The federal government hopes to transform Nigeria using gas as an enabler. In pursuit of this goal, the government has launched the Decade of Gas initiative. With hindsight, the reactivation of the Brass and Olokola Liquefied Natural Gas projects, which have suffered delays in execution for 17 years, are pivotal for a successful gas drive. Peter Uzoho writes
The federal government, through the Ministry of Petroleum Resources and the agencies and parastatals under the ministry, particularly the Nigerian National Petroleum Corporation (NNPC) and the Department of Petroleum Resources (DPR), have been talking loud about the aspiration of government to transform Nigeria through the oil and gas industry.
The county’s standing as a resource-endowed nation and yet ranks amongst the poorest countries in the world are a narrative that demeans its leaders, for which the incumbent government hopes to reverse by using the abundant gas resources as an enabler.
Instructively, Nigeria is very rich in oil and gas deposits, boasting of 36 billion barrels of oil reserves and 206.53 trillion cubic feet (tcf) of gas reserves, as at January this year.
But these vast resources have not been fully exploited and utilised to the benefit of the country and its citizens.
With the demand for fossil fuels projected to lose its relevance in the next 30 years, coupled with the ongoing global push for a shift towards renewable energy, many countries are turning to gas as an alternative.
Nigeria has joined the move and is now looking the way of gas to guarantee sustainable energy security for the people, increase revenue, industrialise the nation and improve the living standard of the citizens.
This, it intends to achieve through creating an enabling fiscal and social environment for investors to be able to ramp up their investments in the gas sector.
The government has pushed and succeeded in seeing to the passage and signing of the Petroleum Industry Bill (PIB) into law, which now exists as the Petroleum Industry Act (PIA) after over 13 years of delay. The government believes that the PIA will lead to more investments in the Nigerian oil and gas industry, particularly the gas sector.
However, with the potential in the nation’s gas resources still not yet fully optimized, and a huge volume of gas still being flared, government should pay greater attention to ensuring that critical Liquefied Natural Gas (LNG) projects in the country are brought back to the table for recommencement and completion.
Two of such critical LNG projects –the $20 billion Brass LNG project and the $9.8 billion Olokola LNG project have remained continually stalled with attendant losses to the nation after 17 years of their initiation.
The projects rarely come to the mind of the government, particularly this current federal government. The continued neglect by successive governments despite the benefits inherent in such high value projects has raised questions as to whether Nigeria was really ready to power its economy using gas, as its counterparts across the world are doing.
Experts, who believe that Nigeria has a lot to gain from the projects when completed, have urged the federal government to return to the projects and ensure that issues behind their delay were addressed so that they can go on without further delay.
Brass, Olokola LNG Projects
Estimated to cost $20 billion and $9.8 billion respectively, the Brass LNG and Olokola LNG were initiated in 2003 and 2005 respectively under the administration of former President Olusegun Obasanjo.
The Brass LNG project, sited in Bayelsa State, and the Olokola LNG project, sited on the border town between Ogun and Ondo States, were planned to augment the Nigeria LNG Limited (NLNG) to enhance the monetisationof the nation’s gas resources.
So far, the partners involved in the two projects have failed to endorse the Final Investments Decisions (FIDs) on them due to several unresolved issues and some have pulled out of the consortium, a situation that has affected the continuation of the projects significantly.
The two LNG projects, which were initiated as joint venture (JV) projects to be carried out between the NNPC and some international oil companies (IOCs), were designed to produce 10 million metric tonnes per annum (mtpa) each.
While Brass LNG was to be built by the NNPC, Chevron, ConocoPhillips and Eni Group, OK LNG was to be built through a JV by the NNPC with Royal Dutch Shell, Chevron and BG Group.
Unfortunately, ConocoPhillips and Chevron have withdrawn their participation in the Brass LNG project, while all the IOCs have also backed out of the Olokola LNG project, leaving the projects to continue wallowing in oblivion.
Lack of Commitment
The late former Group Managing Director of the NNPC, Dr Maikanti Baru, had at his time at the saddle of the corporation, stated that the NNPC was committed to monetizing the nation’s gas resources through such projects, citing the gains being recorded by the Nigeria LNG in gas monetization.
He had attributed the delay of the two projects to “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.”
Since Baru’s demise, not much has been heard about the future of the projects as the current GMD of the corporation, Mallam Mele Kyari, has not shown commitment to proceed with the Brass and Olokola LNG projects.
The lack of commitment by the federal government to see to the resuscitation of these LNG projects puts a question mark on the government’s avowed drive to approach the energy transition with aggressive focus on developing the nation’s gas resources.
The government had declared this decade–January 2021 to December 2030 – as the Decade of Gas, with the target to pursue the development and transformation of the nation within this period using gas as an enabler.
It had said it would create an enabling environment so that more gas development projects will kick off in the country to be powered by current and prospective investors.
The federal government has also described the PIA as a gas law, saying the Act contains provisions that give investors attractive fiscal terms and increase their appetite to carry out more gas development projects in the country.
While such efforts are commendable, the government should not lose sight of the somewhat low-hanging fruits like the already laid out Brass and OK LNG projects.
