes and procedures before they can agree as long as the project can pay back and make some profit for them, " he said.

Rector, Kaduna Polytechnic, Prof. Idris Bugaje, in his intervention said if huge projects like the AKK were taken seriously in the past, the current insurgency in the North would not have happened.

"If we had AKK 25 years ago, Boko Haram, banditry and other cases of insecurity would probably not have happened because these issues are fuelled by poverty, high-level unemployment, etc.

"The project should be finished within the shortest possible time. Companies in Kano are collapsing, AKK will help revive them.

"The armed forces are not able to completely weaken the insurgents because we are not looking at the other side of this insurgency, like the economy, industry, etc," he stated.

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