ANALYSIS: Nigeria LNG Train 7: Little step with giant global significance

Oloibiri Oil Field
Oloibiri Oil Field

Recently, shareholders and partners in the multi-billion dollar Nigeria LNG sealed the final investment decision to construct the Train 7 expansion project after almost 12 years of delay. BUSINESS EDITOR, BASSEY UDO, who witnessed the event in Abuja describes it as a little step with giant economic implications and global significance.

It was a little step with a huge significance. The final investment decision (FID) by the 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, arguably, restore Nigeria to the elite groups in the global gas scene as one of the leading players.

The FID 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 potentials of crude oil equivalent by ten 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 potentials for lack of electricity.

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

Nigeria LNG

The incorporation of the Nigeria LNG as a limited liability company by the Nigerian government in May 1989 was a strategic investment to help harness and export the huge gas resources in LNG and natural gas liquids (NGL) forms for economic value.

In November 1995, when the shareholders and partners of the project took the initial FID to construct an LNG plant in Finima, Bonny Island in River State, the founding fathers’ vision was to build just a two-train facility.

Trains 1 and 2, called the Base project, comprised the Gas Transmission System (GTS) and the Residential Area (RA).

The primary objective of the project was to help process, ship and market Nigeria’s gas resources, diversify the country’s economy and minimise the environmental impact of gas flares in the Niger Delta region.

By December 1995, the shareholders awarded the turnkey engineering, procurement and construction (EPC) contract to the consortium of Technip, Snamprogetti, Kellog and Japan Gas Corporation (TSKJ) for the construction of the two-train plant.

Between February 1996 and August 1999, the construction of the plant was completed, ready for start-up operations.

In October 1999, the country’s first LNG cargo was exported from the plant to Europe, launching Nigeria into the big league of global players in the international gas scene.

In April of the following year, the plant’s output expanded rapidly, with the first export of condensate cargo from its production lines.

Within 18 months of the start-up of the Base project, the FID for the development of Train 3 and the NGLs handling units (condensate stabilisation and LNG production) was taken in quick succession.

By September, production of LNG commenced, with Train 1 coming on stream in February 2000. By August 2000, the 50th cargo of LNG had already been shipped to Europe. By February 2001, the significant milestone export volume of 100 cargoes was achieved.

With the completion and coming into operation of the expansion project in November 2002, it was as if there was no going back on the plant’s phenomenal growth and expansion.

Earlier in March of that year, the FID for the construction of Trains 4 and 5, called the NLNGPlus was taken.

While the construction of NLNGPlus projects were ongoing, the FID for the construction of NLNGSix project, or Train 6, was taken in 2004.

Train 6 was to add the condensate processing line, LPG storage and jetty facilities, to the plant.

In November 2005, Train 4 came on stream, while Train 5 started operations in February 2006.

By December 2006, the company marked the 1000th LNG cargo exported from the plant.

By December 2007, Train 6 became operational, with the 2000th LNG cargo exported in October 2010; 3,000th cargo in January 2014 and 4,000th cargo in May 2017.

With rapid development of the plant into a six-train facility, the production capacity of the NLNG facility grew to 22 million tonnes per annum (MTPA) of LNG; 5 MTPA of NGLs from the initial 3.5 billion standard cubic metres (BCM) per day of natural gas intake.

‘Golden era of Nigeria’s LNG’

The Managing Director of the Nigeria LNG, Tony Attah, describes the years between 2000 and 2006 as the golden era of Nigeria’s LNG story.

He said this was the period the company was considered the “fastest-growing LNG company in the world.”

Since its inception in 1999, the Nigeria LNG was either bringing on stream a new LNG production train every 18 months, or taking an investment decision to expand one aspect of the plant’s capacity or the other.

Since coming into operation, records show the Nigeria LNG has generated over $100 billion from delivering over 4,700 LNG cargoes to buyers around the world.

The company remains Africa’s leading exporter of LNG, accounting for about 6 per cent of the global LNG exports.

