Exactly 15 years after it was initially initiated, Olokola Liquefied Natural Gas (LNG) terminal project also called OK LNG is bleeding Nigeria’s economy with a loss of about N991 million despite processing zero gas.
The $9.8 billion projects designed to produce an initial 10 million metric tonnes per annum was 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.
However, the project went down the drain after international oil companies such as Chevron, Shell, and British multinational BG group pulled out of the project in 2013, citing the lack of progress on the project leaving the NNPC as the sole shareholder, a development that comes with huge cost implications.
According to the latest audited Nigeria’s National Petroleum Corporation (NNPC), the OK LNG project cost Nigeria a loss after tax of N991 million as of 2019 compared to N952 million in 2018.
“NNPC share of loss in OKLNG was not recognised since the accumulated share of loss is higher than the initial investment,” NNPC said in its audited 2019 financial statement.
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Had the project been allowed to come on stream, some stakeholders say it would definitely have served as a major contributor to Nigeria’s economic development and put Nigeria at the forefront of African LNG production.
“The project never 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 factors leading up to the stalled state of the project could be linked to the various controversies around it during former President Olusegun Obasanjo’s regime.
The former president was accused of sowing the seed of discomfort with OK LNG project when he also initiated the project in 2005 barely one year from the conception of the Brass project.
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).
Some energy analysts say the stagnation of the two projects is robbing the country over $24 billion in estimated revenue, as well as about 18,000 jobs while others 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.
“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,” late Maikanti Baru, former group managing director of NNPC, said sometimes last year.
But nothing substantial was achieved.
Nigeria’s natural gas reserve is estimated to be about 202 Trillion Cubic Feet (TCF), and that places the country as the largest holder of proven gas in Africa.
While the country’s LNG projects continue to suffer setbacks, other countries, including Mozambique are pushing ahead with their own projects.
Seven countries are backing a $20 billion project to extract, liquefy and export gas from Mozambique, lead operator Total revealed in August.
The US, Japan, UK, Italy, Netherlands, South Africa, and Vietnam are putting public money towards a $14.9 billion package of loans, the biggest on record in Africa. The African Development Bank and 19 commercial lenders are also contributing.
The mammoth bet on LNG comes amid a global pandemic and despite the climate, security and human rights concerns.
French oil major Total, which acquired a 26.5% stake in the project from Anadarko last year, hailed it as a “significant achievement”. “It demonstrates the confidence placed by the financial institutions in the long-term future of LNG in Mozambique,” said chief financial officer Jean-Pierre Sbraire in a statement.
The government of Mozambique expects gas development to generate billions of dollars in revenue and raise the country to middle-income status by the mid-2030s.
