Train 7: Prospects, pains, gains

The final investment decision on $10 billion Train 7 was taken at a time the threat to Nigeria’s position as the world’s fourth biggest LNG exporter got to its crescendo. Adeola Yusuf takes a look at the gains of this progression in the face of Federal Government’s lip services to gas development

 

T

he comatose multi-billion dollars Olokola Liquefied Natural Gas (LNG) and Brass LNG projects present Nigeria as unserious with gas development.

 

This, coupled with 10 years of paying lip services to the final investment decision on Train 7 of the Nigeria Liquefied Natural Gas (NLNG), constituted a threat to the country’s position as the fourth biggest LNG exporter in the world.

 

 

Though fate of the two gas projects is still hanging in the balance, the Train 7 scaled through the hurdles when on December 27, shareholders in the NLNG project signed document to validate the investment decision taken on the project expected to create over 10, 000 direct and indirect employment for Nigerians among other benefits accruable to the country.

 

Murdering a dream

 

 

The Brass LNG was incorporated in 2003 to construct and operate an LNG plant to be sited on Brass Island, in Bayelsa State. In the same way, two years after the Brass LNG project started, the Olokola LNG project was also initiated.

 

 

Sadly, it has remained at the planning stage since then, consequently leading to loss of a projected output of about 12.6 million tonnes of LNG per year, 30, 000 barrels of Liquefied Petroleum Gas (LPG) per day, and 15, 000 barrels of condensate per day.

 

 

The project was expected to have a total capacity of 12.6 million metric tons per annum (mtpa), or 1.81 billion cubic feet per day (bcfd), with an original price tag of $9.8b.

 

 

The shareholders included NNPC, 49.5 per cent, Shell and Chevron each had 18.5 per cent and the UK’s BG Group, which Shell bought in 2016, had 13.5 per cent. Start-up was originally scheduled for 2011.

 

 

 

In 2009, BG Group also pulled out of the project, and in August 2013, Shell and Chevron followed suit, leaving NNPC as the sole shareholder.

 

The companies were reportedly frustrated by the lack of progress.

 

Counting losses

 

 

Apart from the over $24 billion loss from the Brass LNG project and nearly a similar figure from the Olokola LNG project, going by the plan of the project sited over 8005-hectares of land, shareholders, including the NNPC, were expected to have taken the first investment decisions in 2007, and recoup their investments at the end of the first five years (2012).

 

 

Had the project been up and running, it would have equally enabled the country produce additional 10 million metric tonnes of gas yearly, and also secure a brighter future in the international market.

 

 

Stakeholders are also insisting that the failure of the present and past administrations to act proactively on the Brass LNG has led to a loss of a $3 billion yearly revenue for the past eight years, which is when the first output was expected from the project.

 

Change in narrative

 

The long list of losses suffered by Nigeria due to delay in investment decision on Brass LNG and Olokola LNG projects bring to the fore the notion that the signing of investment decision on Train 7 and development of the projects should naturally be accompanied by benefits.

 

 

Tagged a little step with a huge significance, the final investment decision by Nigerian government, shareholders, and partners to invest in the construction of Train 7 of the Nigeria Liquefied Natural Gas (NLNG) project has monumental implications on Nigeria’s economic future.

 

 

The shareholders consist of the Nigerian government, through the Nigerian National Petroleum Corporation (49 per cent), Shell Gas BV (25.6 per cent), Total Gaz Electricite Holdings France (15 per cent) and ENI International (10.4 per cent).

 

The expansion of the Nigeria LNG output capacity to seven production trains will, unarguably, restore Nigeria to the elite groups in the global gas scene as one of the leading players.

 

 

The investment decision also has the immediate impact of giving international investors a massive boost of confidence that Nigeria’s oil and gas industry is still a viable investment destination in the world.

 

 

Nigeria is reputed to be a rich gas province producing a little oil. Conservative estimates say the country’s proven reserves of over 202 trillion metric standard metres (TCM) of natural gas outstrip the potential of crude oil equivalent by 10 times over.

