The huge gas resources in Nigeria’s offshore region are expected to provide the much-needed relief to the prevailing gas supply shortfall that has long stalled the final investment decision (FID) on the Brass and Olokola Liquefied Natural Gas (LNG) projects.
This is as the Federal Government, through the Nigerian National Petroleum Corporation (NNPC), is embarking on a renewed effort to tap into the country’s abundant offshore gas resources that have remained unexploited.
“We are working on an integrated approach to ensure that high-cost gas on the offshore is made available for LNG projects, etc, so that the three LNG projects will be fed from that opportunity,” said Joseph Thlama Dawha, group managing director, NNPC, last Thursday at the 38th Nigerian Annual International Conference and Exhibition (NAICE) organised by the Society of Petroleum Engineers (SPE) Nigeria in Lagos.
“We are working on a master plan to do this as we have commissioned consultants to look at that. And we are committed to making sure that gas is available and affordable domestically,” he said.
The strategic policy of the Nigerian government to keep the country’s share of the global LNG market at 10 percent recently went awry as its share has slipped by 2.5 percent amid delay in the start-up of the key projects, including Nigeria’s LNG Train 7.
Olokola LNG (OKLNG), Brass LNG and Train 7 projects have over the past few years continued to await FID by the stakeholders on the projects, even as some have pulled out of the projects.
“We don’t have fiscal terms for deepwater gas. A country as big as this, with all the resources, we don’t have a term for deepwater gas, which means that deepwater gas is being stifled because the policy we needed to put in place to allow people to participate has not been put in place,” Bayo Ojulari, general manager, development, Shell Petroleum Development Company, told BusinessDay on the sidelines of the NAICE.
In a bid to ensure sufficient gas supply for Brass LNG, Chevron was recently reported to have submitted a development project for non-associated gas on Oil Mining Lease (OML) 85, 86 and 88 to the Department of Petroleum Resources (DPR), aimed at merging production on the gas fields of Funiwa, North Apoi, Okunbe, Pennington, North Chioma and Middleton.
The Brass LNG, which includes two liquefaction trains with a capacity of 5 million tonnes per year each, requires supplies of 11.7 Tcf of gas to be profitable. Eni is expected to supply 4.7 Tcf from its OML 60, 61, 62 and 63, and Total 3.6 Tcf.
“We have a necessity to ensure that all of these projects go ahead. That is a necessity mandated by the law,” said Dawha, who was represented by Timothy Okon, group coordinator, corporate planning and strategy, NNPC.
“Whether it is Train 7 or Brass LNG or OKLNG, we are consistently putting those projects forward because strategically, our policy towards LNG is to keep our market share at about 10 percent, which has slipped to about 7.5 to 7.7 percent. So strategically, we are committed to that and as far as government policies are concerned, we will pursue this,” he said.
Nigeria, Africa’s top oil producer and largest holder of natural gas reserves in the continent, is home to the world’s ninth-biggest gas reserves, with about 187 trillion cubic feet (Tcf) of proven gas reserves and 600 Tcf of unproven gas reserves. The country, which is the world’s fifth-biggest LNG exporter, currently has LNG production capacity of 22 million metric tonnes per annum (mtpa), which is expected to increase when a seventh train comes on stream.
The Nigeria LNG Limited (NLNG), in its recently released ‘Facts and Figures on NLNG 2014’, said sale and purchase agreements had already been executed with five buyers for the 8.4 mtpa Train 7 project, which will raise the liquefaction capacity of NLNG to 30 mtpa.
“Plans for building Train 7 that will lift the total production capacity to 30 mpta of LNG are currently progressing, with some preliminary early site preparation work initiated. Further work awaits an FID by the stakeholders,” the company said.
Brass LNG project was designed to produce 10 million metric tonnes of LNG per year, with the FID initially planned for 2006. But it was later rescheduled for 2008 and then 2010. It was expected to happen in 2012 and then last year, but it has yet to be taken by the shareholders, which include the Nigerian National Petroleum Corporation (NNPC), Total and Eni Group. ConocoPhillips withdrew from the project in 2012.
The withdrawal of ConocoPhillips in 2012 is a major factor hindering the existing stakeholders in the project from taking the FID on the project as there is need to sell the stake to a new buyer.
The OKLNG project was initiated in 2005, with NNPC as the major shareholders. But other shareholders including BG Group, Shell and Chevron have withdrawn from the project.
NNPC had recently said that the OKLNG inevitably had suffered a setback as a result of the exit of Chevron and Shell, adding that effort would be intensified to secure other willing investors.
FEMI ASU
