July 2018, Vol. 245, No. 7


Nigeria Makes Progress on Delayed Gas Pipeline Project

By Shem Oirere  

Nigeria has announced progress on a key gas pipeline project that is seen as part of the country’s difficult balancing act between increasing natural gas production to 11,000 MMcf/d by the end of 2018 and creating adequate domestic demand to consume the increased volumes.

Nigeria, which has the largest proven natural gas reserves in Africa estimated at 187 Tcf and a possible but yet undiscovered potential for 600 Tcf, has picked two consortia as preferred engineering, procurement and construction (EPC) contractors for two sections of the 382-mile (614-km) Ajaokuta-Kaduna-Kano (AKK) gas pipeline to link the country’s gas-rich region to the populated, industrialized but electricity-starved northern part.


The country’s oil and gas operator Nigerian National Petroleum Corporation (NNPC) has awarded the two-party consortium of Nigerian-based Oando Plc and United Arab Emirates-headquartered Oilserv Limited the EPC contract for the first phase of the $2.8 billion AKK pipeline system, involving the 134-mile (215-km) pipeline stretching from Ajaokuta to Abuja, which includes a terminal gas station, metering, pigging and block valve provisions. The 100% contractor financing modeled tender is worth $727 million. 

A similar EPC contract for the third phase of the 40-inch pipeline project involving the 137-mile (221-km) section linking Kaduna and Kano terminal gas stations has been awarded to another two-party consortium – Nigeria’s Brentex Petroleum Services Limited and Chinese energy contractor China Petroleum Pipeline Bureaux – at a cost of $1.2 billion. NNPC has deferred the award of Lot 2 of the contract covering 120 miles (193 km) of the AKK pipeline to be confirmed later.

Like in other previous Nigerian gas pipeline projects, the two consortia are expected to carry out contract specified engineering design of the pipeline, the right-of-way survey with the support of the government, right-of-way acquisition, pigging, trenching and drilling hole works, delivery and stringing of pipes, welding of line pipes and coating, lowering of welded pipes into prepared trenches, and back-filling.

However, both NNPC and parties of the two consortia could not immediately confirm timelines for achieving these tasks and other details such as possible sub-contractors, material and equipment supply and anticipated number of jobs to be created during the construction, operation and maintenance phases.

Nigeria’s Federal Ministry of Petroleum Resources listed the project as one of the nine critical gas infrastructure initiatives that the government has given priority under country’s national gas policy that was released last year.

The other eight gas transmission projects are the Aba-Owerri-Nnewi-Onitsha, Calabar-Ajaokuta, ELP-Ibadan-Jebba, Obiafu-Obrikom-Oben, expansion of ELP Phase 2, Oso Platform to QIT, Erha/Bosi and the Trans Sahara Gas Pipeline.

The award of AKK’s Lot 1 and Lot 3 contracts is not only a key phase in the implementation of the 2008-approved Nigerian gas master plan, which partly targets reduction of the current flaring levels estimated at 50% of the natural gas and the nearly 12% of it that is injected to facilitate crude oil recovery, but also a link the nation’s gas pipeline to the rest of  Africa and Europe.

The plan is part of Nigeria’s 30-year Nigerian Integrated Infrastructure Master Plan to support infrastructure development in specific economic sectors, such as the oil and gas, for the 2013-2043 period.

Lack of reliable gas transmission pipelines has been blamed for Nigeria’s low-capacity electricity generation despite more than 80% of the country’s power generation plants being gas-fired.

Nigeria’s natural gas-fired power plants have a nameplate capacity of more than 11,600 MW but only 7,445 MW are either operational or partially operational with an estimated 4,990 MW being available according to government statistics. Actual electricity available from these gas-fired plants at times goes below 3,900 MW.

Nigeria, which produces a mere 25% of its proven natural gas reserves, has about 23 gas-fired electricity generation plants of which three are fully operational, five are not in operation and 15 are operating partially due to a lack of infrastructure maintenance and adequate gas supply.

The country’s latest national gas policy document said Nigeria failed to achieve “a full-blown domestic market by 2015” as envisaged in the gas master plan.

The document added the “Plan has not delivered on all its set targets” and that the country “still lacks critical gas infrastructure and continues to fall short of domestic gas supply obligations.”

“Nigeria is experiencing a full-blown energy crisis in spite of its abundant gas resources (and) a new gas policy that is more effective and adjusted for the much harsher international business environment for gas is required to drive the reforms necessary to attract investment into the sector,” according to the national gas policy document.

With the government estimating electricity demand at 12,800 MW and financing being sought for the biggest gas-fired power plant project, Azuri Thermal power station, which is projected to have capacity of 1500 MW when fully complete, additional pipeline infrastructure is critical in Nigeria.

“For so long, NNPC had activated an aggressive gas reforms and implementation drive, requiring accelerated implementation of gas pipeline infrastructure development with specific focus on critical pipeline infrastructure to power plants and industries,” said Ndu Ughamadu, NNPC’s Group General Manager, Group Public Affairs Division, in early April.

Currently, NNPC’s affiliate Nigeria Gas Company Ltd, owns and operates nearly 777 miles (1250 km) of gas pipeline with the rest being operated by Shell Nigeria Gas and Gaslink Nigeria Ltd, which are units of Shell Petroleum Development Company Ltd and Oando Nigeria Ltd., respectively.

Existing key gas pipeline network in Nigeria include the Escravos-Lagos link to the West, Oben-Ajaokuta to the North and Alakiri-Obigbo-Ikot-Abasi to the East.

NNPC said AKK is key “in forming the primary foundation for the planned Trans-Sahara Gas Pipeline project.” This transcontinental project is being developed by Nigeria, Niger and Algeria, and will terminate in Spain.

It involves construction of 2,736 miles (4,401 km)  of gas pipeline through Nigeria, Niger and Algeria to Spain. The pipeline will include 644 miles (1,037 km) in Nigeria, 523 miles (841 km) in Niger, 1,430 miles (2,302 km) in Algeria and 137 miles (220 km) in Spain, and transport an estimated 30 billion cubic liters of natural gas.

Initially, the plan called for the pipeline to be online this year under a partnership of NNPC, Algeria’s Sonatrach and Niger’s National Oil Company. The deadline now looks unlikely to be met. The plan is to have the gas pipeline commence in Nigeria’s Warri region and lay it north via Niger to Hassi R’Mel in Algeria before connecting it with the existing Trans-Mediterranean, Maghreb-Europe, Medgaz and Galsi pipelines.

Nigeria had earlier said it allocated $400 million for the project in addition to the $450 million raised more than three years ago through Euro-bonds. The pipeline, which is expected to be 48 inches on some sections and 56 inches in others, was previously estimated to cost more than $23.7 million.

For Nigeria to achieve the 30,000 MMcf/d natural gas production by 2043 and meet the national electricity demand of more than 12,800 MW, a sustainable gas infrastructure, particularly quality gas transmission systems, is almost mandatory.

Author: Shem Oirere is a freelance journalist based in Nairobi, Kenya. He holds advance diplomats in  journalism from London School of Journalism and in Human Resource Management in International Relations and Diplomacy from the University of South Africa. P&GJ


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