Africa Oil & Gas: Nigeria incurs huge losses over stalled $30bn LNG projects

More than two years after the Nigerian National Petroleum Corporation reiterated its commitment to two Liquefied Natural Gas projects in the country, there is still uncertainty over whether the multibillion-dollar projects will come on stream.

Industry experts, who spoke with our correspondent in separate interviews, said the country was losing out on the growing global LNG demand.

The $20bn Brass LNG project in Bayelsa State and the $9.8bn Olokola LNG project, located on the border town between Ogun and Ondo states, were initiated in 2003 and 2005 respectively.

But the projects have been stalled by a lack of Final Investment Decisions over the years.

The Brass LNG project, which was designed to produce 10 million metric tonnes per annum, was to be built by the NNPC, Chevron, ConocoPhillips and Eni Group. But ConocoPhillips and Chevron have withdrawn from the project.

OK LNG project, which was also designed to produce an initial 10 million metric tonnes per annum, was being built through a joint venture by the NNPC with Royal Dutch Shell, Chevron and BG Group. But all the international oil companies have pulled out of the project.

In December 2016, the NNPC said the two projects were high priority gas ventures capable of boosting revenue to the Federal Government.

The Group Managing Director, NNPC, Dr Maikanti Baru, said, “We are still committed, as NNPC, to monetising our natural gas. We have the Nigerian Liquefied Natural Gas, which is at the moment monetising about four billion standard cubic feet of gas on a daily basis. We also have plans for Olokola LNG as well as Brass LNG.

“We have a little challenge with market windows for these projects which we are reviewing on a monthly basis. Once the appropriate market window opens up, we will quickly get more shareholders to join us for the projects.”

In June last year, the NNPC, Shell, Total and Eni signed the front-end engineering design contract of the Train 7 of the Nigeria LNG Limited, with the FID expected in the fourth quarter of the year. But it has yet to materialise as of the time of filing this report.

The Chairman, Petroleum Club, Lagos, Mr Godswill Ihetu, said the OK LNG had been virtually put on ice because other shareholders apart from the NNPC had withdrawn from it while the Brass LNG project continued to face challenges.

He said, “LNG projects are huge projects. Unless you have partners or shareholders who are ready to participate and markets that will take whatever it is you are producing, then you really don’t have a project.

“So, it will be good if we have another LNG plant that is as successful as NLNG. Talking about the Nigerian economy, if we had another one like that, the country would have been smiling.”

The Director, Emerald Energy Institute, University of Port Harcourt, Prof. Wumi Iledare, noted that the market for LNG had changed from what it used to be.

He said, “I think there is a glut in the market; the spot market is developing, and then you look at our location relative to the destinations. You have some emerging LNG producers that we have to compete with. There were opportunities that Nigeria failed to take advantage of. It has to do with the governance of the industry.

“To me, politics tends to hamper the growth of the industry. It is not that we don’t have competent people but the political interference and the prism through which we look at business decisions is not particularly favourable to investors.”

The Chairman/Chief Executive Officer, International Energy Services Limited, Dr Diran Fawibe, said the Olokola and Brass LNG projects were shrouded in secrecy, noting that the front-end engineering design study for the NLNG’s Train 7 project was still ongoing.

“It is hoped that before the year runs out, the FID will be taken,” he added.

While the country’s LNG projects continue to suffer delays, other countries, including Mozambique and the United States, are pushing ahead with their own projects.

Reuters reported this month that US independent energy producer, Anadarko, moved closer to an FID to build a giant LNG terminal in Mozambique after signing up an Indian buyer for the gas and saying another deal was imminent.

Anadarko and Exxon Mobil are expected to sanction two separate but neighbouring LNG projects in Mozambique this year after finding large offshore gas deposits, turning the African nation into a major global gas exporter, according to the report.

The Energy Information Administration projected in December that US LNG export capacity will reach 8.9 billion cubic feet per day by the end of 2019 from 3.6 Bcfpd, making it the third largest in the world behind Australia and Qatar.

The US began exporting LNG in February 2016, when the Sabine Pass liquefaction terminal in Louisiana shipped its first cargo. Since then, Sabine Pass expanded from one to four operating liquefaction trains, and the Cove Point LNG export facility began operation in Maryland.

Two more trains—Sabine Pass Train 5 and Corpus Christi LNG Train 1—began LNG production last year. Several LNG projects are currently under construction in the US.

Global LNG trade will rise 11 per cent to 354 million tonnes this year as new facilities increase supplies to Europe and Asia, Royal Dutch Shell said in an annual LNG report on Monday.Source: The Punch

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