-By Teddy Nwanunobi
On Thursday, April 8, the Nigerian Railway Corporation (NRC) began the haulage of line pipes from Warri, Delta State in Southern Nigeria to Itakpe, Kogi State in North-Central Nigeria. That was a “major boost in the delivery of the Ajaokuta-Kaduna-Kano (AKK) Gas Project”, according to the Nigerian National Petroleum Corporation (NNPC). The journey, which commenced by 11:05am on Thursday, April 8, saw a single NRC locomotive carrying 96 pipes at once. It was a massive haul.
“This locomotive carried 96 pipes at once, an equivalent of 32 trailers on the road!” the NNPC said in a terse tweet to announce what looks like a light at the end of a dark tunnel. It would take the next 10 hours 20 minutes for the equivalent of the 32-trailer-load of pipes to reach their destination.
“We congratulate our team on the arrival at 10.25pm 8.4.2021 of AKK gas project line pipes by rail from Warri to Itakpe – less cost, faster delivery time, safer, protecting our roads and more. The infrastructure revolution is paying up,” an excited Group Managing Director of the NNPC, Mallam Mele Kyari, tweeted on his Twitter handle.
Surely, what happened on that day was, arguably, a testament to the seriousness of the government to actualizing the AKK project.
The unfulfilled old days
Nigeria, over the years, has lived with so much talk about fulfilling its gas-to-power aspirations and the much talked about industrialisation of the world’s most populous black nation. This is coupled with the fact that nearly every energy forum has discussed the utilisation of Nigeria’s abundant natural gas resources in order to boost domestic gas consumption, improve power generation, and ultimately, achieve an enviable industrialised status.
Unfortunately, that dream, as beautiful as it is, was never realised. The reason for this failure is not farfetched. Most of the conversations hardly went beyond the discussion tables, where they were raised.
According to the Department of Petroleum Resources (DPR), Nigeria, with 203 trillion cubic kfeet (tcf) proven gas reserve and 600tcf unproven gas reserve, has the largest reserve in Africa. Sadly, the resource has not benefited the country, especially in meeting energy needs in the area of power generation, domestic utilisation (cooking), industrial use, and transportation.
When one considers how Nigeria had continued to wallow in power crisis, one would see how worrying the situation was. Nigeria’s perennial power crisis has remained a cog in its wheel of progress. Arguably, experts have attributed shortage of critical gas infrastructure, notably gas transmission pipelines, to this perennial power crisis.
It is in fulfillment of this dream that the Nigerian National Petroleum Corporation (NNPC) decided to come up with the Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline Project. The idea and hope were that the project would act as a catalyst to Nigeria’s industrialisation.
Multibillion-dollar critical gas projects
Following the Public-Private Partnership (PPP) compliance certificate, which was issued in July 2017, along with the approval of the feasibility study, the Federal Executive Council (FEC), in December 2017, approved the Engineering, Procurement and Construction (EPC) contract for the AKK Gas Pipeline Project. It was launched by President Muhammadu Buhari on Tuesday, June 30, 2020, through a virtual platform. Governors Yahaya Bello of Kogi State and Nasir El-Rufai of Kaduna State, however, physically flagged off the commencement of works at the Ajaokuta and Rigachikun sites in Kogi and Kaduna states, respectively.
Nigeria, as a country, has recorded progress on key gas projects. The $2.59 billion worth AKK Gas Pipeline Project is just one of the things the Federal Government is doing to harness the enormous gas potential in the country.
The Brass Gas Hub is expected to be built for $3.5 billion, while the Nigeria-Morocco gas pipeline will cost $25 billion. The Nigeria LNG (NLNG) Train Seven will cost $6.6 billion to build, while an additional $5 billion is expected to be spent on wells and pipelines.
Others are ANOH gas project, which is estimated at $1.4 billion; and Obiafu-Obrikom-Oben Gas Pipeline, also called the OB3 Pipeline, which is estimated at $700 million.
The above projects are known as the critical gas projects, and they are being executed to achieve the decade of gas.
The AKK, which has been described by many as the single biggest gas pipeline in the history of oil and gas operations in Nigeria, is a 40-inch x 614-kilometre gas pipeline project. It is riding on the Trans Nigeria Gas Pipeline (TNGP) initiative. It will be fed from the existing Escravos Lagos Pipeline System (ELPS) and Obiafu-Obrikom-Oben (OB3) Gas Pipeline Systems.
Currently under construction, the OB3’s pipes are being laid under the River Niger to feed the Ajaokuta end of the AKK gas pipeline project. The importance of the OB3 Pipeline stems from the fact that the AKK is anchored on it. It is from the Ajaokuta end of the OB3 that the AKK gas pipeline project would link up to the northern part of the country.
When completed, the AKK project is expected to harness the nation’s abundant gas reserves by making available gas to generate electricity and stimulate rapid industrialisation using gas as feedstock for fertilizers, ammonia and other petrochemical applications. It would eventually extend to the North of Africa.