Where the music stopped

It appears the momentum of growth and progress of the company was caught up in the global economic meltdown, which adversely impacted Nigeria, making the once beautiful bride lose her attraction for both existing and prospective investors. Then, the melodious music came to a halt.

For almost 12 years since Train 6 was completed and brought into operation, the Nigeria LNG partners and shareholder made no further additional investment decision to expand the capacity of the plant.

The company joined other multi-national oil companies in the country who were either not willing to renew their contracts, or held back important investment decisions due to the uncertainty in the country’s business environment.

The uncertainty was fueled by the unresolved issue of the Petroleum Industry Bill (PIB) initiated for almost 18 years to update the outdated regulatory, fiscal terms and legal framework for the petroleum industry.

The lack of conclusion of the oil and gas industry reforms through the bill took its toll on most economic activities, meaning several projects that required urgent decisions had to be scaled down, or halted completely till a more auspicious time.

On the march again

In July 2018, the NNPC and partners got together in London to sign the front-end engineering design contract with the joint venture consortia of B7 and SCD to set the stage for the engineering concept of the expansion project called Train 7, estimated to cost about $4.3 billion.

In September 2019, a Letter of Intent for the Engineering, Procurement and Construction (EPC) contract was issued to the consortia made up of Saipem of Italy, Chiyoda of Japan and Daewoo of South Korea.

The EPC phase involves the design, procurement, construction, commissioning and handover of the Train 7 project.

In December, the first basic 20-year term of gas supply agreements (GSAs) was also signed with the JVs for the supply of feed-gas stock for the project.

During the FID for Train 7 event last Friday in Abuja, the Nigeria LNG MD, Mr Attah lamented the impact of the apparent inactivity after NLNGSix project (Train 6) became operational by December 2007.

“When the Nigeria LNG was set up, the original ambition was just to construct Trains 1 and 2. But, on the back of Trains 1 and 2 FID, we went from two trains to six production trains, which took 30 years.

“From the sixth train, we have struggled for several years to move on to the seventh train. We have been pushing for long to get to the decision over the last 14 or so years,” he told PREMIUM TIMES in Abuja.

To put in context how far behind the lost momentum affected Nigeria in the global gas play, Mr Attah recalled that when the Nigeria LNG started in 1999, the country was just 24 months behind Qatar, in terms of the regularity in expanding their output capacities.

He said today, a little over a decade, “Qatar LNG is sitting on over 77 million metric tonnes per annum production capacity, against Nigeria LNG’s current 22 million metric tonnes per annum since 2007.”

To worsen the situation, he said, at a time, the Nigeria LNG shareholders and partners appear to be waking up from their slumber to think about Train 7, expected to add another 8 million metric tonnes to take the plant to about 30 million metric tonnes per annum, Qatar is already progressing to add another 30 million metric tonnes to its capacity.

“That’s the sad reality,” Mr Attah said. “This is a major reason for Nigeria LNG to wake to the reality that Train 7 is no longer ambitious; not for Nigeria LNG; not for Nigeria,” he added.

Significance of Train 7

Train 7 represents a lot of positive things for Nigeria. Apart from its pivotal support to Nigeria’s aspiration to diversify its revenue base, the project will help generate more revenue from harnessing the economic value of over 202 trillion standard cubic feet (TCF) of the country’s proven gas reserves.

When completed, the project will boost the Nigeria LNG production capacity by about 35 per cent, and ensure Nigeria remains the 5th LNG exporter in the world.

For the Nigerian oil & gas industry, the project will be guaranteed gas supply in the upstream sector as new development opportunities will be opened up.

With over $10 billion to be invested, the project will boost prospects of the much desired foreign direct investment (FDI) in the country.

The Nigeria LNG has, so far, converted about 119 billion standard cubic metres, or 4.2 trillion cubic feet of associated gas to exports as LNG and NGLs, helping to cut gas flaring by upstream companies from over 60 per cent to below 25 per cent.

