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Delayed LNG projects deny Nigerians 50,000 jobs

By on March 24, 2014

The continued delay of three major Liquefied Natural Gas projects in the country is not just costing economic loses; it is also denying Nigerians 50,000 construction jobs.

The Chief Executive Officer/Managing Director, NLNG, Mr. Babs Omotowa, said the government was losing $5bn in revenue yearly as long as the projects failed to see the light of the day.

He also confirmed the delayed NLNG Train 7, Olokola LNG and Brass LNG projects were denying Nigerians 50,000 construction jobs.

A business intelligent firm, Oxford Business Group, had, in a report circulated during the just concluded 2014 Nigerian Oil and Gas Conference in Abuja, estimated the total cost of the three LNG projects at $37bn.

The NLNG Train 7 project is expected to cost $12bn; Olokola LNG, $10bn and Brass LNG, $15bn.

Omotowa, who delivered a paper titled, ‘Global LNG Developments: What are the opportunities for Nigeria?’, lamented that the 10 million metric tonnes Brass LNG had been delayed for four years; the 12.8 million metric tonnes OKLNG had suffered a three-year delay while the eight million metric tonnes NLNG Train 7 was yet to get the final investment decision after five years.

With 22 million metric tonnes per annum capacity, according to Omotowa, the NLNG generates $12bn per annum.

The three outstanding LNG projects are expected to add 30 million metric tonnes of LNG to the country’s LNG output.

He said, “With additional 30MT per annum, Nigeria can generate additional $15bn revenue annually. Revenue to the Federal Government will increase by $5bn per year and 50,000 construction jobs from the three projects.”

Already, Omotowa said $10bn had been lost to the delay in reaching the 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 more of the currently flared gas, and yielding an estimated $2.5bn in revenue.

“It  is clear to us at the 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 is jointly owned by the Nigerian National Petroleum Corporation (49 per cent), Shell (25.6 per cent), Total LNG Nigeria Limited (15 per cent) and Eni (10.4 per cent).

Although Nigeria has one of the highest gas reserves in the world, Omotowa said its consumption and export ranked lowest among its peers.

According to him, the global LNG landscape is fast changing with a 10 year projected demand pegged at 212MT.

He explained that 147MT of the demand would be supplied by facilities currently under construction globally and the remaining 153MT were currently being designed and passing through consideration stage across 13 nations of the world.

If the three LNG projects in Nigeria are quickly actualised, the NLNG boss said Nigeria would be able to supply 15 per cent of the projected global demand.

Omotowa, however,  warned that the country could not continue to foot drag on the projects because the LNG market was fast changing with the shale gas revolution.

He said, “Historical LNG importers are now self-sufficient, becoming exporters and competing with suppliers. For example, the United States and Canada have approved six LNG projects worth 25 per cent of the current global demand.

“China and the US are potentially the biggest shale gas exporters, with Argentina and Mexico not far behind and the proven shale gas reserves are 7,299 trillion cubic feet.”

Backed by the 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 of two trains with a capacity of 5.5metric tonnes per year (with an additional two-train option).

The FID on the Brass LNG project suffered a major setback 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,” Omotowa said.

A senior official of one of the shareholders involved in one of the projects, who asked not to be named, 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 any interest.”

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 12.6metric 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).

An FID was delayed after BG pulled out of the project in May 2012.

The OKLNG’s fate was further put on hold when Chevron Nigeria Limited and Shell withdrew from the project.

Chevron blamed its exit on the lack of progress on the project, eight years after its inception.

 

 

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