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Brass, Olokola LNG: Succumbing to organised sabotage

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LNG Plant

Nigeria’s natural gas reserve is estimated to be about 192 Trillion Cubic Feet (TCF), and that places the country as ninth largest holder of proven gas in the world.

Indeed experts, including the former Director of the Department of Petroleum Resources (DPR) and Lead Consultant to the National Assembly on the Petroleum Industry Bill (PIB), Osten Olorunsola, think that the country may even become the third largest holder of gas reserves in the world if the PIB is passed.

Sadly, the country has in recent times been sliding from being a top gas destination, a development that some experts say is as a result of “coordinated sabotage.”

   
Two major projects, the Brass Liquefied Natural Gas project and the Olokola Liquefied Natural Gas project easily come to mind each time woes bedeviling the gas sector are discussed, or every time the country’s failure to effectively utilise her gas resources is in focus.

This is considering the fact that government’s inability to get the Brass LNG project in Bayelsa State, (which it initiated) to come on stream nearly 15 years after, is robbing the country of over $24b in estimated revenue, as well as, about 18, 000 jobs.

What Necessitated Brass, Olokola LNG Projects

BRASS and Olokola LNG projects were initiated by the Olusegun Obasanjo-led administration to help the country monetise part of its vast natural gas reserves, and to meet the growing worldwide demand for clean energy.
   
The Brass LNG was incorporated in 2003 with shareholders that included, the Nigerian National Petroleum Corporation (NNPC) (49 per cent), Eni International (17 per), Phillips (Brass) Limited (an affiliate of ConocoPhillips) (17 per cent) and Brass Holdings Company Limited (an affiliate of Total) (17 per cent).

The company was formed to construct and operate a LNG plant to be sited on Brass Island, in Bayelsa State.
  
Reportedly, contract for the Front End Engineering Design (FEED) of the proposed LNG plant was awarded to San Francisco-based Bechtel Corporation in late 2004, leading to the completion of conceptual studies that assessed the feasibility of building an onshore LNG facility in the region of Brass Oil Terminal, operated by Nigerian Agip Oil Company (NAOC).

The FEED was for two LNG trains, each nominally sized at five million metric tons per year.

The primary FEED studies were conducted in 2005 with further optimisation in 2006.

This paved way for the competitive Engineering Procurement and Construction (EPC) tendering process, and the facility was targeted to be in operation by 2011.

Natural gas supplies for the facility was expected to come from the substantial gas reserves within oil and gas fields already operated by existing joint ventures.

Generally speaking, the plant was planned to be a world-class facility, and an important and strategic opportunity for the joint ventures to reduce gas flaring in the country.

The withdrawal of Conoco Phillips, which patented the cascade technology for it mothballed the project resulting in some reassesment.

However, the management decided to adopt the APCI technology used in building the Nigeria Liquefied Natural Gas Company.

These major outfits hinged their reasons for departing on the country’s unfavourable business climate and sundry conditions.

 
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 the NNPC as the sole shareholder.

The companies were reportedly frustrated at the lack of progress.

Loses Mount As FIDs Experience Delay

APART from the over $24b 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 Final Investment Decisions (FIDs) since 2007, and recoup their investments in the first five years (2012).

  
Had the project been up and running, it would have equally enabled the country to 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 $3b yearly revenue for the past eight years, which is when the first output was expected from the project.
   
The first shipment of gas from the project, of which the Federal Government has 49 per cent share was planned for 2010, and was expected to stand at 10 million metric tonnes yearly for the past eight years. 
   
Apart from the job loses and that of returns on investments, other projects planned along with the gas plant, including a seaport and airport, among others, which would have had multiplier effects, as well as, help in addressing agitations in the region have remained a mirage.
  
As the project is considered a strategic catalyst for the acceleration of socio-economic development, concerns are now mounting over alleged plans by the Federal Government to scrap it.

The Guardian gathered that so far, slightly over $1b has been expended on early works, even without the signing of a Final Investment Decision (FID).
  
Right now, instead of the Olokola and Brass LNG projects helping to amplify the country’s presence and widening its share of the global LNG market as planned by the Federal Government, the FIDs on these projects have remained elusive, while the projects have gulped about $600m and $1.2b respectively.

Current, Previous Administrations To Blame For Projects Woes
  
EVIDENTLY, these two multi-billion dollar projects have not received needed attention from previous administrations since Obasanjo left office.

An official of the Bayelsa State government, who pleaded anonymity, told The Guardian that it was regrettable that the former Minister of Petroleum Resources, Diezani Allison Madueke, failed to ensure the actualisation of the project.
 
“It is regrettable that the investment in Brass LNG has remained in the doldrums.

Honestly, it is saddening that this multi-billion dollars worth of projects now face an uncertain future.

There is no doubt that this will further hamper Bayelsa’s dream of being reckoned with as an investment destination,” he said.
  
Brass would now require about $18b for takeoff, a top management staff of the organisation, who does not want to be named said.
   
The source also accused the Federal Government, Mrs. Alison-Madueke, and the Minister of State for Petroleum Resources, Ibe Kachikwu of contributing to the plight of the projects.

  
He added: “The previous model was to have two trains, which would be increased to four, but the plan was dropped because it was going above $20b.

The project needs about $18b to kick off. The company could finance 50 per cent of the fund. Other shareholders must be forced to play their part because they have being unwilling, while their approval processes take long time.

There must be a push now, and the government cannot just stay back and expect the company to work.”
    
Even though Kachikwu penultimate weekend said the Federal Government would soon engage the management of the NLNG on the possibility of acquiring stakes and driving the revival of Brass and Olokola LNGs, the source said, “Kachikwu’s comment is all about 2019 politics.

