$16bn Brass gas project investment faces 2 year delay

Following the pulling out of Conoco Philips from the $16 billion Brass Liquefied Natural Gas project, the final investment decision (FID) on the company may be delayed for another two years, and this could further escalate the cost of the 10 million metric tons per annum project.

This is so when inflation and other factors associated with cost are taken into consideration.

BusinessDay investigations show that despite efforts by the Federal Government to persuade the company not to divest its share in the Brass Liquefied Natural Gas project, the company is still bent on divesting. Analysts however say government’s action was considered too late for the management of the company to be pacified.

The action of Conoco Philips is bound to delay the signing of the FID initially slated for year end. The delay fear is due to the fact that a new shareholder would have to consider afresh, the economics of the project and process optimisation, as well as re-cascade production methods.

It is believed that since the company (Conoco Philips) is the only licensor for the production method, it has the patent, and the process of obtaining it by investors and adopting the technology, might be difficult for any other investor in the Brass LNG.

Analysts who spoke on condition anonymity, said the government would have to convince Conoco Philips to sign the FID before pulling out, so that the project can continue. At the point of signing the FID, all the stakeholders are expected to have paid some money into the escrow account of the company. Three weeks after this money is paid, work must commence on the projects and it would take 56 months to complete.

They said even if a new entity comes in as shareholder, such entity must express satisfaction with the existing arrangement before the project can go on. Some sources in the Nigerian National Petroleum Corporation (NNPC) said one of the agreements reached by the shareholders was that every one of them must be satisfied with existing arrangements before the project can proceed.

The FID has been postponed several times because investors kept pulling out of the project. When it was to be taken for the first time in 2006, the cost of the project was estimated at $8 billion but with the passage of time, the cost has gone up on account of inflation.

A further delay would make international investors to lose confidence in government which holds 49 per cent equity in the project.

Oando ,which is in contention to take over the project is expected to buy the asset from Conoco Philips and would have to carry out due diligence, assess the viability of the gas in terms of gas purchase, as well as confirm that the processes of the plant are of the required standard.

The front end engineering and design (FEED) and the optimisation work have been completed several years back, with about 15 engineers from NNPC who have worked with Conoco Philips at its headquarters in Houstons, Texas in the United States of America.