Work on NNPC’s $2.8bn AKK Gas Line Begins Soon

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Chineme Okafor in Abuja

The Nigerian National Petroleum Corporation (NNPC) on Sunday disclosed that work on its 40 inch by 614 kilometres Ajaokuta – Kaduna – Kano (AKK) gas pipeline and stations will commence in a matter of weeks.

It said the project would cost $2.8 billion, and also financed through a contractor financing model. However, the gas line project has been described as valueless to the Nigerian economy by an energy expert, Mr. Dan Kunle.

In a statement from NNPC’s Group General Manager Public Affairs, Mr. Ndu Ughamadu, in Abuja, the corporation said that works on the project would start soon following its execution of contract agreements for the engineering, procurement, construction, commissioning and financing of Lots 1 and 3 of the project.

It explained that measures have been put in place for the flag off of the project which it described as the single biggest gas pipeline project in the history of Nigeria’s oil and gas industry.

NNPC noted that the project would be completed in 24 months from now, adding that the line will enable gas supply and connectivity between the eastern, western and northern parts of Nigeria which is currently not in existence.

It also stated that it will enable gas supply and utilisation of key commercial centres in northern Nigeria and ensure that power generation and industrial growth are achieved there.

NNPC provided further details on the contract agreement it signed with consortia involving indigenous and Chinese entities under a 100 per cent contractor financing model.

It said Lot 1 with a total length of 40 inches by 200 km stretching from Ajaokuta to Abuja was awarded to the OilServe/Oando Consortium at a contract value of $855 million.

Lot 2, it said, has not been awarded yet but would cover a stretch of 193 km from Abuja to Kaduna and built at a cost of $835 million.

For Lot 3, which runs from Kaduna to Kano, covering 221km and awarded to the Brentex/China Petroleum Pipeline Bureau (CPP) Consortium, the corporation said it would cost $1.2 billion.

It explained that the Federal Executive Council (FEC) approved the project on December 13, 2017.

But in his appraisal of the project, Kunle told THISDAY that based on the current scenario in the global gas market, the project was uneconomical and would leave Nigeria in heavy sovereign debts.

He pointed out that most gas-based industries like gas power generation plants in the southern part of the country where gas is readily produced do not have enough gas for their operations, and as such pushing gas up north through the line would be uneconomical.

Kunle also called on the corporation to open up on the terms of the contractor financing that it has signed with different consortia.

He said he wanted the NNPC to show Nigerians the details of the construction agreements it signed with them, adding that Nigeria could end up in huge debt if it failed to meet up the sovereign guarantees required in the contractor financing agreements.

“This project has become a bad project. We missed it a long time ago, and the only way to justify gas pipeline from Ajaokuta to upper north of Nigeria is if you have excess gas in the southern gas province that you don’t know what to do with it.

“As at today, all the power plants in the south don’t get adequate gas supply. The two power plants in Ajaokuta where the line will take off from are not getting enough gas to operate. Even Dangote cement does not get enough gas,” he stated.

“This project is already belated. Let us even look at the past, the Kaduna refinery which was built in the past has not been profitable. Its capex, that is the money used to build it, has not been recovered.

“So, some of this projects that we think we must politically induce to our zones, are not economically justifiable anymore because economic theory have proved that heavy industries must be located where you have comparative and competitive advantage of raw materials and all other supporting enablers,” Kunle added.