Nigeria LNG’s long wait looks to be over
FID on a long-awaited expansion of the Nigeria LNG project looms. But the nation’s dreams of being a premier league producer have faded, at least for now
The buzz in the LNG community a little over a decade ago—when it was becoming increasingly clear that Qatar would become the dominant force in global LNG by 2010—centred on which country might become ‘the next Qatar’. In these pre-US shale gas revolution days, the two favoured contenders were Australia and Nigeria.
“Between 1999 and 2006 we were deemed the fastest-growing LNG company in the world,” says Tony Attah, CEO of Nigeria LNG (NLNG), “because almost every 18 months we were adding a [liquefaction] train.”
NLNG’s rate of progress was certainly rapid. The project’s first train – Train 2 as it turned out – started up in 1999 and by 2007 six trains were up and running (see fig.1), with a total nameplate capacity of 22.2mn t/yr. And NLNG had ambitious plans for further expansion. Trains 7 and 8 were to be “mega-trains”, with capacities of 8.5mn t/yr each, which would have taken the total to 40mn t/yr.
At that time, there were also two other credible LNG projects in Nigeria: Brass LNG, a two-train 10 mnt/yr facility in Bayelsa State in the central Niger Delta; and Olokola (OK) LNG, a two-train 12.6mn t/yr project in the west Niger Delta.
If all had gone to plan, Nigeria would now have more than 60mn t/yr of production capacity. A planned second phase at OK LNG would have pushed that to over 72mn t/yr—not far short of Qatar’s 77.4mn t/yr today.
The long wait begins
It was not to be, acknowledges Attah wryly. “Since 2007, after our sixth train, we have not been as lucky in bringing on the seventh train,” he says, “because there was competition from other potential plants that were put forward by the government at the time. Interestingly, neither of the other two have seen the light of day.”
NLNG’s nameplate capacity today therefore remains at 22.2mn t/yr—but its long wait to reach FID on a further expansion phase appears to be coming to an end.
At the Gastech conference in Houston, Attah expressed satisfaction at having recently signed a letter of intent (LoI) with an engineering consortium for an engineering, procurement and construction (EPC) contract, and told Petroleum Economist that he was now waiting on the project’s shareholders to reach a decision.
Later in September, Total’s president of exploration & production, Arnaud Breuillac, told investors at a strategy presentation that FID would happen before the end of 2019. NLNG’s shareholders are the Nigerian National Petroleum Corporation (NNPC) with 49pc, Shell with 25.6pc, Total with 15pc and Italy’s Eni with 10.4pc.
“There was competition from other potential plants that were put forward by the government at the time” Atta, NLNG
The Train 7 expansion project is expected to start up in 2023, says Breuillac. It will consist of two liquefaction trains of around 4mn t/yr each, rather than a single 8.5mn t/yr mega-train, taking the project’s nameplate capacity to 30mn t/yr–putting it among the largest single-site liquefaction projects in the world.
Preferred EPC bidder
The LoI signed in London on 11 September makes the SCD JV Consortium, made up of Italy’s Saipem, Japan’s Chiyoda and South Korea’s Daewoo the preferred EPC bidder, after a competitive dual front-end engineering and design (FEED) process.
NLNG has not confirmed in detail who will be off-taking the output from the Train 7 project but the company’s commercial general manager, Godwill Dike, has indicated that most of the volumes are likely to be lifted by the project’s foreign shareholders: Shell, Total and Eni. It helps that Shell and Total are respectively the LNG industry’s largest and second-largest portfolio players.
“The good story about Train 7 is that we already have sales and purchase agreements (SPAs) in place. Train 7 was started about 11 years ago and the volumes were all marketed at the time. We just need to work with the buyers to adapt the SPAs to current market realities,” Dike told Petroleum Economist back in June 2018.
NLNG has also been busy re-marketing volumes from the project’s first three trains, as their long-term contracts – all with European buyers – will expire between 2020 and 2024 (see fig. 2). In total, these volumes amount to around 8mn t/yr. NLNG launched its marketing campaign in April 2017 and says it has had strong interest. However, as with Train 7 offtake, the firm has yet to announce specifics.
What, though, of the other two projects that were regarded as credible back in 2007?
OK LNG was a pet project of former president Olusegun Obasanjo, who was born in the state of Ogun, on the border of which the project would have been sited. In 2007 he took part in a ground-breaking ceremony at the proposed site–rather prematurely, as it turned out. The project suffered the disadvantage of being some distance from potential sources of feed gas.
The foreign shareholders–Shell, the UK’s BG (since acquired by Shell) and Chevron–left the project one-by-one until NNPC was on its own. In 2013, NNPC asked the project team to search for new partners; however, in early 2017 it was reported that NNPC was winding down activities, leaving the project in "preservation mode". There appears to be little prospect of the project going ahead any time soon, if ever.
Brass LNG was, similarly, a pet project of Goodluck Jonathan, vice-president of Nigeria from 2007 until 2010 and president from 2010 until the inauguration of the incumbent, Muhammadu Buhari, in 2015.
He was born in the state of Bayelsa where the project was to be sited and, while he was in power, Brass was prioritised over further development of NLNG. Foreign shareholders, actual and potential, came and went and by 2015 the remaining shareholders were NNPC, Total and Eni. Eni no longer lists its shareholding in its annual reports, while Total’s continuing involvement, if any, is unclear.
72mn t/yr; Nigerian LNG capacity if all projects had moved ahead
In early 2018, the Nigerian Senate called for an investigation into what it alleged was “monumental corruption” at the project. As with OK LNG, it seems unlikely that the project will get off the drawing board in any foreseeable timescale.
Tony Attah’s take on his potential competition is guarded. “I cannot say much about the other projects, OK and Brass. Fundamentally, the main differentiating factor is that we are proven; we are a brown-field development.
“We have a proven history and character in the marketplace. We have relationships that are underpinned by how we are viewed: as responsible, reliable and trusted. OK and Brass would be green field–uncharted waters,” he says.
It remains possible that NLNG could be expanded further, given the scale of Nigeria’s estimated gas resources; to date most of the gas found in Nigeria has been a by-product of oil exploration. However, the company has not recently discussed what might happen next–preferring, it seems, after a hiatus of more than a decade, to focus on making Train 7 a reality.