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AKK: $2.8bn pipelines funnel to gas prosperity

Nigeria, a country that sits on 203 trillion cubic feet of GAS, has, over the years, blamed gas supply deficit as partly responsible for challenges in power generation, local gas consumption and industrialisation. Amid this, President Muhammadu Buhari is billed to flag off the $2.8 billion Abuja-Kaduna-Kano (AKK) pipeline – Nigeria’s biggest gas pipeline project – today, a project that is expected to unlock the trapped gas potential in the country. Adeola Yusuf reports

 

 

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n December 2017, exactly two and half years ago, the Federal Executive Council (FEC) subsequently granted approval for the 614 kilometers Ajaokuta-Kaduna-Kano (AKK) natural gas pipeline, the single biggest gas pipeline project in Nigeria’s history.

 

 

Before this effort described by many as unprecedented at unlocking the trapped gas potential in Nigeria, the country had waited for four years since the Nigerian  National Petroleum Corporation (NNPC) initially announced tenders for this project in July 2013.

 

With their hearts in their mouths, millions of Nigerians and foreign investors have awaited the project’s flag off. They are not waiting for fun, the Nigeria’s gas story has been termed by some as the irony of a gas giant. The country, which, over the years blamed slow down in its industrialisation, local gas consumption and the power generation woes on lack of adeaquate gas supply, sits ironically on 203 trillion cubic feet of gas.

 

 

Light rays at tunnel’s tip

 

President Muhammadu Buhari has been billed to make history as he flags off the construction of the $2.8 billion 614km Ajaokuta-Kaduna-Kano (AKK) natural gas pipeline, the single biggest gas pipeline project in Nigeria’s history, today, Tuesday June 30, 2020, in Ajaokuta (Kogi State) and Rigachikun (Kaduna State).

 

 

In a tweet on Saturday, June 27, sighted by New Telegraph, the NNPC announced on its official Twitter handle @NNPCgroup; “Presidential Flag-off of the Construction Phase of the #AKK Gas Pipeline Project Holds Tuesday, June 30, 2020 in Ajaokuta (Kogi St) & Rigachikun (Kaduna St). The project will boost domestic gas consumption, power generation & industrialisation.”

 

 

The project, which is taking off after months of discussions in and out of the country, will boost domestic gas consumption, power generation, and industrialization.

 

 

What is new?

 

 

The project, the NNPC said, would boost domestic gas consumption, power generation, and industrialisation.

 

The AKK pipeline project, which will carry gas between the southern and northern parts of the country, will eventually extend to North Africa.

 

 

Thorny road to gas commericialisation

 

 

The NNPC, it would be recalled, initially announced tenders for this project in July 2013. A project proposal was submitted to the Infrastructure Concession Regulatory Commission (ICRC) in June 2017, and the Federal Executive Council subsequently granted approval in December 2017.

 

 

The ABC of AKK

 

 

The 614 kilometers-long natural gas pipeline is Phase One of the Trans-Nigeria Gas Pipeline (TNGP) project to be done on a build-and-transfer public private partnership (PPP) basis. It will transport 3,500 million metric standard cubic feet per day of dehydrated gas from several gas gathering projects located in southern Nigeria.

 

 

The project will be in three phases: The first phase is 200 kilometers long and is between Ajaokuta and Abuja, at a projected cost of $855 million.

 

The second phase is 193 kilometers long, between Abuja and Kaduna. It is estimated to cost $835 million.

 

 

The third phase is 221 kilometers-long, between Kaduna and Kano, at a projected cost of $1.2 billion.

 

 

It will eventually reach North Africa in subsequent phases.

 

 

Promises on quintessential gas line

 

The AKK gas pipeline project, according to the government, will when completed create steady and guaranteed gas supply network between the Northern and Southern part of Nigeria, and enhance power generation capacity.

 

 

The industrial sector will be strengthened, local usage of gas will be promoted and increased, and the country’s revenue generation boosted through export of natural gas.