 

 

Sadly, it is a contrast that the country is so blessed, yet has so many gas flare sites dotting the Niger Delta region, while homes and industries are unable to realise their full potential for lack of electricity.

 

The challenge has always remained the dearth of necessary infrastructure to develop and harness these huge potential into economic benefits.

 

 

If there is anyone, who should known about benefits from the new project, it should be the  Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB), Simbi Wabote.

 

 

The agency has the sole responsibility of ensuring increase in Nigeria’s gains in any project on Nigerian soil.

 

 

“To the Nigerian economy, as you are aware, it will bring more revenue to the country; more taxes would be paid and, to the economy, it means a lot,” Wabote said in an interview.

 

 

“To Nigerians, it also means a lot. It means creation of jobs. As you have heard, we will have about 10,000 direct jobs that will be created as a result of the Train 7 project. What that translates to is almost 40,000 indirect jobs that would be created,’’ he added.

 

 

According to him, Train 7 would rejuvenate the economy and a lot of upstream projects would also come up as a result of the project.

 

The NCDB boss said that a lot would be expected in terms of activities in the economy, employment, revenue generation and ending restiveness in the Niger Delta.

 

On the go 

 

 

Nigeria LNG Limited (NLNG) and Total Gas & Power (TGP), in the midst of Train 7 development, signed a Liquefied Natural Gas (LNG) Sale and Purchase Agreement (SPA) last week for 15 million metric tons worth millions of dollars of the remarketed volumes from NLNG’s Trains 1, 2 and 3.

 

 

The agreement, according to a statement by NLNG’s General Manager, External Relations, Eyono Fatayi-Williams, is for the supply of 1.5mtpa for a 10 year term on a Delivered Ex-ship and Free on Board (FOB) basis.

 

 

“Managing Director and Chief Executive Officer of NLNG, Tony Attah, signed on behalf of the company while Thomas Maurisse, Senior Vice President LNG, signed for TGP,” the statement read.

 

 

According to NLNG, the agreement is in line with NLNG’s drive to continue to deliver LNG globally in consolidation of its position as one of the top ranking LNG    suppliers in the world.

 

 

The SPA with TGP advances the plans by NLNG to remarket volumes from three trains. The SPA is expected to boost the company’s global presence and market reach, in line with its corporate vision of being a “global LNG company, helping to build a better Nigeria.”

 

Taking the first step

 

These shareholders of the Nigeria LNG Limited, it would be recalled, took the long-awaited final investment decision on the company’s Train 7 project late last year. The NLNG made the announcement via its Twitter handle on December 27, 2019.

 

The Train 7 project, which has been delayed for over 10 years, aims to increase the company’s production capacity from 22 metric tonnes per annum to about 30 MTPA, and will form part of the investment of over $10 billion, including the upstream scope of the LNG value chain, according to the company.

 

 

NNPC Group Managing Director, Mr. Mele Kyari, was quoted as saying, “we have decided to proceed with Train 7 project today. It is an important day. It is a show of confidence that investors can put money into this project.”

 

Again, Chairman, NLNG Board of Directors, Dr. Osobonye LongJohn, was quoted as saying, “we shall build more trains and increase Nigeria’s LNG capacity to match our peers around the world.”

 

The Managing Director, NLNG, Attah, noted that the company had been bringing huge values to Nigeria through taxes and dividends. “With Train 7, the value will grow,” Attah added.

 

The Federal Government and other shareholders of the NLNG had failed to take investment decision on the Train 7 project when they first met in December.

 

On December 13, the corporation announced the signing of a gas supply agreement between it and major gas producers for the Train 7 project — a condition precedent for the NLNG to take the final investment decision.

 

Last line

 

Government and other shareholders in NLNG have promised a major impact to the economy through the Train 7 project. Nigerians are, however, waiting patiently to confirm this only when the benefits are seen and are felt.

 

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