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Nigeria targets 10% gas market amid stalled mega projects

Last week, the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru, said that the Federal Government is targeting 10 per cent of the world’s market share in traded Liquefied Natural Gas (LNG) as part of its strategic aspirations to derive maximum value from Nigeria’s abundant natural gas resources.

To this end, Baru said that Nigeria was focused on expanding its existing 22 million metric tonnes per annum (MTPA) Nigerian LNG plant with additional 8MTPA from its proposed Train 7, a development that will significantly increase global power generation capacity.

But, the NNPC’s helmsman was silent on two other major gas projects – Olokola Liquefied Natural Gas (OKLNG), and Brass LNG, which were conceived to increase Nigeria’s gas revenue.

OKLNG, Brass LNG and Nigeria NLNG Train 7 were planned by the Federal Government to increase Nigeria’s share of the global NLG market more than five years ago.

But several years after the initiation, the Final Investment Decisions (FIDs) on the three projects are yet to be taken despite gulping, billions of dollars.

OKLNG is a venture for the development of a Greenfield export facility for LNG around Olokola area of Ondo/Ogun States in the Western part of Nigeria. It involves the development of a 25.2 mtpa LNG export facility commencing with a two train first phase launch of 12.6mtpa and expandable to 40 mtpa.

The OKLNG project suffered setbacks when all the international oil companies such as BG, Shell and Chevron withdrew from the projects, living the Nigerian National Petroleum Corporation (NNPC) to itself.

Also, the Brass LNG is a company incorporated under the laws of the Federal Republic of Nigeria. The Shareholders were Nigerian National Petroleum Corporation (NNPC) (49%), Eni International (17%), Phillips (Brass) Limited (an affiliate of ConocoPhillips) (17%) and Brass Holdings Company Limited (an affiliate of Total) (17%).   But ConocoPhillips and Eni pulled out from the project in 2013.

Virtually all the IOCs have pulled out of the project and it is now being monitored while new investors are now being encouraged to stake interest in the gas projects.

The delay in the passage of the Petroleum Industry Governance Bill (PIGB) has also been sighted as one of the reasons some International Oil Companies (IOCs) pulled out of the projects.

The Guardian gathered that the decision by the Federal Government to undertake the three LNG projects almost at the same time, led to failure of the projects many years after conception.

According to some experts who spoke with The Guardian, the government didn’t have the human and financial resources to pursue three LNG projects at the same time.

In the last five years, the projects have continued to get the necessary financial support and had even attracted the rod of the House of Representatives who believed that about $22 billion, which was supposed to be used for the project has been mismanaged.
Already, the House of Representatives has set up an ad-hoc committee to investigate the expenditure and implementation of the $22 billion Brass Liquefied Natural Gas (LNG).It also resolved that the committee should report back to the House within six weeks for further legislative action.

This resolution followed the adoption of a motion by O. K. Chinda, who noted that the state of affairs surrounding the NNPC’s Brass LNG project is a concern. Chinda said there had been several allegations of abuse and mismanagement of funds totalling about $22 billion meant for take-off and running of the project.

Also, he said the project had been stuck in the planning stage for more than a decade, with some Western partners having pulled out because of tough operating conditions and an unfavourable investment environment.

He further noted that towards achieving these gas aspirations, the Federal Government recently approved three-pronged reforms in the gas sector which included domestic gas supply obligation, gas pricing policy and regulation as well as gas infrastructure blueprint.

Baru stated that as at today, Nigeria had completed and commissioned about 600km of new gas pipelines, thereby connecting all existing power plants to permanent gas supply pipelines.

“We have also kicked off the 614km Ajaokuta-Kaduna-Kano (AKK) pipeline project which, on completion, will deliver gas along these areas, thereby generating additional 3600MW to the national grid,” he stated.

He said the Federal Government had intervened to drastically reduce gas flare from 25 per cent down to 10 per cent, even as it had stepped up efforts to stimulate gas utilisation and monetization.

Baru, who described gas as fast evolving preferred fuel for power generation, added that as an economic energy source, natural gas has, today, transformed the economies of several nations.

He said Nigeria’s gas resource base was significant, as its estimated 199TCF has the potential of up to 600TCF in undiscovered resources, a tremendous opportunity to compete favourably with its peers.

The Managing Director of the company, Tony Attah said as the biggest off-taker of gas nationwide, the company remained committed to safely producing its 22 metric tonnes per annum (MTPA); bringing value to shareholders; growing capacity of staff in respect of Train 7 as well as keeping pace with the rest of the world.

The Director, Department of Petroleum Resources (DPR), Mr. Mordecai Ladan, said as a regulator, the Department would soon announce new ways of doing business in its areas of purview, stressing that gas domestication was keen to the Department’s agenda.

Ladan observed that now gas flare-out across the industry had reduced drastically from 12 per cent to 9 per cent.

“We are trying to make sure that companies come up with projects that will utilize the gas, and in turn, reduce gas flaring in the process.

The President of the Nigerian Gas Association (NGA), Mr. Dada Thomas, said renewables and natural gas complement each other, thus what the nation needed was a high energy mix, according to him.

“For Nigeria, gas is clearly the direction. We must all do our bit to attract foreign direct investment around our 192tcf proven gas reserves which we hope shall be translated into energy security, power generation and above all value addition for our teeming populace,” Thomas said.

Emphasising the need for the Federal Government to ensure the execution of the Brass LNG project, Mr Bola Hassan, a Lagos based Lawyer specializing in Petroleum Policy, said that there are several challenges outside the control of Brass LNG stakeholders, which may impede attainment of FID.

One of such challenges, according to him, is the uncertainty arising from failure to pass the PIB, which is hindering investments and growth in the entire oil and gas sector.

He said that Nigeria need to stop gas flaring and start earning money from its vast gas reserves.  “The most viable way to earn money from gas utilization is through the export of LNG. Since it is obvious that OK LNG is no longer viable, the authorities need to focus all their remaining energy on ensuring that BLNG commences production.   BLNG must not be allowed to go the way of OK LNG.  The authorities need to move fast and work with stakeholders to attain FID,” he said.
Nigeria targets 10% gas market amid stalled mega projects Reviewed by Akande Boluwatife on July 11, 2018 Rating: 5

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