“NNPC share of loss in OKLNG was not recognised since the accumulated share of loss is higher than the initial investment”
Olokola Liquefied Natural Gas (OK LNG) project and West African Gas Pipeline (WAGP), capable of making gas a critical catalyst in Nigeria’s economy, are currently rotting away with a loss of about N64.96 billion in 2020 despite processing zero cubic feet of gas.
With no final investment decision, the OK LNG project (construction designed to produce an initial 12.6 million tonnes per annum) and the WAGP (provision of gas transportation) has been stuck for many years despite gulping investment worth billions of dollars.
They were initiated to help develop and monetise some of the country’s abundant gas reserves that would otherwise remain stranded or be flared.
But that seems not to be the case as these two gas projects are currently rotting away due to several years of neglect and government inertia on what to do with them.
The current cumulative unrecognised loss on WAGP cost Nigeria N54.4 billion, while the unrecognised loss on OKLNG investment also cost the country’s economy N10.66 billion in 2020, an audited report of Nigerian National Petroleum Corporation (NNPC) revealed.
“NNPC share of loss in OKLNG was not recognised since the accumulated share of loss is higher than the initial investment,” NNPC said in its report.
Had the two projects been allowed to come on stream, some stakeholders say it would have served as a major contributor to Nigeria’s economic development and put Nigeria at the forefront of Africa’s gas production.
“By delaying these projects Nigeria has lost a major opportunity over the years to kick-start a massive secondary industrialisation, which would have been more geographically dispersed, across the country, thereby creating much-needed jobs,” Joe Nwakwue, former chairman of Society of Petroleum Engineers (SPE) said.
According to him, gas-based industries are very crucial to creating secondary industrialisation in any country.
“Nigeria needs to improve the general ease of doing business in Nigeria; it remains very difficult for investors to come here,” he added.
Other factors leading up to the stalled state of the OK LNG project could be linked to the various controversies around it during former President Olusegun Obasanjo’s regime.
The former president was accused of sowing the seeds of discomfort with the OK LNG project when he also initiated the project in 2005 barely one year after the conception of another Brass LNG project.
The OK LNG project, which was designed to produce an initial 12.6 MTPA, 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.
Some energy analysts say the stagnation of the two projects is robbing the country of over $24 billion in estimated revenue, as well as about 18,000 jobs while others insist that the failure of the present and past administrations to act proactively on the Brass LNG project has led to a loss of $3 billion yearly revenue.
Other experts believe gas flaring could be eliminated if the OK LNG projects and WAGP were completed to join the NLNG in gas monetization and utilisation instead of wasting huge volumes of gas resources on flaring.
“If we have had those two projects things going on now, we won’t be talking about gas flaring,” Niyi Awodeji, CEO at Subterra Energy Resources Limited said.
He added, “All the talks about gas monetization mean turning gas from flare into productive use. We are now using gas in some places for power generation, but that is a drop in the ocean compared with what LNG would have done for you”.
The value gas brings
With 206.53 trillion cubic feet (tcf) of the natural gas reserve, Nigeria sits first as the largest gas producing nation in Africa and ninth globally, and produces 8 billion cubic feet of gas (bcf) daily, according to the Department of Petroleum Resources (DPR), the chief regulator of the industry.
Of this 206.53 tcf of gas, the Nigeria LNG Limited monetizes well over 4billion cubic feet daily, hence the company’s significant contribution to the nation’s economy through dividend payments from foreign exchange earnings, foreign direct investments (FDIs), and immense local content and community impacts.
Since it began operation in 1999, the company has paid to the federal government over $114 billion in revenues, $9 billion in taxes, $18 billion in dividends to the federal government, and $15 billion in feed gas purchase.
The NLNG Train 7 is currently under construction and is targeted to increase the company’s gas supply capacity from the current 22mtpa to 30mtpa.
Apart from Nigeria, many major gas-producing countries are also embarking on new LNG projects to boost their capacity and compete in the market.
For instance, Qatar’s ongoing LNG expansion project is 32mtpa and valued at $32 billion. The project aims to increase the LNG production capacity of the North gas field from 77mtpa to 100mtpa. The facility is billed to be operational by 2023.
SOURCE: businessday.ng