Africa is becoming a leader in the next phase of global Liquefied Natural Gas (LNG) megaprojects as Greenfield investment in 2019 is expected to reach nearly $103 billion. This development leaves nothing to cheer to Nigeria despite having largest natural gas in the continent of around 202 Trillion cubic feet (TCF) of proven gas reserves plus about 600 TCF unproven gas reserves.
According to Rystad Energy, a Norway-based independent energy research and business intelligence institution, Mozambique’s Area 1 and Area 4 projects are making Africa the dominant LNG investment destination this year, with the continent seeing nearly one-third of total Greenfield investment.
A Greenfield investment refers to a type of Foreign Direct Investment (FDI) where a company establishes operations in a foreign country, building its operations such as new production facilities, from the scratch to the echelon.
Data from Rystad Energy showed Greenfield CAPEX for Mozambique’s Area 1 project is estimated at $15.6 billion, putting the project in the same league as the major LNG developments in the United States, Russia, and Australia.
Rystad noted that if ExxonMobil’s Area 4 reaches FID this year, it will represent another $14.7 billion in Greenfield expenditure in Africa, bringing the yearly total to 28 percent of the global tally for approved investments in newly sanctioned LNG projects.
Mozambique’s Area 1 is the largest LNG project that has been sanctioned in Africa to date and will also kick-start the wave of sanctioning activity of other, bigger LNG projects this year.
In West Africa, BP and partner Kosmos Energy will decide on the development of the Tortue field off the coast of Senegal and Mauritania, which received a final investment decision for phase one of its LNG export project last December.
But while other countries are growing in leaps and bounds, Nigeria which was once ranked the fourth largest LNG exporter in 2016, according to the World LNG Report, has delayed in taking Final Investment Decision (FID) on various LNG projects in the country and this is eroding the country’s share in the global market.
Ayodele Oni, energy partner at Bloomfield Law practice, said the major challenge facing the NLNG sector is its problematic fiscal regime and its unspecific laws which will always distract deep-pocket investors from coming into the country.
“There was a specific NLNG law which the government wanted to change at some point despite the fact that it was a fringe period where the government is not expected to modify that law,” Oni said by phone.
He said competition is growing across Africa and other countries are stepping up activities in their gas sector, but Nigeria that has enjoyed the benefit from the oil and gas sector for a long time seems relaxed.
“Nigeria has more gas than oil, so we should leverage on our gas resources and continue to put structures in place to encourage deep-pocket investors to invest in Nigeria,” Oni said.
According to the Nigerian National Petroleum Corporation’s (NNPC) latest monthly report, total gas supply for the period May 2018 to May 2019 stood at 3,050.97BCF out of which 466.39BCF and 1,316.35BCF were commercialised for the domestic and export market, respectively, while gas-injected, fuel gas and gas flared stood at 1,268.23BCF.
NNPC’s monthly report also noted that national gas production for May 2019 stood at 223.73BCF, translating to an average daily production of 7,430.96mmscfd.
“If you take a holistic view of Nigeria’s economy and what it needs for industrialisation, gas is a bigger enabler of what Nigeria needs than oil,” Bolaji Ogundare, CEO of NewCross Exploration and Production Limited, said.
Stakeholders said Nigeria lost more than $5 billion to Olokola Liquefied Natural Gas (OKLNG), Brass Liquefied Natural Gas (BLNG) and Train 7 because of bureaucratic bottlenecks and delay in taking final investment decision.
Louis Brown Ogbeifun, a former president of Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), said the Federal Government conceptualised the projects in 2004 and gave them five years’ completion date. Fifteen years after, however, the projects are not yet completed, he lamented.
“Brass LNG gulped $3 billion and Olokola $2 billion. This is aside that foreign exchange has changed significantly in the last 15 years, when the projects were awarded to contractors,” Ogbeifun told News Agency Nigeria.
The $20 billion Brass LNG project in Bayelsa State and the $9.8 billion Olokola LNG project, located on the border town between Ogun and Ondo States, were initiated in 2003 and 2005, respectively. But the projects have been stalled by a lack of FIDs over the years.
The Brass LNG project, which was designed to produce 10 million metric tonnes per annum, was to be built by the NNPC, Chevron, ConocoPhillips and Eni Group. But ConocoPhillips and Chevron have withdrawn from the project.
OK LNG project, which was also designed to produce an initial 10 million metric tonnes per annum, was being built through a joint venture by the NNPC with Royal Dutch Shell, Chevron and BG Group. But all the international oil companies have pulled out of the project.
Other projects that suffered similar fate, Ogbeifun said, include the Gas Revolution Industrial Park (GRIP) that was conceived and built by the administration of former President Goodluck Jonathan and the Nigerian Liquefied and Natural Gas (NLNG) Train 7.
The NLNG Train 7 expansion project aims to increase the company’s production capacity from 22 metric tonnes per annum to over 30 MTPA by upgrading Trains 1-6 and adding Train 7 and associated infrastructure at an estimated cost of $4.3billion, according to a statement by the NNPC.
Leading consulting firm PricewaterhouseCoopers (PwC), in its Africa oil and gas report, said poor infrastructure and an uncertain regulatory framework were the top two challenges identified by new emerging players and markets especially in Uganda, Ghana, Tanzania, Nigeria and Kenya.
“The Nigerian government has been in the process of implementing the Petroleum Industry Bill (PIB) since 2006 and it has been estimated that uncertainty around it has cost the country $50 billion in capital projects,” PwC noted in its report.
DIPO OLADEHINDE