Financing AKK
On financing the AKK, the Minister of Finance, Zainab Ahmed, in a recent report said that Nigeria will issue a sovereign guarantee to back the bulk of the gas pipeline.
The sovereign guarantee will back 85 per cent of the $2.6 billion pipeline cost, funded in turn by a loan facility from Chinese lender, Sinosure. The loan has an interest rate of libor plus 3.7 per cent with a 12-year repayment period and a three-year moratorium.
The NNPC will cover the remaining 15 per cent of the project’s cost.
“We have done an extensive review of this project and we are satisfied that the cash flows from the Ajaokuta-Kaduna-Kano gas pipeline will be sufficient to repay the facility. This project is one of the cardinal policies of this administration and it is very strategic to national development,” Ahmed said in March.
Benefits
What Nigeria stands to gain from the above listed cannot be overemphasised. Looking at the AKK, for instance, the benefits are very obvious for one to see.
Buhari, while enumerating the benefits of the project, said that it would provide gas for generation of power and for gas-based industries which would facilitate the development of new industries.
He also stated that it would also ensure the revival of moribund industries along the transit states of Kogi, Abuja (FCT), Niger, Kaduna and Kano, adding that the cascading effect and impact of the AKK, when operational, would be immeasurable.
“It has significant job creation potential – both direct and indirect, while fostering the development and utilisation of local skills and manpower, technology transfer and promotion of local manufacturing.
“When completed, the AKK Gas Pipeline Project will provide gas for generation of power and for gas-based industries which would facilitate the development of new industries and also the revival of moribund industries along transit towns in the corridor States.
“This will ultimately create numerous direct and indirect employment opportunities, while fostering the development and utilisation of local skills and manpower, technology transfer and promotion of local manufacturing. The project is, therefore, part of the delivery of our Next Level Agenda for sustainable development and enhancement of the economic prosperity of our country,” he added.
Nigeria has not needed anything now more than it needs peace and stability. A successful AKK Gas Pipeline Project means that moribund cottage industry will be resurrected with the available power from the electricity that would be generated from the gas. It also means that farming will be boosted as a result of the fertilizer that would be produced.
Functional cottage industries and booming farming will give birth to job creation. Nigeria needs these gas projects across the country to help it curtail the increased issue of insecurity. With enough job creation in the North, the issue of kidnapping will be reduced and discouraged, as most of the idle young people would be gainfully engaged to earn honourable means of livelihood. A good number of northerners are migrating to the south in search of livelihood. This northern-southern migration issue is expected to be reduced drastically according to projections.
Challenges
For once, in a very long while, the Federal Government has shown that it can venture into serious projects that would be of immense benefits to both country and citizens. The arrival of the pipes at the Kogi axis raises hope for Nigerians. Valuechain, however, observed that delivering the pipes to the sites caused serious traffic for commuters who ply the road which is the major link between the northern and the southern parts of the country. Opinions have it that the evacuation of the pipes by trailers at the Itakpe end could have taken place at nights when majority of the commuters were not using the road. Of course, the trucks would move faster at nights, too.
Conclusion
Recently, oil and gas stakeholders, who converged virtually at the ‘Nigeria Gas/Energy Strategic Outlook for 2021 and Beyond and Review of Petroleum Industry Bill’, which was organised by Energy & Corporate Africa, noted the need to address existing bottlenecks in the country’s gas space.
The Chief Operating Officer, Gas and Power of the NNPC, Engr. Usman Yusuf, stressed the need to leverage the investment for sustainable future energy and technological revolution that would enhance gas uptake in existing and emerging gas markets.
Yusuf noted that the growth in the global energy market would continue as natural gas has a critical role to play in the industrial development of the continent.
“Africa has enough gas resources to enhance utilisation, but requires adequate investment and favourable policies to provide the necessary infrastructure,” Yusuf said.
The Executive Director, Production at Seplat, Effy Okon, noted that capital, under-investment, delayed delivery of planned gas infrastructure and poor pipeline network continue to affect the gain of gas resources, adding that the lack of cost-reflective tariffs and huge debts in the power sector were affecting the gas market.
“Lack of clear gas fiscal terms for production sharing contracts and the delay in the passage of PIB have reduced investors’ confidence in the sector,” he said.
He also raised concern over foreign exchange challenges as investors receive revenue in naira against dollar-based investment.
“Non-bankable off-take agreement and lack of a properly-diversified consumer base for gas suppliers impact investor confidence. High loan interest rates, as well as delay in the joint venture funding, make it difficult to fund capital intensive, long-term gas projects,” he noted.
The Executive Director, Asset Management at Total E & P Nigeria Limited, Patrick Olinma, stressed the need for Nigeria to get the right necessary legislations that would help the country harness its gas resources, while calling for necessary policies that leapfrog domestic gas utilisation in the country.