There are strong indications that the Nigerian National Petroleum Corporation (NNPC) may cancel the Olokola Liquefied Natural Gas (LNG) project situated between the border town of Ondo and Ogun States, THISDAY has learnt.
It gathered at the weekend that despite last Thursday’s commitment by the Group Managing Director of the NNPC, Dr. Maikanti Baru to carry on with the project, its economics does not favour the multi-billion dollar gas liquefaction plant.
A dependable source at the NNPC told THISDAY on condition of anonymity that Chevron, Shell and BG withdrew from the project without the conclusion of their exit formalities.
He said the non-conclusion of the exit formalities for these shareholders had hindered any search for new investors, thus imposing the financial burden of sustaining the project on the NNPC.
According to the source, the NNPC has actually started the process of winding down activities on the OKLNG project because the project has become a drain pipe, depleting the resources of the corporation.
“The statement by the GMD was a political statement because the project economics does not justify investment on the project. That was why Chevron, Shell and BG withdrew and abandoned the project for only the NNPC. NNPC alone does not have the financial capacity to embark on such multi-billion dollar project and no other multinational is willing to partner the NNPC. Similar project located right inside the heart of Niger Delta in Brass is yet to take off because of gas supply constraints. So, nobody can guarantee investment in gas that will be piped all the way from Niger Delta to Ogun to start OKLNG. Where are the gas and the pipelines to take the gas to the area? Even if the pipelines are in place, investors are not ready to stake their money because they are not sure of the security of the pipelines,” the source explained.
“Again, gas projects are mainly joint ventures between the NNPC and the international oil companies (IOCs). The position of the IOCs is that for them to invest in new gas development to feed new LNG plants, the NNPC must bring their own funding. NNPC doesn’t have the money. That is new LNG plants – Train 7 of Nigeria LNG, Brass and OKLNG have not seen the light of the day,” he added.
He said the case of OKLNG was even more complicated as the project was located far away from gas sources apparently for political reasons rather than pure business decision.
“The IOCs and other private investors are for business and will not stake their money on projects that have political undertones. NNPC alone cannot do it,” he said.
According to him, the NNPC has commenced the process of winding down activities on the OKLNG project.
“A memo has been issued to that effect. The OKLNG staff have been relocated to the Gas and Power Investment Company Limited (G &PIC) of NNPC in Abuja because since the exit of the other shareholders, it is only the NNPC that has been sustaining the project and this has depleted its lean resources. For now, NNPC is only maintaining the project on what is called preservation mode,” he added.
Baru had told the management of the Nigerian Television Authority (NTA) that the corporation was determined to implement the Brass LNG and OK LNG, and also confirmed THISDAY’s exclusive report that the shareholders of the Brass LNG would meet in London next month to decide the fate of the multi-billion project, according to a statement by the spokesman of the NNPC, Mr. Ndu Ughamadu.