BusinessDay

Demand in Morocco seals $1.4bn deal for Nigerian gas

...As NNPC seeks equity stakes in joint venture company

High demand for Nigeria’s gas by Morocco has enabled a landmark $1.4 billion deal finally sealed Tuesday between the Nigeria Sovereign Investment Authority (NSIA), OCP of Morocco as well as Akwa Ibom State to develop a plant where Ammonia and Di-ammonium Phosphate will be produced.

The new deal comes under NSIA Gas Industrialisation Strategy and will drive implementation of the Multipurpose Industrial Platform project – a backward integration initiative, which builds on the successes of the Presidential Fertilizer Initiative (PFI) and other sovereign bilateral initiatives between Nigeria and Morocco.

The first phase of the project will produce 1.5 million tons per annum of ammonia in two phases.

Up to 70 percent of the ammonia produced will be allocated for export to Morocco and the balance will be routed to the production of 1 million tons per annum of Di-ammonium Phosphate (DAP) and NPK fertilizers to feed domestic demand.

The Multipurpose Industrial Platform (MIP) project is structured to commercialise Nigeria’s vast natural gas resources and satisfy Morocco’s demand for cost-competitive ammonia.

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The project is also seen as a huge boost to Nigeria’s quest to become self-sufficient in fertilizer as well as in food production.

The MoUs were signed at the Mohamed VI Polytechnic University (UM6P) in Benguerir, Morocco.

The NSIA, managers of Nigeria’s Sovereign Wealth Fund, and Morocco’s OCP Group, one of the world’s largest producer of phosphate-based fertilizer, had been in talks since June 2018 when the parties signed a protocol agreement to build the plant.

Parties in the deal also include the Nigerian National Petroleum Corporation (NNPC), Nigerian Content Development and Monitoring Board (NCDMB), Gas Aggregation Company Nigeria Limited (GACN), and Fertilizer Producers and Suppliers Association of Nigeria (FEPSAN).

Authorities have assured that project construction will commence no later than third quarter 2021, while the plant is expected to commence operations 2025.

Land availability and accessibility; gas adequacy; sufficiency of marine draft, and other environmental and social considerations informed the decision to site the plant in Akwa Ibom.

NSIA said at completion, the integrated ammonia and fertilizer plant will house – within its battery limits – the process plants for ammonia and fertilizer production, administrative buildings, fertilizer bagging units, water purification units, storage for raw materials and finished goods, onsite power plant and other ancillary facilities.

The plant is also structured to have a dedicated jetty to facilitate seamless importation of raw materials from Morocco and other suppliers, and export of excess ammonia and fertilizer to Morocco and potentially other regional markets.

The agreements on the second phase of the Presidential Fertilizer Initiative (PFI) give effect to the presidential directive, which has restructured the PFI programme.

With the revised structure, NSIA’s role under the PFI moves upstream thereby limiting its involvement to bulk importation of raw materials on behalf of the fertilizer blenders, with bank guarantees provided by the blenders.

The five different agreements signed include: MoU between the NSIA, OCP Africa and the Fertilizer Producers and Suppliers Association of Nigeria (FEPSAN) to commit to the second phase of the Nigerian PFI.

The NSIA also signed a Shareholders Agreement (SHA) with the OCP Africa for the creation of the Joint Venture Company (JVC), which will oversee the development of an industrial platform that will produce ammonia and fertilizers in Nigeria.

The third MoU is between NSIA, OCP Africa and the Akwa Ibom State in Nigeria on land acquisition, administrative facilitation, and common agricultural development projects in the state.

The fourth MoU between NSIA, OCP Africa, and the NNPC, is to evaluate the opportunity of an equity investment by the NNPC in the JVC and for its support on gas.

The fifth is a Framework Agreement between NSIA, OCP Africa, Mobil Producing Nigeria (MPN), the NNPC and the Gas Aggregation Company Nigeria (GACN) on gas supply for the MPI.

According to Uche Orji, managing director, NSIA, the project forms a key part of NSIA’s gas industrialisation strategy and will deep intra-continental trade which is essential to Africa’s development and economic renaissance.

“This landmark project, the MIP, will explore increased levels of synergy between NSIA and OCP and the partners to the transactions and ultimately ensure that Nigeria builds an industrial base that is sustainable and complimentary to mutual objectives of developing the agriculture sector in Nigeria.

“The changes to the PFI significantly reduce NSIA involvement and transfer the responsibilities to the blenders.”

Authorities have expressed firm commitment to the project with optimism that this approach will make the programme more sustainable, strengthen the productive capacity of the blending plants and eliminate financial risk to the NSIA.

Timipre Sylva, minister of state for petroleum and head of the Nigerian delegation, said, “President Buhari is quite committed to actualisation of this project and has mandated the Ministry of Petroleum Resources and all its agencies, notably the NNPC, DPR, NCDMB and all other government agencies to give maximum support.”

Chairman/CEO of OCP, Terrab said, “Ultimately, these agreements will strengthen the partnership between the NSIA and OCP Group and the different institutions in the gas industry in Nigeria.”

According to Terrab, the agreements will translate to knowledge transfer and broader economic opportunities as we build out the industrial platform, saying, “The platform will leverage the best of Nigerian and Moroccan natural resources, namely the Nigerian gas and the Moroccan phosphate and create a new basis for stronger ties.”

Mele Kyari, GMD, NNPC, assured that the NNPC and all its subsidiaries were committed to the project, noting of NNPC’s plan to take equity stakes in the joint venture company and would ensure sufficient gas was available for the project to succeed.

Governor Emmanuel Udom of Akwa Ibom State also assured the parties that his state was committed to ensuring the PMI project was a resounding success, stating, “Our state is receptive to investments and we are prepared to offer the necessary support to make the project a reality.

“With a site that is suitably located to enable operational logistics and an abundance of gas resources, all that is left is for the parties to accelerate the project development process.”

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