Question on maintainance as NNPC commits billions of dollars in gas pipelines
With several gas pipeline projects already completed and others in the pipeline to address the gas deliverability challenges in the country, questions as to whether or not the Nigerian National Petroleum Corporation (NNPC) has capacity to maintain this huge investment has come to the fore.
Among critical pipeline infrastructure completed in the country includes Oben-Geregu project, addressing supply deliverability to Geregu power plant and future expansions; Itoku-Olorunshogo project, currently supplying gas to Olorunshogo power plant, and Escravos-Lagos Pipeline System (ELPS) A Escravos-Warri.
Projects in the horizon include the $5billion Trans-Nigeria pipeline project; $4 billion South-North gas pipeline, part of the Trans-Sahara pipeline project and the Escravos-Lagos Pipeline (ELP) expansion project, among others.
“I will be very surprised to see that NNPC is solely financing all the projects. The risk of failure will be significantly high. Initially, it was more of government funding; now NNPC is doing pipeline projects as joint venture,” Wumi Iledare, president of International Association for Energy Economics (IAEE) and director at Emerald Energy Institute, University of Port Harcourt, told BusinessDay West Africa Energy.
“This time around things are different from what it used to be,” he said, adding “I expect more discipline in maintaining the pipelines to ensure that the investors recoup their money. The entire objective of the gas master plan is to enable private investors come in. The investment requirement is massive and no investor will put their money into such an investment without adequate returned guaranteed.”
By the end of 2018, the backbone pipeline infrastructure for gas would have been delivered, concluding an initial phase of over 2,500km of gas pipeline infrastructure development, according to Diezani Alison-Madueke, minister of petroleum resources.
Almost 500km of new gas pipelines have been completed and commissioned, including the doubling of the capacity of the ELPS between Escravos and Oben and the extension from Oben to Geregu and River Imo to Alaoji, respectively, she said at a recent conference in Abuja where she was represented by Andrew Yakubu, general managing director, NNPC.
Highlights of gas pipeline projects
The minister, who is also the chairman of NNPC board, had in May disclosed that the federal government was planning to construct the longest pipeline in the country, as part of efforts at ensuring steady supply of gas to meet the growing market demand for the product, especially in the power sector.
The $4 billion South-North gas pipeline is designed to run from Calabar through Ajaokuta and terminate in Kano.
With the Trans-Nigeria pipeline project, NNPC plans to integrate all gas transmission systems in the country. The total investment outlay for the project is about $5bn for an estimated 1,200 kilometres of pipeline.
The corporation said that the backbone of future gas supplies will be the three proposed major pipeline projects namely the Obiafu-Obrikom-Oben (OB3), Calabar-Ajaokuta-Abuja (CAP) and Abuja-Kaduna-Kano (AKK) pipeline projects. The contract for the OB3 project has been awarded and the project is expected to be completed this year.
The over $12 billion Trans-Saharan pipeline project, for which $700 million had been reportedly mobilised by Nigeria, is a sub-regional project that will transport natural gas from Nigeria to Europe through Algeria. Niger Republic is a co-sponsor of the pipeline which is about 4,400km long. The Calabar-Kano line project forms part of the Trans-Sahara gas pipeline.
Dolapo Oni, energy analyst at Ecobank, described the Trans-Sahara gas pipeline as a good project. “We need to create that international channel for our gas. It is an opportunity to secure long-term gas supply contracts.”
Noting that it is an international pipeline, he said the NNPC may only have to manage the Nigerian end of the pipeline, adding that “Algeria has considerable experience in maintenance of gas pipeline. Russia’s Gazprom is also going to be involved in that project.”
The construction of the strategic East-West pipeline is ongoing, while the Lagos end of the ELPS is nearing completion.
The ELP expansion project is an ongoing gas pipeline expansion project which involves the engineering, procurement and construction (EPC) works for the expansion of the ELPS. The intention is to expand the existing capacity of the ELPS from the current 1,100 million standard cubic feet (mmscfd) to 2,200 mmscfd to accommodate more gas on the ELPS to meet the increasing demand for gas.
The West African Gas Pipeline (WAGP) project supplies gas from producing fields in Nigeria through the NGC ELPS and WAPCo’s pipelines to Volta River Authority in Accra, Ghana and industries in Togo and Benin Republics. The project includes supply of initial volume of 133mmscfd to peak 470mmscfd in future. The project has been commissioned and is currently supplying gas to VRA while the spur lines to Togo and Benin Republics are almost completed prior to commissioning. The long-term plan is to extend this pipeline to Dakar, Senegal to make natural gas available to the whole region.
Frequent vandalism hurting pipeline integrity
David Ige, group executive director, gas and power, NNPC, who noted that frequent sabotage of gas pipeline in the country reduce pipeline integrity, told BusinessDay West Africa Energy: “We have been maintaining for over 30 years and despite the difficult environment characterised by frequent vandalism, we have manage to keep the lines at a high level of availability. Also remember that the NNPC and other supplies are owed a lot of money for both supply and transmission of gas. Despite the under payment and high operating cost due to vandalism, we manage the transmission network.”
Ige had said at a recent summit in Lagos said that the NNPC was working very closely with security agencies to curb the issue of pipeline vandalism, adding “We are looking at some technology like SCADA to minimise our response time and know exactly where the pipeline vandalism is taking place.”
Speaking on the Calabar-Kano line project, which is being envisioned as a public private partnership (PPP) project, he said: “The front-end engineering design (FEED) is going on in Germany by our engineering consultant. They have finished the conceptualisation. We are doing the right of way survey and we are working on the final aspect of the bankability framework. You can’t answer question on bankability from interested investors without the FEED. We are doing things right to make the project viable for private investors. Over 50 groups of investors from all over the world have expressed interest in the project.”
FEMI ASU