A Review of the Nigerian Energy Industry

Shell, NNPC assess options for $12bn NLNG expansion

NLNG28 March 2014, Lagos – Shell Nigeria, Nigerian National Petroleum Corporation and other shareholders of the Nigerian LNG Limited are considering options that can be used to implement the expansion of the LNG facility estimated to cost $12bn.

The Vice-President, Nigeria & Gabon Shell Upstream International, Mr. Markus Droll, who gave this indication, said , “We are embarking on a number of large gas projects so that we can keep the NLNG supplied with enough gas, and to make sure Nigeria can maintain its strategic position in the global LNG market.

“Together with the NNPC and the other shareholders in NLNG, we are investigating how we can further expand the NLNG supply and processing capacity. And I should mention that the NLNG is a world-class operation, recognised as such well beyond the borders of Nigeria.”

Droll, who spoke during the recently concluded 2014 Nigerian Oil & Gas Conference in Abuja, said, “Importantly, we have a very strong team working right now on how we can make the Assa North/Ohaji South project works. This aims to be one of the largest ever domestic gas projects in Nigeria, and of course, I don’t have to remind everybody how important domestic gas, electricity and its multiplier effect is on keeping the Nigerian economy as a whole moving forward on its strong  growth trajectory.”

The NLNG is jointly owned by the NNPC (49 per cent), Shell (25.6 per cent), Total LNG Nigeria Limited (15 per cent) and Eni (10.4 per cent).

With six trains in full operation, the NLNG’s Bonny Island natural gas liquefaction plant has capacity for 22 million metric tonnes per annum and generates $12bn yearly.

The plan to expand the facility with a seventh train that will see its LNG capacity expanded to 30 million metric tonnes per annum has been delayed for four years.

The Chief Executive Officer/Managing Director, NLNG, Mr. Babs Omotowa, had recently put the monetary losses from the delay encountered by the train-seven project at $10bn.

“$10bn had been lost to the delay in reaching the final investment decision for the train-seven project,” he sai.

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 the annual output to 30 million metric tonnes.

The Federal Government, either overtly or covertly, is believed to have been delaying not just the $12bn NLNG’s Train 7, but the $10bn Olokola LNG and the $15bn Brass LNG projects.

These three projects are considered critical to maintaining Nigeria’s leadership role in LNG supply globally.

Though the $12bn NLNG Train 7 project is considered as the most economical of all the three LNG investments, a senior official of one of the shareholders involved in one of the projects, who asked not to be named, identified government interest in Brass NLNG located in Bayelsa State as the factor delaying the entire $37bn LNG projects, particularly the NLNG Train 7.

He argued that there was political undertone in the delay of the projects.

The Federal Government, through the NNPC, 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.

In defence of the need for all shareholders to ensure a final investment decision of the NLNG train seven project, Omotowa 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 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.”

Omotowa, however, said the delay of the NLNG Train 7, Olokola LNG and Brass LNG projects were denying Nigerians 50,000 construction jobs.

He said the government was losing $5bn in revenue yearly as long as the projects failed to see the light of the day.

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

“With another 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,” he added.


– The Punch

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