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Gas supply, PIB delay NLNG Train 7 project

By on January 7, 2014

There are indications that the continuous delay of the 8.4 million-tonne per annum Train 7 project of the Nigeria Liquefied Natural Gas is as a result of the non-passage of the Petroleum Industry Bill and the non-commitment by gas suppliers.

The NLNG has six operational trains and the entire complex is capable of producing 22 million tonnes per annum of Liquefied Natural Gas and five million tonnes per annum of NGLs (Liquefied Petroleum Gas and condensates) from an intake of 3.5 billion standard cubic feet per day of natural gas.

Under long-term Gas Supply Agreements with three Joint Ventures, the NLNG receives natural gas (feedgas) supply from Shell Petroleum Development Company of Nigeria Limited, Elf Petroleum (Nigeria) Limited now Total Exploration Production Nigeria, and the Nigerian Agip Oil Company Limited.

The Niger Delta Petroleum Resources, an indigenous marginal field operator, also supplies 35mmcf/d of NLNG daily feedstock under a special supply arrangement with the SPDC JV.

The Final Investment Decision has been delaying the building of Train 7, which will lift the total production capacity of the plant located in Bonny Island, Rivers State to 30 million tonnes per annum of LNG.

But a senior NLNG official, who asked not be named because he was not authorised to speak on the subject, told our correspondent on Monday that the non-commitment by gas suppliers was one of the major factors delaying the FID for the project.

“We’ve not got any commitment from our gas suppliers and there is no way the Train 7 project can take off without long-term gas supply agreements. The agreements will ensure efficient gas supply to the train,” the official said.

The source also said that financing the multi-billion dollar project was not a problem, while stressing that SPAs had already been executed with five buyers in respect of the output of the train whenever it came on stream.

With some preliminary early site preparation initiated, the source said the Train 7 project was progressing and stressed that its Front End Engineering design had been completed, while awaiting the FID by stakeholders.

Analysts, who are familiar with the proposed NLNG seventh train, also ascribed the delay in the project takeoff to the non-passage of the PIB.

One of them, who pleaded anonymity because of the complexity to the project, told our correspondent that International Oil Companies operating in the country were not ready to invest in major oil and gas projects due to certain clauses in the proposed bill.

According to him, the fiscal terms proposed in the bill are making major oil and gas investments unattractive to players and this may not be unconnected with the delay in the NLNG project.

The Oil Producers Trade Section of the Lagos Chamber of Commerce and Industry, some of whose members are joint owners of the NLNG, said the harsh fiscal terms in the PIB had slowed down the N17.2tn ($109bn) investment proposals.

“$109bn in planned investments is not progressing as new projects are no longer economical,” the Chairman, OPTS, Mr. Mark Ward, said.

He explained that the IOCs had planned to invest $33bn in the next five years but lamented that the fiscal terms of the PIB, if not reviewed, might jeopardise this.

The Chief Executive/Managing Director, NLNG, Mr. Babs Omotowa, was on Monday quoted in a statement as saying that part of the next phase of the company’s growth programme was the addition  of a seventh train to the existing six.

When completed, the NLNG boss said the seventh train would enable the company to add some eight million metric tonnes to its current production capacity and increase annual output to 30 million metric tonnes.

Omotowa, who was represented at a ceremony to commemorate the company’s loading of the 3,000th  LNG  cargo at the Bonny terminals by the Manager, Technical Services, NLNG, Mr. Joseph Alagoa, said, “The Train 7 is potentially capable of mopping up and exporting some more of the currently flared gas, and yielding an estimated $2.5bn in revenue.

 

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