The chances of the multibillion-dollar Nigeria Liquefied Natural Gas (NLNG) Train 7 project taking off are getting slimmer as the Nigerian government is yet to meet the condition put forward by other investors before they would take the Final Investment Decision (FID), sources have told BusinessDay.
Some industry operators said if the project is not signed off by December 31, 2019, that may well be the end of it. This, they said, is based on a clause in the agreement between stakeholders involved in the project which said if the FID is not taken by this year-end, Nigeria can as well forget about it.
The implication of not going ahead with the project is the loss of the expected $9 billion revenue from it for the government. The 10,000 direct jobs and 40,000 indirect jobs to ease the youth unemployment challenge in the country would also be lost.
But the Nigeria Liquefied Natural Gas Limited said it remains fully committed to realising the Train 7 project.
“NLNG remains fully committed to realising the Train 7 project which is expected to increase its production capacity by 35 percent as well as boost its competitive edge in the global LNG market,” the company said in a response to BusinessDay enquiries.
“As part of activities leading to the Final Investment Decision, NLNG recently signed Gas Supply Agreements with its gas suppliers. Other activities leading to achieving FID are in progress,” it said.
The Train-7 project is located at the Bonny Island LNG facility in the Niger Delta. Once complete, it would include a new liquefaction unit, an 84,200m3 storage tank, a 36,000 m3 condensate tank and three gas turbine generators.
Earlier in the year, NLNG announced that the joint venture company, SCD Group, comprising the Italian company Saipem, Japan’s Chiyoda Corporation and South Korea’s Daewoo, would undertake the engineering, procurement, and construction for the $10 billion Train-7 project.
The much-publicised FID for the NLNG Train 7 last week failed to meet the Thursday, December 19 deadline as the meeting preceding the signing dragged beyond expectation.
At the meeting in Abuja last week, investors were said to have demanded a letter of guaranty that would state expressly that the government would not tamper with the fiscal regime that would govern the operations of the project midway.
This, BusinessDay gathered, is to guard against what has happened with the PSC Act. Government action on the Deep Offshore Basin Production Sharing Contract (PSC) Amendment Bill which has been passed into law has created a high level of uncertainty among the foreign investors and they would need assurance that would give them confidence to operate.
Unfortunately, this assurance was not forthcoming during the two-day marathon meeting that was supposed to precede the signing of the FID.
The international oil companies appear to be taking their pound of the flesh from the government following the signing by President Muhammadu Buhari of the new Deep Offshore Basin Production Sharing Contract (PSC) Amendment Bill into law, putting an end to decades of calls for review of the PSC terms.
The other investors need a letter of comfort, an industry source told BusinessDay.
Already, the new PSC Act is taking its toll on the deepwater operated by the IOCs as one of them is said to be currently experiencing 40 percent cut in returns on one of its deepwater projects, meaning that it would take a much longer term to recoup returns on its investment.
NLNG is a joint venture company owned by Nigerian National Petroleum Corporation (49 percent), Shell (25.6 percent), Total (15 percent) and Eni (10.4 percent).
The Nigerian National Petroleum Corporation (NNPC), which holds 49 percent on behalf of the Federal Government, did not, however, respond to the BusinessDay enquiries as regards its role on this particular issue.
Olusola Bello
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