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FG inaction threatens $37bn natural gas projects

By BusinessNews Staff on January 31, 2014

The Federal Government, either overtly or covertly, is believed to be threatening the take-off of the $12bn Nigeria LNG’s Train 7, $10bn Olokola LNG and the $15bn Brass LNG projects.

A business intelligent firm, Oxford Business Group, had in a recent report estimated the total cost of the three LNG projects at $37bn, and experts had expressed worry that continuous political interference from the Federal Government would further jeopardise these projects.

A senior official of one of the shareholders involved in one of the projects, who asked not to be named, argued that there was political undertone in the delay of the projects.

Though the $12bn NLNG Train 7 project is considered as the most economical of all the three LNG investments, the source identified government interest in Brass NLNG located in Bayelsa State as the factor delaying the entire $37bn LNG projects.

The Federal Government, through the Nigerian National Petroleum Corporation, owns 49 per cent each in NLNG and Brass LNG, and experts have said the President Goodluck Jonathan-administration might be more disposed to having Brass LNG take off before NLNG’s seventh train.

The Chief Executive Officer/Managing Director, NLNG, Mr. Babs Omotowa, had recently said $10bn had been lost to the delay in reaching a final investment decision for the train seven project.

When completed, he 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.

He 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 revenues.

“On balance, it is clear to us at NLNG that Train 7 is an enterprise which all shareholders and stakeholders should support and pursue with vigour, for the simple reason that its outcome will be good for Nigeria and for our business.”

The NLNG boss, however, did not give specific details as to when the FID for the seventh NLNG train would be taken.

NLNG is jointly owned by the Nigerian National Petroleum Corporation (49 per cent), Shell (25.6 per cent), Total LNG Nigeria Ltd (15 per cent) and Eni (10.4 per cent).

Backed by NNPC (49 per cent), Agip/ENI (17 per cent), Total (17 per cent) and ConocoPhillips (17 per cent), the $15bn Brass LNG facility was planned to consist two trains with a capacity of 5.5m tonnes per year (with an additional two-train option).

The FID on the Brass LNG project suffered major setbacks when ConocoPhillips, in 2013, announced the intention to divest its Nigerian assets.

“As a result, Brass LNG is now seeking third-party investors to take on the remaining 17 per cent stake by end-2013,” OBG said.

The source said, “With the exit of ConocoPhillips from the Brass LNG project, it has been challenging finding who will replace ConocoPhillips and take over its shareholding. The shareholding of ConocoPhillips has been marketed globally and no company has shown an interest.”

Before ConocoPhillips’ exit, the Chairman, Board of Brass Liquefied Natural Gas, Dr. Jackson Gaius-Obaseki, had expressed the hope that the project would take off on or before the end of the first quarter of 2013.

It was, however, not to be as the exit of ConocoPhillips created a vacuum that must be filled before the project could take off.

The FID on the Brass LNG project had suffered several postponements as it should have been taken in December 2006 and later in December 2008. It was also postponed to the first quarter of 2011 with construction expected to start by mid-2011. It was later postponed in 2012 to the first quarter of 2013.

Former President Olusegun Obasanjo, in 2006, facilitated the $10bn Olokola Liquefied Natural Gas project overlapping the states of Ondo and Ogun and adjacent to the OK-Free Trade Zone under development.

The 12.6m-tonnes-per-annum facility, consists of four trains backed by the NNPC (49 per cent), Chevron (19 per cent), Shell (19 per cent) and the United Kingdom’s BG Group (13 per cent).

A Final Investment Decision was delayed after BG pulled out of the project in May 2012.

OKLNG’s fate was further put on hold when Chevron Nigeria Limited and Shell withdrew from the project. Chevron had blamed its exit on the lack of progress on the project, eight years after its inception.

The General Manager, Policy, Government & Public Affairs, CNL, Mr. Deji Haastrup, confirmed in a statement that the company effectively pulled out of the project on July 31, 2013. The statement also confirmed that Shell pulled out of the OKLNG project on July 31, 2013.

The source, who reiterated that political interference was one of the major challenges facing the projects, said that OKLNG projects were on the front burner during the Obasanjo administration, but argued that attention shifted to Brass LNG since the former President left office.

Obasanjo, who seemed to have lent credence to this in his recent open letter to Jonathan, said, “Some of our development partners were politically frustrated to withdraw from the Olokola LNG project, which happily was not yet the same with the Brass. I initiated them both. They were viable and would have taken us close to Qatar as LNG producing country.

“Please, do not frustrate Brass LNG and in the interest of what is best for the Nigerian economy, bring back the OKLNG into active implementation. The major international oil companies have withheld investment in projects in Nigeria. If they have not completely moved out, they are divesting.

Nigeria, which is the Saudi of Africa in oil and gas terms, is being overtaken by Angola only because necessary decisions are not made timely and appropriately.”

[Punch]

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