In terms of monetisation, Train 7 project will significantly raise the Nigeria LNG contributions to Nigeria’s income from the over $13 billion paid out as dividends in the last 13 years, and over $18 billion paid out on gas purchases from oil-producing companies.

It will also increase Nigeria’s overall earnings of over 70 per cent from Nigeria LNG, comprising 49 per cent dividend, 30 per cent company income tax, and other taxes and levies.

“Train 7 is the crux of a growth agenda,” Mr Attah explained. “It will ensure Nigeria LNG’s position as the 5th major supplier of global LNG is maintained; increase the value to its shareholders; grow the taxes paid to the Nigerian government; multiply employment opportunities, and further reduce the gas otherwise being flared, in fulfillment of Nigeria LNG’s vision of being a global company, helping to build a better Nigeria. Most importantly, it will launch Nigeria back on the global energy resource map.”

For the Group Managing Director of the NNPC, Mele Kyari, the execution of the project will ultimately deliver at least $20 billion of net revenue per annum for the federation and create at 12,000 direct and 40,000 indirect jobs to Nigerians.

“The significance of the FID on Train 7 is that there is a renewed confidence by international investors, particularly the partners in the project in the country. For them (international oil companies) to still agree to bring money back into the Nigerian economy means they are ready to move Nigeria and our (NNPC) relationship forward.

“It shows confidence in the strength of the Nigerian economy and the capacity of President Muhammadu Buhari to bring value to the country’s economy and create the environment to attract more foreign investments,” Mr Kyari said.

For NNPC, Mr Kyari said Train 7 FID has convinced its management that doing things right transparently and with accountability to its shareholders, including over 200 million Nigerians, is the way forward to create value, prosperity and employment for the economy.

“The FID on NLNG Train 7 has opened a gateway for greater things to come in the economy in the immediate future.

“It has shown that despite all the challenges with NNPC and its partners, they are committed to working together to bring more projects in the upstream sector of the oil and gas sector as well as the midstream sector to grow the country’s economy,” he said.

In terms of Nigerian content, the project is a major boost to the aspiration to ‘Nigerianise’ the operations of the oil and gas industry.

In March this year, the Nigeria LNG and Nigerian Content Development and Monitoring Board (NCDMB) signed off the Nigeria Content (NC) Plan for the Train 7 project.

The plan will facilitate the delivery of value and benefits to the Nigerian economy in terms of the quantum of involvement of Nigerians in the development, construction and operational phases of the project.

Apart from the expected 12,000 direct and 40,000 indirect jobs to be created at the peak of construction, the project will support the development of local engineering and fabrication capacities, with total in-country engineering and procurement man-hours set at about 55 per cent.

The Executive Secretary of the NCDMB, Simbi Wabote, said over 70,000 tonnes of fabrication materials, covering condensate stabilisation units, tanks, pipe-racks, flare system, non-cryogenic vessels, and many other pipe spools and fittings will be done in-country during the construction phase of the project.

Other opportunities for local content include procurement, logistics, equipment leasing, insurance, hotels, office supplies, aviation, haulage, and many more.

“Lots of fabrication yards that have remained idle for years will kick back to life. That is one of the biggest opportunities the project will bring, to create additional value for the country,” Mr Wabote said.

‘Future is LNG’

The NNPC GMD says President Muhammadu Buhari wants to see the capacity of the Nigeria LNG raised beyond Train 7 to 12.

He said with the presidential directive, it means there is an enormous political will to energize the commitment of the shareholders to pursue the target.

“We know the decision (FID on Train 7) was delayed. Mr President’s directive is that we should take it to Train 12. We are confident it will work because the future is not only gas, but also LNG.

“We (all joint venture partners) are all committed to do everything to take the next steps to make further progress to realise Trains 8, 9, 10, 11 up to 12 as soon as possible.

“There is a huge opportunity for this. There is a significant will to go ahead to push forward to Train 12. We are on course to do so,” Mr Kyari said.



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