22 December 2015, Abuja – The Minister of State for Petroleum and Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Dr. Ibe Kachikwu has said that the planned withdrawal of the French oil giant, Total, from the Brass Liquefied Natural Project (LNG) will not hamper the signing of the Final Investment Decision (FID) for the multi-billion dollar project.
Kachikwu also told THISDAY in an exclusive interview that the FID for the Train 7 of the Nigeria LNG would soon be signed as the shareholders were determined to take advantage of the market dynamics and the economies of scale of the existing trains.
The minister however argued that in view of the current dynamics in the global LNG market, the shareholders would take a second look at the proposals for Train 7, so as to change some of the financial concepts and take advantage of the existing economies of scale.
He acknowledged that the FID for Brass LNG was a struggle because Total had served other shareholders a notice of planned withdrawal but added that Total’s withdrawal would not affect the FID.
According to him, the worst that could happen is for the shareholders to build one train for now, rather than the planned two trains.
“Brass LNG was struggle because Total of course, has given us notice that it is leaving. So, right now, it is only NNPC and ENI but we are also looking at other partners to come in. Perhaps, rather than two trains, we do one train but I think our energy right now is on NLNG because it has worked and it is working. The market dynamics are already established. Getting the market today for your produced LNG will give us challenge because the thing with LNG is not like crude oil where you can make a couple of mess and still survive. They (LNG business) are long-term contracts commitments. If you don’t deliver on them, people will sue you, because their whole national planning is based on that. So, if you say you are going to give ‘X’ Standard Cubic Feet of gas and you don’t show up with it, they sue you,” Kachikwu explained.
Speaking on the commitment of shareholders to the early signing of FID for Train 7 of NLNG, Kachikwu said “we are moving rapidly”.
“I think we held a meeting two months ago and we are almost getting towards the FID. I think everybody is on block now that Train 7 needs to happen. Of course, you know that increasingly, the LNG market is getting very tight with the likes of the Qataris; the Saudi Arabia and Russia, dominating the market and of course, the United States, which is now in a position to actually export,” he said.
“So, they (United States) are no longer a net importer of LNG. In fact, if they open up their floodgate today, to actually go out and begin to export massively, this market will be in serious trouble. So, it means therefore that in doing an investment today, which by the way has gone up in terms of unit cost of trains, you have got to ask yourself what is the yield. So, we have to very meticulously look again at the proposals, change some of the financial concepts, take advantage of the existing economies of scale but we are all committed that we should do Train 7,” Kachikwu explained.
Brass LNG project is designed to produce 10 million metric tonnes of LNG per year.
With a pre-FID expenditure of over $1 billion, a lot of early works have been completed on the site, demonstrating the faith of the shareholders in the project.
The shareholders have since agreed on major issues, including the funding structure, while the resolution of issues surrounding gas supply remains the only hurdle.
- This Day