NLNG aims for FID in 2018

05 December 2017, Week 48, Issue 718

Nigeria LNG (NLNG) intends to take a final investment decision (FID) on Train Seven in 2018, according to a statement from the company on November 29. Speaking at an industry conference in Portugal, an official went further, saying this was expected in the fourth quarter of the year. 

The additional train would increase production from 22 million tpy to 30 million tpy.

“It is time for gas. This is the time to unleash the country's gas potentials through catalysts like Train 7 Plus to spur socio economic transformation,” said NLNG’s managing director, Tony Attah. The country has proven reserves of 5.44 tcm of gas, Attah said, but with another 17 tcm of potential.

“NLNG remains a success and we are determined to sustain our status as an inspiration to Nigeria. The company has generated US$90 billion in revenues as well as [having] paid US$5.5 billion in taxes to the government. The company has also has helped monetise the country's gas resources and significantly contributed to reducing gas flaring from 65% to less than 20%,” he continued.

The six trains at Bonny Island receive 99 mcm per day of gas and have, thus far, liquefied more than 142 bcm of gas. In addition to its LNG output, the plant supplies around 40% of Nigeria’s cooking gas.

The FID for the first phase, of two trains, was taken in 1995, with production starting in 1999. The last train received FID in 2004 and began production in 2007. KBR completed front-end engineering and design (FEED) work on a Train Seven – and Eight – plan, each with capacity of 8.5 million tpy.

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The size of the proposed train may pose some problems. NLNG’s largest train now running has 4 million tpy of capacity. The construction of an 8 million tpy train may be challenging and would be the largest such unit in the world – Qatar has a number of 7.8 million tpy trains.

Progress has been slow on expansion plans for NLNG owing to a number of issues, including regulatory uncertainty. The government’s Natural Gas Policy, published in the summer, expressed support for expansion but also struck a cautious stance on oversupply in the Atlantic Basin.

“It is likely that Nigerian LNG supplies will be able to find markets, but price discounting will likely become the norm. Nigeria will also have to work much harder in the future to market its LNG,” the document said. It went on to say the country would seek opportunities through the expansion of NLNG or the construction of the Brass or Olokola (OK) LNG plans.

Attah also said Nigeria planned to be the third largest exporter of LNG by 2024 a target that seems impossible. Qatar produced around 77 million tpy in 2016 and is planning on adding another 23 million tpy by that point. Australia produced 44 million tpy and will add 26.6 million tpy by 2018. The US, meanwhile, is set to have just under 60 million tpy on line by 2020.

 

Local challenges

NLNG has faced a number of political problems, including a dispute with the Nigerian Maritime Administration and Safety Agency (NIMASA), and questions about its tax payments. The government agency blockaded ships from NLNG in 2013 after the company refused to pay a levy. In October of this year a court found for NLNG, saying that the 3% levy should not be imposed on the company.

Scrutiny has also called into question NLNG’s payments to the government’s Nigeria Delta Development Commission (NDDC). All oil and gas companies are required to pay a portion of their spending in the Niger Delta to the NDDC.

Under the NLNG Act, though, the LNG producer is exempt from such charges. An attempt was made in May to change this but, on November 29, the NDDC act was amended, rolling back the proposed changes to the NLNG Act. As such, the liquefaction plant remains exempt from such payments.

“By preserving the LNG Act, we will send a strong message to Nigeria's development partners that we respect the sanctity of agreements,” the head of Nigeria’s Senate, Bukola Saraki, said.

 

With these two issues having gone in its favour, NLNG is well positioned for expansion. In its statement last week, the company took care to note various contributions it is making to the local economy, including the construction of a road that will connect Bonny Island with the mainland. It also pointed to the signing of a memorandum of understanding (MoU) with Bonny Kingdom that will run for 25 years, with a commitment of more than US$245 million over that time. 

Edited by

Ed Reed

Editor

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