Is that how things are done? If the minister were to be serious, he would have called experts together and engage all the shareholder companies, constitute a committee with the mandate to deliver. Have you heard anything apart from the statement?”

Nigeria Has No Gas For LNG Projects
 
WHILE Nigeria is being regarded as a country with abundant gas reserves, there are no investments currently towards developing a pure gas field.

This (gas) remains a major problem because the country’s gas is basically associated gas, that is, gas that is obtained in the course of producing oil. 

“So, there is need for a deliberate policy to go out there and tap out from the gas fields,” President of Nigerian Gas Association (NGA), Dada Thomas said.
 
The Guardian gathered that Brass LNG had planned to take 11.1 tcs of gas from the reserves, which was to come from Chevron, but that hope became bleak when the company pulled out.
 
Giving his perspective on the issue, a source at Brass LNG said, “If you remember, Chevron was with us at the beginning before it pulled out in 2006 and Total took its place.

With the coming of OKLNG, Chevron took its own share of the gas to OKLNG, so Brass LNG started looking for where to get gas for the project.

“Total came along and said that it had gas, but needed to do a lot of field development to treat the gas.

It also wanted to pass that cost to us, but we disagreed.

We told the company that for us in Brass LNG, our policy is not like that of Nigeria Liquefied Natural Gas (NLNG), where they get involved from the gas field up to the point of bringing the gas to their facility.

Our business model is that we pay you once the gas comes to our perimeter and we meter it and know what is coming into our production facility.

So, when we discovered that the gas from Total was to be developed by us, the stakeholders did not like the idea. But then Total was already in.
 
“We started talking with Mobil that also has gas fields around our area; the cost also was a bit high, and it was not as profitable as they thought with Chevron gas.

Chevron was not discussing with us because Chevron was now committed to OKLNG that pulled out,” the source at Brass LNG explained.  
  
According to him, though there are more gas fields than oil, the country needs to work on our gas policy that would drive investors into sourcing gas from the gas fields.
 
Poor Regulatory Structure, CBN Monetary Policy, Others Slowing Down Sector’s Growth 
 
EXPERTS including Thomas; President of Nigerian Association for Energy Economics (NAEE), Prof. Wumi Iledare; former President, Nigerian Association of Petroleum Explorationists (NAPE), Abiodun Adesanya, and Chairman, International Energy Services (IES) Ltd., Dr. Diran Fawibe, have linked the fate of the projects and indeed the sector to unnecessary political interests.
  
They also maintained that these developments have also wasted opportunities the country would have latched onto to place itself in good stead in the global gas market, especially when the price of gas was good.

 
Thomas, who is also Chief Executive Officer, Frontier Oil Limited, said the country has continued to miss economic benefits from Olokola and Brass LNG projects because the projects, like most other government projects were over politicised, leaving viable economic decisions to suffer.
  
According to him, the nation missed the projects because Nigeria has continuously failed to make decisions swiftly and properly for the total benefit of the system.
  
Thomas said: “We missed Olokola LNG and Brass LNG because we over politicised economic decisions and have continuously failed to make decisions swiftly and properly in the overall interest of the nation because the speed of making decision in todays’ world is critical.

We cannot have a globally dynamic ecosystem in which we are not in control, yet we delay decision for 10 years whereas other people make swift decisions and bring projects on stream in less than five years.”  

For Prof. Iledare, who doubles as the Director of Emerald Energy Institute, University of Port Harcourt: “Three things are beclouding the projects- the downturn of the global LNG market, the lack of a conducive political environment, and the investors’ perception of the non-passage of PIB.”
  
Insisting that the industry is too risky to deal with market and political uncertainties, Iledare added that transparency, accountability and governance of the industry were still key challenges.
  
He said: “We used to be number two in the gas market globally, now we are number five and trying to make our way back to number four when Train Seven comes on stream.

Governance, stability in taxation regime and sanctity of contracts are too important, and those are what investors look out for.”
  
Abiodun on his part blamed past administrations, as well as, the incumbent for not giving the projects the needed attention, adding that the lack of seriousness and support by governments is what led to the withdrawal of investors. 
    
While pointing out that the country’s risk index was also posting a serious challenge to the inflow of foreign direct investment into the oil and gas sector, he said both projects were taking too much time on the drawing board, and that is very unfortunate.

For the Brass LNG specifically, the community in Bayelsa State has been hopeful and waiting for the project to take off.”

While availability of gas feed remains a key challenge holding down the project, Abiodun said there was need to invest in dry gas fields in order to get more gas for the plants to run effectively.
   
Fawibe, who is of the view that the projects would have been beneficial to the country’s economy, corroborated the views of others, adding that change of governments have also contributed to the lull the projects are experiencing.
     
“The expectation has been for the FIDs to be signed, but that has become elusive. Overall, we are losing a lot of opportunities,” Fawibe said.
   
While commending efforts made towards getting the NLNG Train Seven on stream, the energy expert said the development must not halt the other LNG projects.
    
“I think if we get serious about how we are able to get investors, the country has got a natural gas endowment to bring the two projects on stage,” he said.
   
He regretted that engagement process geared towards getting the project running was missing, adding that, “whether with regards to getting investors or putting the investment packages together, shareholders and government would have to show a high level of seriousness.”
  
According to him, since market opportunities are dynamic, Nigeria must know that other countries are gaining from our potential market.
  
As at the time of filing this report, the spokesperson of NNPC, Ndu Ughamadu, was yet to reply The Guardian email on the subject.


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