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RUNNING NEWS ON THE GAS INDUSTRY IN NIGERIA
This Day July 31, 2004
NNPC, Partners Agree on $1.6bn Gas Project
The Nigerian National Petroleum Corporation (NNPC) and its three multinational joint venture partners yesterday, agreed to fund the construction of the sixth train (production line) of the Liquefied Natural Gas (LNG) project at a cost of $1.604 billion (N211.7 billion).
The signing of the Final Investment Decision (FID) in London by NNPC, Shell, Total and Eni, will raise gas production from Bonny LNG plant to 22 million tones per annum, from nine million tones, and five million tones of natural gas liquids (LPG and condensate) per year. Revenue from export of gas from the plant will hit about $4 billion by 2007. Speaking shortly after the signing of the FID, the Group Managing Director of the NNPC, Engineer Funsho Kupolokun, said the project represents another major step in achieveing the present government's objective of raising income from gas to match that of crude oil. According to Kupolokun, with the completion of the NLNG train six in third quarter of 2007, Nigeria's gas exports would have risen from zero level in 1999 to 22 million tones. "It means more revenue for the Federation Account, more revenue for the Federal Government, the states and the local governments," said he. "The Nigeria LNG is the fastest growing of such project in the world. We must salute the vision and courage of President Olusegun Obasanjo in pursuing the expansion of the LNG project and other gas projects," he added. The terms for the FID provides that the four shareholders will provide the entire $1.604 billion to fund the project. NNPC with 49 percent equity, will provide about N785.9 million. Shell holding 25.6 percent will contribute $410.6 million, France's Total with 15 percent shares, will provide $240.6 million and Italy's Eni with 10.4 percent equity, will provide $166.82 million. The magnitude of funds the shareholders will provide, stretched negotiations on the taking the FID to three days. The board of the NLNG first met on Thursday to resolves issues surrounding execution of the project. These included guarantee of stable gas supply to the plant and availability of Nigerian government's counterpart-funding. Kupolokun later called President Olusegun Obasanjo, who was in Ghana, after the funding agreement was sealed. The president later spoke to congratulate the shareholders individually and to give them assurance of the Nigerian government backing for the project. "This business is not that of camaraderie, it is money business. What happened on this occasion was that we had a number of outstanding issues, we tried to resolve them early as we can. "Essentially there were 14 essential conditions for taking FID and all these have been met. It was tough but at the end of the day we are able to resolve issues around gas supply agreement and so as so forth," he said. The Federal Government will rely on revenue currently generated from gas exports from first three trains of the Bonny plant, to provide its share of the funding, Kupolokun said. The NLNG Ltd, declared over $500 million dividend for its shareholders last week Contract for the construction of the sixth train was awarded to the TSKJ consortium, which handled the earlier five trains for the plant. Italian firm Entrepose will handle the construction of the tankage and jetty works. Most of the production from the LNG train six has been sold to the North American market on long term sales and purchase agreements. The buyers are Total Gas and Power, which will take 1.0 million metric tones per annum and Shell Western LNG, 3.0 million metric tones per year. The Nigeria LNG plant began production in October 1999 with two trains while the third train was added in November 2002. Trains four and five are billed to come on stream in 2005. NLNG other long term customers are located in Italy, France, Turkey, Spain and Portugal. Also speaking after the signing of the FID agreement, NLNG Managing Director, Mr. Andrew Jamieson, expressed delight that the shareholders agreed to fund the expansion project. "LNG production in Nigeria took about 30 years to get off the grounbd, but since first production in 1999, the rate of growth has been the fastest in the history of the LNG industry," Jamieson said. The Managing Director of Shell Petroleum Development Company, Mr. Chris Finlayson, also said the project was very important for his company as well confer a tremendous vote of confidence on Nigeria. "It (LNG project) will grow from zero to over 20 million tones per year in the period of 10 years, that is unprecedented in any LNG project anywhere world wide," he said. The LNG expansion will provide a further outlet for associated gas now being flared in the oil fields scattered around the Niger Delta, as well as helping the producer meet the gas flare out deadline of 2008.
The Guardian July 29, 2004 NNPC directs oil firms to 'stream' gas projects
THE Nigerian National Petroleum Corporation (NNPC) has directed its foreign multi-national oil partners to focus more on gas development to achieve zero-flare target of the government by 2008.
Specifically, the corporation wants the foreign operation to concentrate on execution of all the gas projects currently being developed in order to boost revenue base from the sub-sector and act as catalyst for the industrialisation of the country.
NNPC Group Managing Director, Mr. Funso Kupolokun, made this position known to the chief executives of oil companies.
According to The Guardian source, the NNPC boss told the oil chieftain's that oil companies should also identify gas project to be developed under an alternative funding arrangement stressing that there were enough incentives to make the project profitable.
"In 1999, the president wrote to us in NNPC directing that by the turn of the decade, we must have as much as revenue from gas as from oil," he said.
According to him, for the operators to achieve zero gas flare by 2008, substantial part of oil sector budget should be targeted towards the development of downstream gas driven feed stock and gas powered industries.
Kupolokun said that Nigeria would develop domestic market for gas and would target the creation of gas powered industries in the country. He pointed out that oil-operating companies had been directed to convert the fleet of their vehicles to the use of Compressed National Gas (CNG) as one of way of making gas as energy of the future.
The NNPC boss projected that domestic demand and consumption of natural gas would hit 1,800 million standard cubic fleet per day by the end of the decade.
He put current consumption level nationwide at 650 mmscf compared to 225 mmscf per day in 2001.
"We are on the right track in complying with the presidential order to generate as much revenue from gas as from oil," he stated.
He stressed that the country then produced about two million barrels per day of crude oil and about 3.9 billion scf of associate gas.
He said further that out of this volume, 40 per cent was flared by oil companies resulting in a loss of $2.5 billion in monetary terms.
According to him, the government was putting together input that would form the national gas policy for the country stressing that the objective of the polity was to enhance investment partnership in the gas sector.
The NNPC boss told the oil chief executives that Nigeria's gas reserve then stood at 166 trillion cubic feet (tcf) with about 30 tcf committed to on-going projects.
He explained that since "trains one, two and three of LNG had been completed and delivered to consumers in Europe and Americas, while trains four and five would be ready before the end of the year.
Kupolokun stated further that Final Investment Decision (FID) on trains five and six would soon be taken.
He added that work on Brass LNG was on-going and would be completed by 2008, Gas to Liquid (GTL) project was also progressing, and that work on "floating pressurise LNG" proposed by Exxon Mobil would soon start.
It has been estimated that gas sub-sector now generated $6 billion per year from zero dollar before 1999.
In the Brass LNG, government through NNPC has 49 per cent equity while Conoco-Phillips, Eni (Agip) and ChevronTexaco has 17 per cent each. Conocophillips is the operator of the project.
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