 

Irony of a gas giant

 

 

Nigeria, currently ranked the 7th most endowed natural gas country in the world. The country, according to the latest data from the Department of Petroleum Resources (DPR), sits on about 203 trillion cubic feet of natural gas deposits, which can be utilised as gas to power, gas to petrochemicals, liquefied natural gas (LNG), liquefied petroleum gas (LPG), and compressed natural gas (CNG), among others.

 

 

Over the years, Nigeria has exploited its oil resources more, to the detriment of gas, which incidentally fetches more revenue although more expensive to prospect.

 

One big advantage the average Nigerian can look forward to is the evolution of compressed natural gas (CNG), which is still at pilot stage in the country.

 

Confidence

 

The Federal Government had since 2017 being exoresaing confidence that the nation’s energy landscape is set for a major change with the award of a $2,809,522,548.36 gas pipeline contract approved then by the Federal Executive Council as proposed by the Ministry of Petroleum Resources.

Senior Special Assistant to the President on Media and Publicity, Mallam Garba Shehu, disclosed this in a statement made available in Abuja.

The then Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, had, according to Shehu, informed FEC that the project was for the construction of a 40 inches pipeline across 614 kilometres from Ajaokuta to Abuja-Kaduna-Kano.

 

“This should mark an important landmark in the implementation of the first phase of the Nigerian Gas Master Plan approved in2018,” Shehu said.

 

 

He maintained that the second contract approved under what he called “massive, blockbuster investment” is for the engineering, verification, procurement and construction of a 40 inches 30 kilometres Odidi to Warri gas pipeline expansion project.This means that to transport additional gas supply from upstream producers to various demand points at the cost of N7.7bn and $56m.

 

 

According to the presidential spokesman, the projects, which can rightly be termed as being among of the President’s pet projects, is owed, in part, to his vision and momentum back in his days as the federal commissioner for Petroleum Resources.

 

 

A temporary setback

 

The FEC on March 5, 2020 reviewed the gas project contract and approved $2.571 billion.

 

Minister of Budget and National Planning, Hajjia Zainab Ahmed, who said this, also announced the issuance of a sovereign guarantee to the tune of 85 per cent of the Engineering Procurement and Construction (EPC) contract for the project.

 

 

Ahmed explained that the contract, which was approved by the Federal Executive Council (FEC) during its weekly meeting, was not a new contract but rather revised at a cost of $2.571 billion.

 

Recall that in 2017, the Infrastructure Concession Regulatory Commission (ICRC) announced that $2.89 billion had been approved for the Ajaokuta-Kaduna-Kano gas project.

 

Financial implications

 

 

Ahmed’s words: “This is not a new contract; it was previously approved by the council in 2017 in the sum of $2.89 billion. The memo of March 5 is at a revised cost of $2.571 billion, equivalent to a 10 per cent discount of the original sum.

 

“The previous contract was a contractor financing model, the contract that has been approved today is an EPC lump sum contract with the NNPC required to pay 15 per cent of the contract amount while the 85 per cent will be provided by Cynosure of China in the form of loan facility with a sovereign guarantee.

 

 

“We have done an extensive review of this project and we are satisfied that the cash flows from the Ajaokuta-Kaduna-Kano gas pipeline project is sufficient to pay the facility itself. This project is one of the cardinal policies of this administration and it is very strategic to national development.”

 

 

Beyond the AKK project

 

The minister also made known that the facility had an interest of 3.7 per cent with a 12-year repayment period and three years moratorium period.

 

 

As stated by Ahmed, the project, when completed, would create employment opportunities, increase government revenue, encourage export and enhance the nation’s foreign reserves by reducing dependencies on imports. Basically, it would have a lot of positive impact on the nation’s economy, Ahmed said.

 

Last line

 

 

The flag off of the $2.8 billion AKK gas pipeline project by President Buhari will, no doubt, make today historic but what will make the day impactful and memorable is seeing the project to the completion stage. The long wait for Nigeria to unlock its gas potentials is overdue.

 

 

Meanwhile, in ensuring that government takes the project to the stage of delivery, all hands must be on deck by Nigerians to support government’s aspiration.

 

 

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