A Review of the Nigerian Energy Industry

Gas Supply: We remain committed to West African region – NNPC

Dr. David Ige12 September 2014, Abuja – Recently, the media was agog with news that NNPC and some of its JV partners have been fined over a breach in gas supply to Ghana through the West African Gas Pipeline.

In this statement NNPC’s Group Executive Director, Gas & Power, Dr. David Ige, clarifies the situation and throws more light on efforts being made to expand gas supply infrastructure to boost gas supply to meet domestic needs and international obligations.

“Nigerian suppliers (NNPC, Chevron and NPDC) have a contractual obligation to supply about 130mmcf/d of gas to customers across West Africa. This transaction is governed by a supply agreement which recognizes various operational and commercial situations.

“Since 2013, there have been some unfortunate supply disruptions affecting gas shipped through the West African Gas Pipeline. These have been largely due to Force Majeure (FM) events like the outage of the Escravos-Lagos pipeline and other secondary pipelines such as the Trans-Forcados pipeline. Many of the disruptions have been addressed and where net shortages existed as in 2013, these were remedied according to terms of the agreement through penalty payment of $10m.

“The outstanding force majeure situation is being addressed by NGC and should be lifted very shortly. Beyond this, major interventions are being implemented to grow supply to meet the full requirements of both WAGP and the domestic power market. It is expected that much of the net supply shortages beyond the FM induced reduction, will be addressed within the next 4-5 months.

“Nigeria remains committed to supplying the West African region. The current supply challenge is being addressed aggressively and full contractual supply should be attained within a few months.
In addition, new independent suppliers are also looking to develop supplies to WAGP beyond the base volume. The medium term projection is very positive.

Calabar-Kano AKK Project to gulp $5b
“The Abuja Kaduna-Kano gas pipeline is going to be the first gas pipeline that would be built on a Public-Private-Partnership basis in Nigeria. The total pipeline project between Calabar to Kano is estimated to cost of about $5 billion. As you bring private investors to partake in this kind of project, there is a more rigorous demand in terms of bank-ability, before the investors can come in to fund the project.

This entails that we have to close in on all engineering designs and all that, the right of way has to be mapped out, environmental impact assessment, all of these are critical requirements before you access international funds. But more importantly also is assurance on revenues because the investors want to be sure that if they put in such amount of money, they would recoup it at the end of the day. So getting all of these done actually takes a lot longer than normal unlike when the project is being funded 100 percent by government.

“So over the last year or so we have been working diligently, we have done the right of way survey for the entire pipeline length, we have progressed with the engineering and we hope to cross a major threshold by the end of September.

“We have done our initial bank ability assessment and we continue to review this because of the dynamic nature of the gas supply situation. We know that in order to secure bank-ability we need to be very firm on the gas supply so all of these things are being done or were being done to put the project in place to attract the right investment.

So I think all the work being done is very relevant to the project going forward. Essentially the committee would have to look at how to ascertain what can be adapted incrementally to get the project going, so they would be looking at options now and all that work that has been done in the past would now manifest.

Relevance of AKK Project to Gas Master Plan
“The intention of the gas master plan is to grow the economy with natural gas. Currently half of the entire country is not connected to gas infrastructure so by the time we open up the northern part of Nigeria to gas, we would begin to see significant boost in the cost effectiveness of energy sources that has an immediate impact on the industrialization of the north and job creation.

“So the real intent of the gas master plan is brought to light with a project like this. The Abuja-Kaduna-Kano gas pipeline project is essentially designed to function as a backbone into the heart of the North and from there we will begin to build eastward and westward.
*Press statement

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