The Delayed NLNG Train 7 FID

1

The failure of shareholders to sign the lingering NLNG Train 7 Final Investment Decision after a two-day marathon meeting last week in Abuja, is beginning to generate concerns, writes Peter Uzoho

In about seven days, the December 2019 deadline for the signing of the Nigeria Liquefied Natural Gas Limited’s Train 7 Final Investment Decision (FID), will come to an end. But, the signing of the landmark FID is still being delay for reasons not clear to outsiders.

Between Thursday and Friday last week, the shareholders of Nigeria LNG Limited, comprising the Nigerian National Petroleum Corporation (NNPC), Shell, Total, and Eni, met in Abuja, and the meeting was presumed to produce the eventual signing of the train 7 FID.

The presumption was however wrong as the deal could not be signed at the end of the meetings.
If it had been signed, it would have sent a major signal to prospective participants in the $12 billion project.

The Train 7 project is expected to complement the existing six-trains and raise Nigeria’s total production capacity from the current 22 million tonnes per annum (MTPA) of LNG to 30 million tonnes per annum, which is an increase of 35 per cent.

NLNG currently has six trains capable of producing 22 million metric tonnes per annum (MMTPA) of LNG, and five MMTPA of Natural Gas Liquids (NGLs), that is Liquefied Petroleum Gas (LPG) or cooking gas, and condensate – from 3.5 billion standard cubic feet per day (Bcf/d) of natural gas intake.

THISDAY learnt through a reliable source at the Abuja meetings that the shareholders did not conclude, and that more meetings between them would be convened in a later date to further iron things out and then put the final pen to the deal.

However, there are concerns that the NLNG Train 7 FID may fail the December deadline like the previous deadlines.
The deal was expected to be signed last October, but could not come through, leading to its postponement to this December.

There have been questions as to what could be responsible to this delay even when some issues that were expected to be addressed before the FID signing had been addressed.
For instance, in March, 2019, NLNG and the Nigerian Content Development and Monitoring Board (NCDMB), signed-off the $1 billion Nigerian Content Plan for the Train 7.

Also, two weeks ago, Oando Plc through its upstream subsidiary, Oando Energy Resources, signed two Gas Supply Agreements (GSA) with the NLNG), for the renewal of gas supply for the existing Trains 1-3 for a term of 10 years and for gas supply for the impending Train 7 for a term of 20 years.

Under the terms of the current agreement, the NAOC Joint Venture (JV) made up of NNPC/NAOC/Oando, has a total supply obligation of 850 million standard cubic feet (mscf) of gas for Trains 1–6.

The JV is specifically responsible for supplying a Daily Contract Quantity (DCQ) of 344.6MMscf/d for Trains 1-3 and 505MMscf/d for Trains 4-6, making the NAOC JV the second largest gas supplier to NLNG. The first GSA is a renewal of the gas supply terms for Trains 1-3.

In addition to the JVs current supply to trains 1-6 and under the terms of the second agreement, the JV will be responsible for supplying a DCQ of 294.7MMScf/d for Train 7.
Train 7 is a major project in the Nigerian oil and gas industry and partners and would-be participants both local and international are watching with keen interest what are playing out in the project.

History of NLNG Trains

Trains 1 – 3 were a brain child of the Shell-run Nigeria LNG, established to tap into Nigeria’s abundant gas resource and monetise it through LNG exports. The FID for the first two trains was received in November 1995. Production commenced in September 1999 for Train 2, while Train 1 started in February 2000. Train 3 commenced production in November 2002 respectively.

The next phase of development called the NLNGPlus project, comprised Trains 4 and 5, commenced in March 2002. Train 4 came on stream in November 2005 and Train 5 was started up in February 2006. The NLNG Six project, consisting of Train 6 and additional condensate processing and LPG storage facilities commenced in 2004. Train 6 became operational in December 2007.

With six trains currently operational, the entire NLNG plant is capable of producing 22 million Tonnes Per Annum (MTPA) of LNG, and 5 MTPA of NGLs (LPG and Condensate) from 3.5 billion standard cubic feet per day (Bcf/d) of natural gas intake. Gas is supplied via six main dedicated Gas Transmission Systems (GTS) with four of them on-shore. The addition of Train 7 is intended to enhance the total production capacity to over 30 MMTPA of LNG.

