More than 17 years after they were initiated, the Brass Liquefied Natural Gas (LNG) project and the Olokola LNG project with a combined worth of approximately $30 billion are yet to commence, reflecting Nigeria’s failure to effectively utilise its gas resources.
The $20 billion Brass LNG project in Bayelsa State and the $9.8 billion Olokola LNG project, located on the border town between Ogun and Ondo States, were initiated in 2003 and 2005, respectively. They were expected to create thousands of new jobs, spur domestic gas demand, generate electricity, create an opportunity to diversify revenue of the Nigerian government, strengthen the country’s revenue base and turn the country into a dominant geopolitical player in Africa.
The two projects initiated by the President Olusegun Obasanjo administration were also projected to help the country monetise part of its vast natural gas reserves and meet the growing worldwide demand for clean energy.
However, none of the two LNG projects has progressed beyond the drawing board despite billions of dollars already expended on them. The projects have been stalled by lack of Final Investment Decision (FID) as well as delays caused by unnecessary bickering, lack of political will and, above all, uncertainties around the Petroleum Industry Bill (PIB).
Development of the Brass LNG has remained elusive as foreign investors in the proposed investment backed out. Energy analysts say the development is robbing the country of over $24 billion in estimated revenue, as well as about 18,000 jobs. Similarly, the Olokola LNG has seen all investors pull out and is currently on the verge of being scrapped.
Shareholders, including the Nigerian National Petroleum Corporation (NNPC), ought to have taken the first FIDs since 2007 and would have recouped their investments in the first five years (2012). However, 17 years after the first project was introduced, there is still nothing tangible to show.
“When the Brass LNG project was originally set up in 2004, the initial project cost was pegged at about $3.5 billion. Today, the cost of that same project stands at over $25 billion,” a source close to the project told BusinessDay.
“The suppliers are insisting they have to invest heavily in gas development if they are to commit to a Gas Supply Agreement (GSA) for 25 years with Brass LNG. And then the questionable ability of the NNPC to fund its own share of the joint venture cash call for this development still adds to the quagmire,” the source said.
Timipre Sylva, minister of state for petroleum resources, said the FID taken on NLNG Train 7 is a significant milestone that reinforces the government’s commitment to the acceleration of the gas revolution. However, some stakeholders said if the Brass LNG and Olokola LNG project had been up and running, they would have equally enabled the country to produce an additional 10 million metric tonnes of gas yearly as well as secure a brighter future in the international market.
“None of the two LNG projects has progressed beyond the drawing board despite the fact that billions of dollars have already been expended on them, which is very sad,” Charles Akinbobola, an energy analyst at Lagos-based Sofidam Capital, said.
Other experts insist that the failure of the present and past administrations to act proactively on the Brass LNG project has led to a loss of $3 billion yearly revenue for the past eight years when the first output was expected from the project.
Two months ago, the Senate urged the Federal Government to ensure the immediate revival of the Brass LNG project even as it hailed the conceptualisation, design, and commencement of the work since 2004. The Senate said the project had gulped about $1.2 billion as at 2011 covering early site works and maintenance after which it has remained moribund.
“We also have plans for Olokola LNG as well as Brass LNG; we have a little challenge with market windows for these projects which we are reviewing on a monthly basis. Once the appropriate market window opens up, we will quickly get more shareholders to join us for the projects,” Maikanti Baru, former group managing director of NNPC, had said.
But nothing substantial was achieved.
The Brass LNG was incorporated in 2003 with shareholders that included the Nigerian National Petroleum Corporation (NNPC) (49 percent), Eni International (17 percent), Phillips (Brass) Limited, an affiliate of ConocoPhillips (17 percent), and Brass Holdings Company Limited, an affiliate of Total (17 percent). But ConocoPhillips and Chevron have withdrawn from the project.
Olokola LNG project, which was also designed to produce an initial 10 million metric tonnes per annum, was being built through a joint venture by the NNPC with Royal Dutch Shell, Chevron and BG Group. But all the international oil companies have pulled out of the project.
In 2009, BG Group also pulled out of the project, and in August 2013, Shell and Chevron followed suit, leaving the NNPC as the sole shareholder.
The companies were reportedly frustrated at the lack of progress.
DIPO OLADEHINDE
