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NLNG Train 7 Under Threat As Stakeholders Shelve FID

–By Gideon Osaka

The much talked about final investment decision, FID, for the Nigeria Liquefied Natural Gas, NLNG, train 7 did not take place in 2018, after all.

Valuechain gathered that the event may not take place until issues surrounding the completion of the Front End Engineering Design (FEED) which are expected to give investors a fair idea of what would be needed financially to complete the project are settled.

This was given credence to by Tony Attah, NLNG chief executive, who in a chat with journalists on the sidelines of the Gastech conference and exhibition in Barcelona, Spain, late last year, said that the 8 million tonnes per annum (MTPA) capacity project has made a lot of progress towards securing FID, but cannot give the specific date when the milestone will be attained.

According to the NLNG chief executive, the FID cannot be taken until the completion of the dual front end engineering design (FEED) which was awarded in July 2018 to B7 JV consortium and SCD JV consortium. He explained that train 7 has in place existing sales purchase agreements (SPAs).

“In terms of volume off-takers for Train 7, we are not struggling because we have guaranteed market for it”, Attah said, adding that while the SPAs are still valid, they may not hesitate to take a second look at it if need be without necessarily changing the off-takers. He also said that the company has secured gas feedstock guarantees supply for the forth-coming Train 7 from companies like Shell, Total and Eni to ensure steady supply of gas feedstock for the project.

“All the volumes anticipated for Train 7 would be coming from our shareholders´ gas suppliers. We are analysing data book on how much gas would be needed and where all the supplies will be coming from. In the next couple of weeks, we will sign off that agreement,” Attah assured.

He also said that there is now more clarity on the funding strategy to be deployed for the project, which will be a mixed financing model with multiple inflows as they are not expecting the entire $7 billion required for the project to come from one source.

Already, financial advisers have been appointed with GT Bank emerging as the local bank and SNBC. Sounding cautionary and the need to expedite action on the FID, Attah said “we can’t control the market, and are mindful of other unexpected risks that will arise. This is why we are focused on always achieving competitiveness in this project. “In the lead-up to the FID, during the post-FID period and in the years running up to 2023, we will need to be strong as the market rapidly evolves with new players and new demand.”

Attah is clearly considering all the factors that he can to push the project forward, but Train 7 also faces strong competition for the portion of the global energy investment pot it is targeting and in that race domestic stability will also need to play a crucial role.

Nigeria was the world’s fourth-biggest exporter of LNG behind Qatar, Australia and Malaysia between 2015 and 2017, according to data from IHS Markit, and Nigerian LNG exports reached a record 21.3m t/y last year. But it faces a potential decline in influence as the US, Russia and Mozambique ready major new export capacity ahead of an expected global LNG supply crunch in 2023.

The deadline may be helping to fuel Attah’s resolve, but his ambition is set against major challenges including domestic political wrangling over the cost, and international apprehension over security issues such as militancy in the Niger Delta.  NNLG has been structured so that IOCs own the majority of the company. The state-controlled Nigerian National Petroleum Corporation owns 49 percent, while Shell has 25.6 percent, Total and Eni share the remaining at 15 percent and 10.4 percent respectively.

Speaking on the potentials of the project, Mahdjouba Belaifa, the Department Head of Gas Market Analysis, Gas Exporting Countries Forum (GECF), explained that NLNG Train7 is a good investment decision for Nigeria and by extension a big achievement for GECF because Nigeria is a member country and the project will increase the country’s capability in terms of LNG export.

According to her, the market share of GECF represents 54 percent, adding that recently, the forum discovered capacities coming from non-GECF member countries, including USA, Australia and Cameroun with only one project coming from one member country, Russia.

According to her, ‘‘with Train 7 from NLNG, this will be a great asset to GECF, and will help increase our LNG market share.” 

Train 7 has been in the works for 11 years now. In 2007 when Train 6 was expected to commence operation, the NLNG awarded the contract for project specifications and FEED for a two 8.5 million metric tons per annum NLNG Seven Plus Project, to TSKJ consortium. TSKJ consortium was made up of Technip, Snamprogetti Netherlands, KBR and JGC Corporation.

The contract included additional utilities, product storage and loading facilities. It was anticipated that the train 7 project, scheduled for completion in 2007, would become the largest LNG train in the world. However, the project stalled 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 bribe to Nigerian government officials, to win contracts to build the NLNG’s liquefied natural gas facilities on Bonny Island, Nigeria worth more than $6 billion. Following his guilty plea, KBR and its one-time parent Halliburton paid $579 million in 2009 to resolve criminal and civil charges brought by the U.S. Department of Justice under the Foreign Corrupt Practices Act. Since then, no meaningful decision has been taken to actualize the project.