It is a good initiative, but there are many questions to answer

In a virtual ceremony, President Muhammadu Buhari recently approved the commencement of work on the AKK gas line, a 614-long Ajaokuta-Kaduna-Kano (AKK) pipeline being developed by the Nigerian National Petroleum Corporation (NNPC). Expected to cost about $2.8 billion, the president has described the project as a utilitarian infrastructure; one that will provide gas for generation of electricity as well as for industries within its route. In addition, the president noted that the project will revive moribund industries along transit towns in Kogi, the Federal Capital Territory – Abuja, Niger, Kaduna and Kano States.

If implemented properly, this project will enhance the social wellbeing of our people, further economic growth, and guarantee the provision of basic services and facilities for businesses to develop and thrive. We therefore welcome the president’s drive on the AKK gas line. However, there are concerns. The not-so-edifying history of our country with petroleum pipelines, the seeming scarcity of gas for use by power plants and industries in the south, as well as the equitable market fundamentals for gas supply in the north are some of the reservations many have expressed on this project which deserve compelling clarifications.

According to the NNPC, the AKK project on completion would enable the injection of up to 2.2 billion standard cubic feet of gas per day into the domestic market. It will also facilitate additional power generation capacity of 3,600 megawatts (MW). As potentially beneficial as this pipeline may be, the NNPC needs to clarify from where exactly the huge volume of gas to be fed into it will come. The current volume in the corporation’s books is from existing production facilities and provinces, thus raising the question: are there upcoming gas production concerns to support the new pipeline and demands or is the AKK just being built without firm plan or conclusion on its supply sources?

We are also aware that up to Kogi State, which is where the AKK would take off, gas power plants and gas-based industries there are still challenged with gas supply scarcity. This also needs to be clarified. There are two gas power plants of about 430 megawatts each – Geregu one and two – which are mostly under-producing because gas supply to them are either insufficient or not of the right quality. Besides, some Niger Delta militants have argued that there is nothing in the name of the project that indicates where the gas to be piped is coming from since neither Ajaokuta, Kaduna nor Kano produces gas.

Meanwhile, there are several other questions that are still hanging about this project. Will it tie the government to subsidising gas supplies up north, at what cost to the federation and for how long in the future? If Ajaokuta which is about 350 kilometres from the Niger Delta cannot get sufficient gas, how would gas get to Kano which is farther and at what cost? Should the country encourage the transportation of gas that is more than 700 kilometres away from source to the market and through what means, or should it transport finished products over this distance to the market? If it decides to take gas from the Niger Delta all the way to Kano, and add up the capital expenditure to the production cost of industries in Kano, what will be the unit cost of these finished products there?

We must emphasise that while Nigeria has comparative advantage in gas as a natural resource, it does not have a competitive advantage in gas production and distribution across the country. Given this state of affair, the focus should be on localising gas processing industries. That is the only way we can utilise our abundant gas resources properly for economic development.