US oil giant Exxon Mobil is investing $33 billion into two liquefied natural gas projects in Mozambique, a country of 30 million people with less than 50 percent of Nigeria’s gas reserves, at a time when investment into the continent’s biggest oil producer is drying up.
This development raises questions about why investment dollars are fleeing Nigeria for smaller African countries and what will be Nigeria’s ability to remain competitive in a world where gas is on the ascendancy and oil slips from prominence.
ExxonMobil on Tuesday awarded a JGC Corp.-led group a contract to develop its $33 billion liquefied natural gas project in Mozambique, which is set to be the biggest ever private investment in Africa.
JGC will be joined by Fluor Corp. and TechnipFMC plc to develop the Rovuma LNG project, Exxon Senior Vice President for LNG Peter Clarke said in a speech Tuesday in the Mozambican capital, Maputo. The project will cost between $27 billion and $33 billion, according to March estimates by Johannesburg-based Standard Bank Group Ltd.
Rovuma’s planned output is 15.2 million tons of LNG per year, higher than a nearby project that Total SA is developing with a capacity of 12.9 million tons.
Adeola Adenikinju, director, Centre for Petroleum, Energy Economics and Law, University of Ibadan, said the LNG market is basically for export and a shift of emphasis to the domestic market meant the incentives that were provided for Nigeria Liquefied Natural Gas (NLNG) were no longer available for other LNG projects.
“This made super oil majors seek countries that are focusing on the export market,” Adenikinju said.
Muda Yusuf, director general, Lagos Chamber of Commerce and Industry, said investors have options because foreign investments naturally flow to where they are most valued or where returns will be the most guaranteed.
“We have remained struck with Petroleum Industry Bill (PIB) which is expected to create certainty in the sector, while the issues surrounding insecurity are still here,” Yusuf told BusinessDay.
President Muhammadu Buhari had on Tuesday sought the support of the legislature to pass into law two Petroleum Industry Executive Bills supposed to provide certainty and attract further investments into the sector.
Yusuf said Nigeria needs to put on the table the right kind of incentives and policy framework that will make it the preferred investment destination for oil and gas projects.
Kelvin Atafiri, who runs Cavazanni Human Capital Limited, an investment firm exposed to the oil and gas sector, said foreign investors operate in other countries apart from Nigeria and they would rather go to countries with less bureaucracy and agencies than countries with uncertainty such as Nigeria.
Mozambique holds 100 trillion cubic feet (TCF) of proven natural gas reserves, the third-largest in Africa behind Nigeria and Algeria, yet the Southern African country has continued to attract more new investments than Nigeria and Algeria.
However, international oil companies (IOCs) have virtually halted new large projects in Nigeria with the country’s once-lucrative oil sector which accounted for a significant part of foreign direct investment into Nigeria now missing on the African FDI radar.
Deloitte, one of the “Big Four” accounting organisations and the largest professional servicing firm, named Ghana, Mozambique, Tanzania and Uganda as new countries that will be competing with Nigeria’s oil and gas sector for Foreign Direct Investment in 2019 and beyond.
For an established oil country such as Nigeria, Deloitte noted that delays in reforming the sector have deterred further investments as governance challenges, corruption, as well as economic, security and high-cost concerns still hinder investment inflow.
“Improving economic conditions and transport sector growth could see domestic consumption increase by 31 percent between 2017 and 2023 while investment in gas infrastructure, such as new pipelines, will boost production,” Deloitte said in its “The new frontier: Winning in the African oil and gas industry” report.
While other countries are growing in leaps and bounds, Nigeria, which was once ranked the fourth largest LNG exporter in 2016, according to the World LNG Report, has delayed in taking Final Investment Decisions (FID) on various LNG projects in the country. This is eroding the country’s share in the global market, and stakeholders said this has cost the country over $5 billion.
Since the development of the NLNG, new projects have been too few and far between. Two LNG projects in Nigeria – Olokola LNG and Brass LNG – have been unable to reach Final Investment Decision. The NLNG’s Train 7 is finally making progress towards FID after many false starts.
The OK LNG project was stalled because all the international oil companies (BG, Shell and Chevron) withdrew from the project, with only the Nigerian National Petroleum Corporation (NNPC) left.
The Brass LNG project, which was designed to produce 10 million metric tonnes per annum, was to be built by the NNPC, Total, ConocoPhillips and Eni Group. But ConocoPhillips withdrew from the project in 2013.
“Brass LNG gulped $3 billion and Olokola $2 billion. This is aside that foreign exchange has changed significantly in the last 15 years, when the projects were awarded to contractors,” Louis Brown Ogbeifun, a former president of Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), told News Agency Nigeria.
Several years ago, the Anglo-US giant British Petroleum withdrew from Nigeria where it had sought to become a large player in the gas sector and moved to Tanzania because of policy uncertainty and poor government response.
Mozambique, one of the world’s poorest countries, is looking to the projects to uplift its $15 billion economy while Nigeria prides itself as one of the biggest economies in Africa but continues to fail in providing an environment conducive for businesses.
ISAAC ANYAOGU, STEPHEN ONYEKWELU & DIPO OLADEHINDE
