Playing Russian roulette with new Nigeria-Morocco gas pipeline deal
At this time that government is trying to refocus the gas industry, hugely ambitious deals like the new Nigeria-Morocco gas pipeline to link Africa to Europe mirrors a potentially very dangerous lethal game of chance just like the Russian roulette that is capable of distorting and distracting policy makers from the robust draft National Gas Policy.
According to Geoffrey Onyema, Minister of Foreign Affairs, Nigeria and Morocco have signed a joint venture agreement to construct a gas pipeline that will connect the two nations as well as some other African countries to Europe. The agreement reached during a visit by the Morocco’s King Mohammed to Nigeria recently, would be designed with the participation of all stakeholders in the project.
The gas pipeline project, according to Onyema, is aimed at creating a competitive regional electricity market, fostering economic regional integration and strengthening gas exports to Europe. However, no timeline was given for when the pipeline construction work will start and how much it will cost.
Roadmaps to hell are paved with good intentions
Creating competitive regional electricity market, fostering economic regional integration and strengthening gas exports to Europe which are all the objectives of the proposed Nigeria-Morocco gas pipeline deal, no doubt, are good intentions but the project itself brings back memories of the ill-fated Trans-Saharan Gas Pipeline (TSGP) project announced in 2002 by Nigerian National Petroleum Corporation (NNPC) and the Algerian state oil company, Sonatrach.
The TSGP project was conceived under the NEPAD Initiative championed by former Presidents Olusegun Obasanjo of Nigeria, Thabo Mbeki of South Africa, Abdoulaye Wade of Senegal and President Abdoulazeez Boutaflika of Algeria, to carry natural gas from oil fields in Niger Delta region to Algeria’s Beni Saf export terminal to connect with the existing Trans-Mediterranean, Maghreb-Europe, Medgaz, and Galsi pipelines across the Mediterranean sea and eventually supply natural gas to Europe.
Mohammed Sanusi Barkindo current OPEC Secretary General and then Group Managing Director of the NNPC described the Trans-Sahara Gas Pipeline Project as “a veritable vehicle for strengthening the bilateral economic relations between Nigeria, Algeria and Niger”.
The initial estimate for the 4,400km expected to deliver first gas around 2015, was $7bn but the cost tripled to $21bn by 2010 amid security concerns. Over 1,037 km of the pipeline would be in Nigeria, 853 km in Niger, 2,310 km in Algeria, and 220 km connecting Algeria to Spain.
It was believed at conception that the TSGP has the critical advantage of supplying gas to Northern Nigeria, Niger, Southern Algeria, Burkina Faso and Southern Mali in addition to helping to integrate the economies of the sub-region in line with objectives of NEPAD and also promote growth and poverty alleviation by opening up economic growth opportunities in the sub-region.
The project feasibility studies was concluded and accepted by the various governments involved as at September 2006 with the internal rate of return ranging between 15.5 and 25 percent. A major milestone was reached with the official signing of an intergovernmental agreement (IGA) between Nigeria, Algeria, and Niger. The project feasibility study was also revalidated by first quarter 2014, reassessing gas supply options and the Trans-Nigerian optimisation study but the project remains a mirage till date.
The last mention of TSGP was in the build up to African Union summit earlier this year when Geoffrey Onyeama, Nigeria’s Foreign Affairs Minister, said the summit would open the way for a serious appraisal of the $20 billion Nigeria-Algeria Trans-Saharan gas pipeline project under the New Partnership for African Development (NEPAD) adding that the Nigeria-Algeria gas pipeline is a major project of NEPAD that the summit would give attention to this year.
WAGP, operational but in intensive care
A similar ambitious project, the West Africa Gas Pipeline (WAGP), initiated by the Nigeria’s government with the governments of Benin, Ghana, and Togo, though operational is in intensive care unit as the project has not yielded the desired results.
The pipeline is designed to supply gas from the Escravos region of Niger Delta to feed generating plants of the participating countries. The project, which was the first regional natural gas transmission system in sub-Saharan Africa, was initiated to, among others, channel away associated gas from Nigerian oil fields where gas is flared, generate employment for Nigerians and foster economic integration of the West African countries involved.
The project, which runs both onshore and offshore, through the Republic of Benin, Togo and terminates in Ghana, was initially scheduled to terminate in Senegal, but this was shelved owing to political instability in several countries where the pipelines would run through, notably Ivory Coast, Sierra Leone and Liberia.
However, the gas flows are erratic as gas supply is compromised by militant attacks on gas infrastructure in the Niger Delta. In addition to issue of security of gas supply, WAGP has been battling with huge debt overhang. Severally, it had suspended the flow of gas from Nigeria to Ghana over unpaid bills by the Ghana government.
Ghana’s state power producer Volta River Authority owes Nigeria’s N-Gas around $180 million, while N-Gas in turn owes the Pipeline Company $104 million, Harriet Wereko-Brobby, WAPCO spokeswoman said in June this year.
Keep focus on domestic gas utilization
The view of stakeholders in the gas value chain is that government should focus more on domestic utilization of gas which has the potential of solving the power conundrum and reviving the industrial sector.
“We need to take a second look at our current model whereby the bulk of our gas resources are channeled towards export, whereas we face a growing demand on the domestic front. Government should provide the institutional and legal frameworks that will enable greater domestic gas supply to create multiplier effects on the economy through the power and industrial sectors. A high level of engagement with private capital and operators is the way forward, while government restricts their role to regulatory oversights”, said Audrey Joe-Ezigbo, Co-Founder/Executive Director, Falcon Corporation Limited and 2nd Vice President, Nigerian Gas Association (NGA).
FRANK UZUEGBUNAM