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Total builds $900m pipeline to supply gas to Alaoji Power Station

By BusinessNews Staff on August 27, 2014

Hope for improvement in power supply in Nigeria has been rekindled as French oil giant, Total has stated that it has built a $900 million worth of pipeline infrastructure to supply gas from the company’s Oil Mining Lease (OML) 58 to the 964 megawatt-capacity Alaoji Power Station in Abia State.

The new Managing Director of Total Upstream Companies in Nigeria, Mrs. Elisabeth Proust, who confirmed this investment to THISDAY at the weekend, however, stated that for the investment of such magnitude to be economic in Nigeria, the price of domestic gas should be increased from its current level of $2.5 to $7 per million British Thermal Unit (BTU).

“We have invested in very huge pipeline onshore – 50 kilometres of 24-inch pipeline, starting from OML 58 to go to Imo River and to Alaoji. Here, we are already in contract with the power plant at Alaoji. This is our first customer. We will be ready to deliver the gas by 2015. So, we are now in negotiation with other industries, not power plants, to provide them with gas. My plan is that in 2017, we should produce and supply the gas through the pipeline,” she said.

Proust said it was a huge pipeline that transverse several communities, adding that the company has spent $900 million on the project.

She however, said to ensure that such project was economic, domestic gas price should be increased to between $5 and $7 per million British Thermal Unit.

According to her, the recent improvement in domestic gas price cannot make such project economic.
“To get the economy of such project, we need to have a good price. The improvement in gas price is good. But we can say that it cannot provide the economy of such pipeline project. I hope that we will achieve a better price so that we can have the economy of such investment,” she added.

The Total boss further disclosed that her company will supply gas to Alaoji at a price of $2.5, adding however, that this price is not adequate to guarantee adequate returns on the investment.

“So, we have made calculations on that and we can say that for the fiscal terms in the joint venture and production sharing contracts, we need between $5 and $7 per million BTU for the development of such facilities. If the fiscal terms change, may be, we will need more. It depends on how they change,” she explained.

She said Total had taken the risk, adding that “when you take risk, you take the reward.”
“The reward is to maintain a big affiliate in Nigeria, create employment opportunities,” she added.

[This Day]

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