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NLNG Train 7 Takeoff Delay Resonates Fresh Debate



Nigeria is ranked the fourth largest Liquefied Natural Gas, LNG exporter in 2016, according to the World LNG Report, but prorogation in taking final investment decisions (FID), on various LNG projects in the country and in particular accelerating process of taking off of the Nigerian Liquefied Natural Gas, NLNG Train 7 has started eroding Nigeria’s market share in the global market, writes CHIKA IZUORA.

The Nigeria Liquefied Natural Gas (NLNG), by every measure is the fastest growing LNG company globally, with the development of new trains between 2000-2007.

LEADERSHIP reports that the Bonny NLNG is one of the biggest success stories of the Nigerian oil and gas industry since it began operation in 1995, as the project has generated approximately $90billion in revenue, $30billion in dividends and contributed four per cent to the country’s gross domestic product (GDP) since inception.

But after the completion of  train 6 way back in 2007, no new train has been developed. The six trains have a total production capacity of 22 million tonnes/annum of LNG and 5 million tonnes/annum natural gas liquids (NGL) from 3.5 billion cubic feet of natural gas reserves, and this according stakeholders has been detrimental to NLNG and Nigeria at large as LNG contributes only 9.6 per cent to the country’s export earnings.

Around October 2017, there was a report that approval for the Final Investment Decision, (FID), for the production of the Bonny Train 7 was given by NLNG Ltd.

In the buildup towards the FID in 2018, NLNG Ltd was seeking $7billion from the global financial markets for the sustainability of its operations through investment in Nigeria’s upstream gas sector, and expansion project. The project is expected to increase total production capacity by approximately 36 per cent to 30mn tonnes/annum.

According to the president, Nigerian Gas Association (NGA), Engr. Dada Thomas, the project is advantageous to both Nigeria and NLNG Ltd, and the expected increase in production capacity would increase Nigeria’s gas export, enabling the country regain its place as one of the top three gas exporters globally, and encourage diversification of energy resources.

He told our correspondent in an interview that amplification in gas exports would boost LNG export earnings by 17 per cent to approximately $5.13bn, which would create more bulwark to enable the Central Bank of Nigeria (CBN) prop the naira.

Also, in her words, Mrs. Audrey Joe-Ezigbo, chief executive of Falcon Oil and Gas said in addition, it would boost fiscal revenue through royalties, profits and taxes from NLNG Ltd.

Joe-Ezigbo, who is president – elect of NGA, said the project was expected to cut down poverty through the creation of massive job opportunities, adding that this would increase fiscal and forex revenue thereby boosting industrialisation which would drive economic activity and growth.

While both who spoke differently said the LNG expansion and general gas development would improve electricity distribution and kick-start Nigeria’s power industry as sporadic power supply continues to persist due to constant gas constraints, they believed that Nigeria’s gas revolution would help ensure long term energy security and reduce environmental hazards associated with gas flaring, and the project would again rebuild investor confidence in Nigeria.

Thomas however, expressed optimism that the recent signing of Front-End-Engineering, FEED, contract by shareholders of the NLNG, which include the Nigerian National Petroleum Corporation, NNPC, Shell, Total and Eni,in London, for the NLNG Train- 7 project, appears to bring hope and an indication that the company was getting closer to actualising its expansion goals of increasing LNG production from 22 Million Tonnes Per Annum (MTPA) to 30 MTPA.

The contract was awarded to B7 JV Consortium and SCD JV Consortium. B7 JV Consortium comprises American company KBR Inc.,Technip of France and Japan Gas Corporation, (the joint venture partners that built the existing six trains) and SCD JV Consortium, made up of Saipem of Italy, Japan Chiyoda and Daewoo of South Korea.

LEADERSHIP reports that going by the fresh contract terms, the consortia would participate in the dual FEED process and produce a basic design engineering package that would  determine their engineering, procurement and construction (EPC) pricing, and eventually their bids to construct the train.

The train-7 project has tarried for more than a decade.

In 2007, the NLNG had awarded TSKJ consortium made up of Technip, Snamprogetti Netherlands, KBR and JGC Corporation, the contract for the preparation of project specifications and front-end engineering and design (FEED) for a two 8.5 million metric tons per annum NLNG Seven Plus Project.

The contract included additional utilities, product storage and loading facilities and it was anticipated that the train-7 project, scheduled for completion in 2007, would become the largest LNG train in the world.

But this ambitious target could not be achieved as the project was halted after the consortium was mired in bribe-for contract scandal.