Although, they are projects of high capital consideration, especially when their estimated costs at the time are juxtaposed with what they will cost now, government should pay attention to them and see how to bring them to reality as the gains far outweigh the cost.
The Value LNG Brings
With 206.53 trillion cubic feet (tcf) of natural gas reserve, Nigeria sits first as the largest gas producing nation in Africa and ninth globally, and produces 8 billion cubic feet of gas (bcf) daily, according to the DPR, the chief regulator of the industry.
Of this 203.53 tcf of gas, the Nigeria LNG Limited monetizes well over 4billion cubic feet daily, hence the company’s significant contribution to the nation’s economy through dividend payments from foreign exchange earnings, foreign direct investments (FDIs) and immense local content and community impacts.
Since it began operation in 1999, the company has paid to the federal government over $114 billion in revenues, $9 billion in taxes, $18 billion in dividends to the federal government and $15 billion in feed gas purchase.
The NLNG Train 7 is currently under construction and is targeted to increase the company’s gas supply capacity from the current 22mtpa to 30mtpa.
Eliminating Flaring
But of the 206.53tcf of gas reserve, about 1.8billion scf is still being flared daily by both the foreign and local oil companies involved in oil and gas production in the country, with huge economic, health and environmental consequences.
Although, government has put in place measures to discourage companies from flaring gas, those measures were at best, too light to be adhered to.
In the revised payment regime for gas flaring, the government stipulated that oil companies producing 10,000 barrels of oil or more per day, will pay $2 per 1,000 standard cubic feet of gas (scf) compared to the previous N10 per 1,000 scf.
The revised penalty regime also stated that oil firms producing less than 10,000 barrels of oil per day will pay a gas flare penalty of $5 per 1,000 scf.
But in spite of the penalties, oil companies especially the international oil companies (IOCs) that have fat pocket have continued to flare, as they don’t see the fines big enough to make them comply.
They rather pay the fines effortlessly and continue with their production and flaring than spend more on facilities to monetise the gas.
Experts believe gas flaring could be eliminated if the Brass and Olokola LNG projects were completed to join the NLNG in gas monetization and utilisation instead of wasting huge volumes of gas resources on flaring.
A former Acting Managing Director of Nigeria LNG Limited, Dr Godswill Ihetu, told THISDAY that with Nigeria’s huge gas volumes, there was need to ensure that projects like the Brass and OK LNG were completed and the plants come on stream, saying that LNG is the largest user of the gas resource.
Ihetu advised that government should try and fix whatever was the reason for the delays so that Nigeria would start getting the benefits from the two plants like it is getting from the NLNG.
He said, “The good thing about LNG is that it is the largest user of your gas. With this NLNG plant now, our gas flare has come down considerably, I can’t give you percentages. In the past, government wanted to do the OK LNG, Brass LNG. If we have had those things going on now, we won’t be talking about gas flaring…
“All the talks about gas monetization mean turning gas from flare into productive use. We are now using gas in some places for power generation, but that is a drop in the ocean compared with what LNG would have done for you.
“So, my take could have been: whatever was the problem with OK LNG, let’s fix it. I’m sure it’s a big problem. I’m not taking it lightly. Whatever was the problem with the Brass LNG, let’s fix it. That’s how we can use our gas, and these are exports of gas.
“I don’t know what the problem is. I don’t claim to know. All I hear is rumours. That’s where the volumes of gas is and they are exports, they are dollar-earning.”
According to him, Nigeria would be “smiling” if it has two more LNG facilities like the NLNG, adding that government should prove its seriousness in its Decade of Gas declaration by ensuring that the Brass and Olokola LNG’s were executed.
“If you say it is the Decade of Gas, let those projects go on so that we can increase our foreign exchange earnings and other values from LNG. There is no capacity in-house to use this gas. We don’t have industries that can use it,” Ihetu noted.
Rise in Global LNG Market
Moreover, since fossil fuel is gradually losing its attractiveness with attendant risk to oil dependent and consumption nations like Nigeria, LNG is emerging as a major source of energy and for revenue for countries.
This is why many countries are embarking on new LNG projects to boost their capacity and compete in the market.
Currently, there are 17 high profile LNG projects going on globally and the top five are in Qatar, United States and Canada. Qatar’s ongoing LNG expansion project is 32mtpa and valued at $32 billion. The project aims to increase the LNG production capacity of the North gas field from 77mtpa to 100mtpa. The facility is billed to be operational by 2023.
In Louisiana, US, Driftwood LNG LLC is building 27mpta LNG plant valued at $15.5 billion. The plant is planned for startup production by end of 2024 and full production between 2026-2027. Rio Grande LNG project is building 27mtpa LNG in Brownsville, Texas, US with over $15billion estimated cost. The plant will be operational in 2023. In Canada, Orca Floating is building a 24mtpa LNG facility worth $15.8 billion and is expected to be operational in 2026. Also in US, Nikiski LNG Alaska Project is for 20mtpa and worth $13 billion, with operation to start between 2023 and 2025. The project is part of the $45 billion integrated gas infrastructure development project, the Alaska LNG project, which is being developed by the Alaska Gasline Development Corporation (AGDC).
Will Nigeria backup up its proclamations with action? Time will tell. Culled from Thisday