Train 7 Potential

Stakeholders and industry operators have been longing for the commencement of activities in the train 7 to enable Nigeria begin reaping its short and long term benefits.

According to the Managing Director of NLNG Limited, Mr. Tony Attah, “train 7 is the next big deal for Nigeria. Train 7 is real; Train 7 is here. If you come to Bonny Island today, you will see that early site work has commenced and we are 97 per cent prepared, just waiting to take that Final Investment Decision (FID).”

He added: “We co-created the Nigerian Content Plan, working in harmony with the agency just to understand the interpretation of the law and then co-creating how we comply. Overall, it’s all about consolidation and co-creating the future.

“I am proud to say in March 2019, we signed off the Nigerian Content Plan for Train 7 project, delivering 100 per cent Nigerian content in construction, production of cables, welding, valves, scaffolding, furniture, painting and medical. It is going to be 55 per cent of in-country engineering and procurement man-hours.”

Attah noted that the project would generate over 12, 000 direct jobs during construction phase and in the upstream industry, with multiple spin-off effects in other sectors of the economy, increasing the number of jobs that will be generated over a six-year project window.

He stated further that the project would help reduce restiveness in the Niger-Delta region by providing jobs, calling for more projects in Nigeria to change the socio-economic narrative in the country.

While making a case for gas development in Nigeria, Attah said: “we believe the future is gas; we believe the future is bright for Nigeria. We are a gas country with some oil because in reality, we have more gas.
“With the energy transition, gas will play more actively and that is why we say let’s focus on gas. But the question is how focused is Nigeria on gas?”

On his part, the Executive Secretary of the NCDMB, Mr. Simbi Wabote, said the train 7 project would generate more revenue to the federal government while also creating about 10, 000 direct and almost 40,000 indirect jobs in the country.
He said: “To the Nigerian economy, as you are aware, it will bring more revenue to the country; more taxes would be paid and, to the economy, it means a lot.

“To Nigerians, it also means a lot. It means creation of jobs. As you have heard, we will have about 10,000 direct jobs that will be created as a result of the Train 7 project. What that translates to is almost 40,000 indirect jobs that would be created.”

Wabote, added that the Train 7 would rejuvenate the economy, saying that, a lot of upstream projects would also come up as a result of the project.
According to him, a lot would be expected in terms of activities in the economy, employment, revenue generation and ending restiveness in the Niger Delta.
He noted that the train 7 would also attract other upstream gas supply projects required to keep the LNG train busy.

Wabote added: “Somewhat stranded gas fields in the shallow and deep offshore in the area could also become economical with this addition of Tran-7.

“We are excited that the Train-7 Project will bring about great opportunities for utilisation of local goods and services in addition to enhancing and developing new capacities and capabilities for the local supply chain. I believe all the various stakeholders are similarly excited that this project is progressing through the funnel.”

The NCDMB boss also said in the next couple of years, the train 7 would lead to boom in the LPG market, stressing that the project is a base for other projects that are coming in.

He further said: “We have created a template. It is setting the pace and legacy for others to follow. In the next couple of years, with the gas commercialisation programme of the government, I can tell you that the LPG area is going to boom very soon. There are opportunities within the funnel.

“Production of NLNG will also see production and increase in LPG. What you are seeing is that NLNG has been leading in the production of LPG for a long while. I can say, their challenge is utilisation, not the production.

“The Train-7 will also increase the capacity of LPG production in the country. And, like they said, it is no longer the value chain, it is more about the value network: how do you also produce and get the communities and other stakeholders bolted along the value chain you have just created? LPG production will also spike equally.”

Also commenting on the impact of the Train 7 project, the Chairman of Petroleum Technology Association of Nigeria (PETAN), Mr. Bank Anthony Okoroafor, said it would have, “Huge impact to the economy in terms of job creation, enablement and creation of more entrepreneurs, utilisation of our fabrication yards, more developmental training and capacity building, VAT payments, Tax payments, PAYEE.
“We need more projects like this to keep our teeming members busy and sustain the capacities they have built over the years.”