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How prolonged pipeline projects robbed Nigeria of gas gains

How prolonged pipeline projects robed Nigeria of gas gains

Four years after the Federal Government launched a programme to harness the country’s gas resources, key projects marked for execution are moving at a snail’s pace, indicating it may have amounted to nothing more than sloganeering, BusinessDay analysis shows.

Nigeria’s ‘Decade of Gas’ is a government-led initiative aimed at harnessing the country’s vast gas reserves to drive economic growth and development. It was launched on March 29, 2021 by President Muhammadu Buhari in Abuja. Under the plan, Nigeria will, in collaboration with other stakeholders, ramp up gas use in the decade from 2020 to 2030.

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The ‘Decade of Gas’ initiative is built on the premise that gas is a key driver of economic growth and development. Nigeria has nearly 209 trillion cubic feet of natural gas reserve, which ranks as the ninth largest in the world, but harnesses only about 8 billion standard cubic feet per day (bscf) of gas, and most of it is sent to the export market.

The $20 billion initiative is centred on four key pillars: increasing domestic gas utilisation, expanding gas infrastructure, growing gas exports, and attracting foreign direct investment into the gas sector.

To achieve these goals, the government outlined many policy measures, including the implementation of a new gas pricing regime to encourage investment in the sector, the development of new gas infrastructure, and the promotion of gas-based industries such as fertiliser production, power generation, and petrochemicals.

A key project of the Decade of Gas vision is the Ajaokuta-Kaduna-Kano (AKK) pipeline project. The AKK is a 614 km-long pipeline developed by the Nigerian National Petroleum Company Limited to transport natural gas from southern Nigeria to central Nigeria.

The construction of the AKK pipeline commenced in July 2020 and the project is aimed to ease transportion of natural gas from Ajaokuta in Kogi state to Kano through several states.

Oritsemiyiwa Eyesan, executive vice president, Upstream, NNPC in November 2023 had said that the project will be ready for commissioning in December 2023.

However, Mele Kyari, the Group Chief Executive Officer (GCEO) of the Nigerian National Petroleum Company Limited (NNPC Ltd) on March 28 said that the completion date for the project is now December 2024.

Kelvin Emmanuel, an economist, told BusinessDay, “The AKK is delayed because of two factors, the Mareva Injunction from a concerned third party involved in engineering design and ⁠the distortion in procurement cost because of FX revaluation losses”.

A Mareva injunction, also known as a freezing order, is a legal remedy used to prevent a party from dissipating or disposing of its assets in a way that would frustrate the enforcement of a potential judgment.

Another major project is the Obiafu-Obrikom-Oben (OB3) gas pipeline, also known as the East-West pipeline. The OB3 is a construction phase natural gas pipeline from the Obiafu-Obrikom gas plant near Omuku, Rivers State, to Oben, Edo State.

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The estimated cost for constructing the OB3 gas pipeline is $700m. The project started sometime in 2016, and is also known as the East-West Pipeline.

It connects the Obiafu-Obrikom gas plant near Omuku, Rivers State, to Oben, Edo State and is to transport two billion standard cubic feet of gas per day.

“I am highly elated to announce that going by the contractor estimates, the OB3 pipeline will be completed by March 2024 and the 42” 127km pipeline will supply 2BCF (two billion standard cubic feet) per day,” Ekperikpe Ekpo, minister of state for petroleum resources, gas said at this year’s Nigeria International Energy Summit in Abuja.

Another major project is the Trans-Saharan pipeline, a joint project between Nigeria, Algeria and Niger. The plan is for a 4,000 km pipeline to ferry up to 30 billion cubic meters of gas a year from Nigeria, through Niger, to Algeria where it would connect up with existing pipelines across the Mediterranean to Europe.

With Nigeria and Algeria’s state oil and gas companies taking the lead, it was originally scheduled to open in 2015 but there was no progress on it between 2009 and 2019.

“The Trans Sahara Gas Pipeline is stalling because the lack of diplomatic ties between Nigeria and Niger makes it difficult to access right of way to Algeria,” Kelvin Emmanuel said.

The West African Gas Pipeline (WAGP) is a natural gas pipeline that runs from Nigeria to countries in West Africa, including Benin, Togo, and Ghana. It was commissioned in 2006 and spans approximately 678 kilometers (421 miles).

The West African Gas Pipeline Company Limited (WAPCo) operates the pipeline designed to transport natural gas from Nigeria’s western Niger Delta region to power plants and other consumers in West Africa. However, the pipeline has not reached its target as it stopped in Ghana.

Riverson Oppong, manager of commercial operations at Ghana National Gas Company, said, “The pipeline is supposed to supply gas across the whole of West Africa, but it stopped in Ghana. It couldn’t go to Senegal and Liberia and the rest, but when Europe needed the gas, we could connect the pipeline to Morocco and supply gas to Europe”.

“The Trans Sahara Gas Pipeline is stalling because the lack of diplomatic ties between Nigeria and Niger makes it difficult to access right of way to Algeria,” Kelvin Emmanuel said.

The West African Gas Pipeline (WAGP) is a natural gas pipeline that runs from Nigeria to countries in West Africa, including Benin, Togo, and Ghana. It was commissioned in 2006 and spans approximately 678 kilometers (421 miles).

The West African Gas Pipeline Company Limited (WAPCo) operates the pipeline designed to transport natural gas from Nigeria’s western Niger Delta region to power plants and other consumers in West Africa. However, the pipeline has not reached its target as it stopped in Ghana.

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Riverson Oppong, manager of commercial operations at Ghana National Gas Company, said, “The pipeline is supposed to supply gas across the whole of West Africa, but it stopped in Ghana. It couldn’t go to Senegal and Liberia and the rest, but when Europe needed the gas, we could connect the pipeline to Morocco and supply gas to Europe”.

The Nigeria-Morocco Gas Pipeline was proposed in December 2016 in an agreement between the Nigerian National Petroleum Corporation (NNPC) and the Moroccan Office National des Hydrocarbures et des Mines.

The pipeline is an extension of the existing West African Gas Pipeline, connecting Nigerian gas to every coastal country in West Africa, ending at Tangiers, Morocco, and Cádiz, Spain.

The $25 billion pipeline, which would carry 30 billion cubic meters per year, would be completed by 2046.

Emmanuel said Nigeria’s inability to produce steel is also one reason for the delayed execution of all these pipelines.

He said, “The fact that Nigeria doesn’t produce its steel, which forms a major component for procurement costs in terms of carbon steel, makes it difficult to plan and execute these projects over the project implementation schedule due to the volatility in the FX markets”.

He said that as a result of the slow progress of these pipelines, Nigeria is missing out on increased revenues to stabilise its economy and finance future projects,

On his part, Oppong stated that although a consortium is working to complete these pipelines, greed and political influence have continued to slow down the progress of these pipelines.

He stated that this has resulted in Nigeria and Africa missing out on energy security and proper electricity generation.

“The Nigerian Government needs to transfer its shares in NNPC to an asset manager like MOFI that will seek the best ways for it to raise the capital it requires (including an IPO or Corporate Eurobond) to finance gas projects inclusive of NMGP, floating LNG projects, for the sake of bringing in revenues required to not only stabilise FX markets but also fund budget deficits,” Emmanuel said.