Nigeria in talks with IFC for gas pipeline funding

Alison-Madueke 111 October 2013, Lagos – The federal government has opened discussion with the International Finance, IFC, for the funding of a national gas-pipeline network to supply power stations and industries, according to Bloomberg report.

Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, said the IFC was interested in financing the 40-inch, 683 kilometre Ajaokuta-Kaduna-Kano northern link, the primary network for the proposed trans-Saharan pipeline to Europe.

She said once the front-end issues are sorted out, mobilisation and implementation of the financial support and the work, as well as project advisorial and project support, will begin with in the next six months.

“We asked for a mixed basket of debt and equity financing,” Alison-Madueke said in Abuja. “Over the next six months, once the front-end issues are sorted out, mobilisation and implementation of the financial support and the work, as well as project advisorial and project support, will begin,” Bloomberg quoted the minister to have said in Abuja.

The Nigerian National Petroleum Corporation (NNPC) in July this year, sought expressions of interest (EOI) in the co-development of the northern and eastern natural gas pipeline system, which it said, was the last leg of the Nigerian Gas Master Plan infrastructure blueprint.

The Northern network comprises Ajaokuta-Kaduna- Kano pipeline and the Eastern Network comprises Qua Ibo/Calabar-Ajaokuta pipeline system. The total estimated cost of the entire pipeline network was $5 billion.

The NNPC had said it would prefer a funding structure of 60 per cent debt and 40 per cent equity ration, which meant that interested parties would provide equity and debt.

“The NNPC, on behalf of the Federal Government of Nigeria (FGN), will co-invest, providing equity and debt from a combination of planned sources including annual appropriation through FGN budget process and other sources such as the ongoing Ministry of Finance Eurobond issue,” the corporation had said in the EOI document published in national dailies.

According to NNPC, the pipeline network was intended to operate commercially, with revenues coming in the form of commercially-determined gas transmission tariff embedded in the Gas Transmission Agreements that will underpin the pipeline flows.

“It is anticipated that by the end of 2018, effective throughput across the network will be about 1.5billion cubic feet/ day. Conceptual engineering has been completed for the network and FEED about to start,” the NNPC said.

The construction, the corporation further noted, would be implemented in segments leveraging an optimum number of EPC contractors to enable speedy completion of the pipeline. It also added that construction was planned to commence by the first quarter of 2014.

The NNPC said: “If final structure is based on selection of interested parties that are willing to invest equity, the pipeline will be developed and operated by an SPV comprising NNPC and the selected parties.

The SPV will operate on a Built Own and Operate basis.

“In the event that selected investors are all providing debt and EPC only, then the pipeline will be operated by NNPC and the default scheme will be on a Built and Transfer basis,” it added.

Providing further explanation about the project, Group Executive Director, Gas, at the NNPC, Dr. David Ige, had stated that the Gas Master Plan was in progress, adding that the plan had paved the way for an unprecedented gas sector growth potentiality.

He said the capacity of the Escravos–Lagos gas pipeline would have doubled in the next six months

“In the next three years, we are going to have gas pipelines that span all over the country. In the next few weeks from now, we will kick start the construction of the country’s gas industrial park,” Ige said.

As much as N289.60 billion was lost yearly to gas flaring as International Oil Companies operating in the country continue to flare 1.4 billion cubic feet of gas across oil fields every day.

The Director, Department of Petroleum Resources, Mr. George Osahon, had disclosed that the 1.4bcfd flared gas cost the government $4.9m daily at $3.50/1,000scf/d.

– Chika Amanze-Nwachuku, This Day

About the Author