Ike Amos
Dublin, Ireland — Group Chief Executive Officer of the Nigerian National Petroleum Corporation Limited, NNPCL, has explained that the seeming high cost of the 615-kilometre Ajaokuta-Kaduna-Kano (AKK) gas pipeline, compared with similar projects across the world, was because of the peculiarity of the Nigerian project.
Addressing newsmen during an inspection of the project, Kyari also stated that the AKK gas pipeline was critical to the Nigerian economy, hence its decision to prioritise the project irrespective of the numerous challenges.
He stated that the AKK gas project was different from others in terms of scope, pipe specification, technology to be used, as well as other extraneous factors such as the challenges of insecurity, weather and insurance, among others.
Kyari was reacting to reports that the value of the AKK gas project was over-inflated, compared with similar gas projects in some other parts of the world, which also made the lead financier, a Chinese-back company, to pull out of the deal.
For instance, the reports stated that comparable projects across the world cost far less, such as the 693-kilometre Yucatan Peninsula Gas Pipeline in Mexico, which cost $266 million and the 460 kilometres Export La Moran Pipeline built between Argentina and Chile, which cost $360 million, while the 3,700 kilometres Export Pipeline between Bolivia and Sao Paolo cost $1.8 billion.
The NNPC chief executive officer explained that the AKK gas pipeline project was initially awarded for $2.8 billion in 2018, but the amount of the project was reduced to $2.5 billion in 2019, after the current management of the NNPC renegotiated the contract.
According to Kyari, the procurement process was supervised by the Infrastructure Concession Regulatory Commission (ICRC), and endorsed by the Bureau for Public Procurement, having complied with all regulatory requirements before the approval by the Federal Executive Council.
He said: “Despite this significant savings, our attention was drawn to the unfounded comparison with other projects definitely not of the same scope, terrain, line pipe specification, welding technology, weather conditions and more importantly the impact of security risks and country risk premiums on Nigerian projects of this magnitude.
“As regards the project financing, discussions on financing commenced in 2018 with the Bank of China as the Mandated Lead Arranger, leading a consortium of interested Chinese banks. All the banks secured credit approvals from their various boards to proceed with the deal, which led to the sign-off of the term sheet for the facility with the Bank of China.
“Following the execution of the Term Sheet, SINOSURE, the Chinese Government insurance agency in charge of international financing went through their review cycle and endorsed the facility to their Chinese Government body for approval.
“Concurrent with the financing deal, NNPC commenced pre-funding the project, which led to the flag-off of the Construction by the President on 30th June 2020.”
Kyari disclosed that so far, NNPC has funded the project to the tune of over $1.1 billion, adding that none of the project activities had been abandoned as reported, as it remained committed to the delivery of the project on schedule.
He assured that the NNPC remains highly committed towards the delivery of strategic national infrastructure projects through responsive project delivery, active collaboration with government security agencies and communities as well as deployment of technology in the form of human and technical intelligence for surveillance along the entire Right of Way.
He added that currently, overall Engineering Design for the linear section of the two segments of the project stands at 93.48 per cent; overall procurement for the linear section for the two segments is at 88 per cent; while 94 per cent of the total line pipes have been manufactured and 90 per cent already in-country.
He said: “Construction activities on both segments are ongoing. We have completed 400 kilometres of the linear section/mainline welding, representing 68 per cent of ROW from Ajaokuta in Kogi state to Kano.
“Also, on-going are several special constructions like Direct Pipe Installation (DPI) across the River Niger in Kogi state and other Horizontal Directional Drilling (HDD) across River Robo, Pai and Shika River in Zaria, Kaduna State.
“Also, several back-end activities have commenced including field joint coating, trenching and lowering, temporary cathodic protection and talks of pre-commissioning of some sections have equally commenced.”
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