A Review of the Nigerian Energy Industry

ConocoPhillips’ exit delays Brass LNG take-off

Brass-LNG15 January 2014, Lagos – Indications emerged on Tuesday that the Final Investment Decision for the Brass LNG project located in Bayelsa State might suffer a further delay due to the shareholding vacuum created by the exit of ConocoPhillips and low interests from financiers, among other critical challenges.

A source close to the project, who pleaded not to be named because he was not authorised to speak on the subject, told our correspondent that the coast was not clear for the project’s FID to be taken any time soon.

This, he said, was because the shareholding lacuna created by the exit of ConocoPhillips had yet to be resolved as no company had showed interest in taking up the 17 per cent stake left by the firm.

According to the shareholding structure of the Brass LNG, the Nigerian National Petroleum Corporation holds 49 per cent; Eni, 17 per cent; ConocoPhillips, 17 per cent; and Total, 17 per cent.

The FID on the project suffered a major setback when ConocoPhillips announced the intention to divest its Nigerian assets. Though it signed a purchase agreement for the Brass LNG in a $1.5bn asset acquisition deal with Oando Plc, the latter had terminated the deal, leaving the 17 per cent shareholding interest held by ConocoPhillips hanging.

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

The source said every shareholder involved in the Brass LNG project had a gas supply commitment, adding that Agip and Chevron, were expected to provide about 5.0 trillion cubic feet and 2.3TCF of gas, respectively.

Total is expected to supply about 3.2TCF of gas, while ConocoPhillips is also expected to provide about 2.3TCF.

But the source explained that ConocoPhillips’ exit from the two-train, 10 million-metric tonne per year project had thrown the feedgas supply plans into disequilibrium.

“If there is no shareholder ready to take over the shareholding of ConocoPhillips and its gas supply commitment, the FID cannot happen,” the source explained.

According to him, the LNG business is a capital-intensive venture that cannot take off without completed gas supply agreements.

Before ConocoPhilips’ exit, the Chairman, Board of Brass Liquefied Natural Gas, Dr. Jackson Gaius-Obaseki, had expressed hope that the project would take off on or before the end of the first quarter of 2013 – The Managing Director, BLNG, Mr. Lorenzo Di Lorenzo, had said contracts for the construction of gas trains engineering and procurement, onshore and offshore works, including loading facilities, had been awarded to Bechtel.

Big projects like Brass are funded through equity and loans, but the source said no known bank, whether locally or internationally, had agreed to fund the project.

He said, “Brass LNG has a lot of problems. One of them is that there are no financiers yet. There are no known banks, whether in Nigeria or outside, that have agreed to fund the construction of the project.

“The direct agreement, which is one of the agreements signed for the project, was signed by the shareholders and a financial consultant. This shows there is no lender yet.”

When contacted, the General Manager, External Relations, Brass LNG Limited, Mr. Gabriel Obando, said, “Thanks for your interest in the Brass LNG project. We, however, have no comments on your questions at the moment.”

The FID for the 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 subsequently postponed in 2012 to the first quarter of 2013.


– The Punch

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