Jack Stanley, who led KBR as CEO between 1995 and 2004, had confessed that he paid $182 million in bribes to Nigerian government officials, to win contracts to build the NLNG liquefied natural gas facilities on Bonny Island, Nigeria worth more than $6 billion.

With this revelation, KBR and its parent, Halliburton had paid $579 million in 2009 to resolve criminal and civil FCPA charges brought by the U.S. Department of Justice under the Foreign Corrupt Practices Act.

In 2010, Technip paid $338 million. And in 2011, JGC paid $218.8 million. The other partner, Snamprogetti, paid $365 million in 2010 to U.S. enforcement agencies for FCPA offenses.

TSKJ consortium built the existing six trains between 1999 and 2007. The consortium was awarded the EPC contract for Trains 1 and 2 and the necessary site infrastructure in December 1995. The first two trains started up in August 1999 and February 2000 respectively. Train 3 with LPG recovery facilities was awarded to TSKJ in March 1999 and was completed in 2002, while Trains 4, 5 and 6, were completed in 2005, 2006 and 2007 respectively.

At the signing ceremony, which witnessed the commemoration of repayment of $5.45 billion shareholders loan for the existing six trains, managing director and chief executive officer of the NLNG Limited, Mr. Tony Attah, said the company was going to look for about $7billion from the global financial markets to expand its operations.

Attah explained that the loans being sought would cover the cost of construction of Train-7 and investment in the upstream gas sector in Nigeria that would ensure the sustainability of feed gas supply to the existing six trains and the seventh train.

On the Dual FEED strategy, Attah, explained that typo a FEED takes about 9-12 months but the shareholders have explored another strategy for the project by adopting the Dual FEED Process which awards this crucial part of the Train 7 project to two prospective engineering consortia, instead of one contractor.

According to his explanation, “What this does for us is give us a degree of freedom to start FEED and sometime after, EPC bidding, with both activities overlapping.”

Attah, who restated the firm’s commitment to taking the FID on the project in December this year, confirmed that the company had been making efforts to build the train-7 plant since 2007.

“Let me establish that this is a very historical moment for us, rekindling what is Train-7. We have made efforts to do Train-7 since 2007, essentially, we’ ve been at it for almost 10 years, but we believe that this is the moment. As one of my friends will say, the stars are lining up in favour of our company and this project,” said Attah.

He further noted, “The history of the LNG industry in Nigeria is chequered. After about 30 years of trying to get an LNG project going, in 1989 NLNG was incorporated and one FID after the other, 6 trains were built in quick succession, making us the fastest growing LNG company in the world at the time. But we lost steam just after 2007, while the rest of the world went past us with the development of their gas resources and the gain of greater market share.

“We started our LNG industry 24 months after Qatar, but Qatargas has attained a production capacity of 77 MTPA with additional target of 30 per cent LNG production in the immediate future. I believe it is time to reset the narrative. It is time for gas revolution in Nigeria.

“So, 30 years after the incorporation of NLNG, and 20 years after we exported our first LNG cargo, we are looking to the future and that future for us is Train 7. Activities are lining up for this project. With the continued support of the Federal Government of Nigeria and the Shareholders towards this future, the odds are clearly in our favour.”

Also speaking at the signing ceremony, the NNPC GMD, Maikanti Baru, expressed the Corporation’s readiness to support the federal government’s aspirations to actualising the train 7 project.

Baru said as a 49 per cent shareholder in the NLNG, the corporation had immensely contributed to the success of the company over the years, supporting equity participation and contribution to shareholders loan.

“Through critical interface with relevant government agencies, we have played a pivotal role in the actualisation of Trains 1 to 6. Given the success of T1-T6, the NNPC is therefore fully committed and aligned with the government aspirations to replicate the success of this project. Therefore, our current focus is to kick-start T7,” Baru said.

With the six trains in full operation, the entire complex currently produces 22 million tonnes per annum (mtpa) of liquified natural gas (LNG), and 5 mtpa of natural gas liquids (NGLs) from 3.5 billion (standard) cubic feet of natural gas intake.

Expectedly, the coming on stream of the seventh train would lift the total production capacity of the plant to 30 metric tonnes per annum (mtpa) of LNG and also boost the company’s contribution to the economy of Nigeria.

Attah disclosed last year that the company generated over $90 billion in revenue, and $15 billion to the federal government, and more than $6 billion in taxes since it became taxpaying in 2009. Given its contribution to the economy, an early completion of the project means more money for Nigeria.