Nigeria to Construct $11bn Lagos-Calabar Coastal Rail Over Six Years

Nigeria’s Federal Executive Council (FEC) has approved $11.174 billion for the construction of a standard-gauge coastal railway from Lagos to Calabar. FEC also approved the award of two contracts to the tune of N6.2 billion and N2.31 billion, respectively, for the construction of two power substations in Jigawa and Akwa Ibom states.

The council approved the acquisition of 20 per cent minority stake by the Nigerian National Petroleum Corporation (NNPC) in Dangote Petroleum and petrochemical refinery in the sum of $2.76 billion. This was as hope for the restoration of the country’s four refineries in less than eight years from now was raised on Wednesday.

Minister of State for Petroleum Resources, Chief Timipre Sylva, disclosed these at the end of the monthly FEC meeting in Abuja. Sylva also announced the federal government’s approval of $1.484 billion for the rehabilitation of both Warri and Kaduna refineries.

However, the Nigerian National Petroleum Corporation (NNPC) failed to meet its gross revenue projections in the first six months of 2021, hitting a huge deficit of N1.106 trillion during the period.

Speaking to newsmen at the end of the weekly FEC meeting presided over by Vice President Yemi Osinbajo at the State House, Abuja, Minister of Information and Culture Lai Mohammed said the meeting approved the memo for the ratification of the president’s approval for the award of the contract for the Lagos-Calabar coastal standard-gauge railway.

The information minister said, “This is a very old project, which we inherited. Under the former administration, an approval was given, but nothing was done, but today, the council has given approval to commence the Lagos-Calabar coastal route.”

According to him, the rail project is important to the nation’s coastal economy, which is why $11.174 billion is earmarked for it with a completion period of six years.

His words: “This particular route is very important because after the Lagos-Kano route, this Lagos-Calabar coastal route, actually will link all the coastal cities in the country.

“The proposed route alignment is to go from Lagos to Shagamu, Shagamu to Ijebu-Ode, Ijebu-Ode to Ore, Ore to Benin City, Benin to Sapele, Sapele to Warri, Warri to Yenagoa, Yenagoa to Port Harcourt, Port Harcourt to Aba, Aba to Uyo, Uyo to Calabar, Calabar to Akamkpa to Ikom, to Obudu Ranch, with a branch line from Benin City to Asaba, Onitsha Bridge and then Port Harcourt to Onne Deep Seaport.”

The minister also stressed that the commitment of the present administration to expanding and consolidating on the rail projects across the country informed FEC’s approval of the funds for work to commence immediately on the Kano-Jibia rail and the Port Harcourt-Maiduguri route.

Speaking also, Minister of Power, Sale Mamman, disclosed that FEC approved two projects for his ministry, including the construction of 2 by 60 MVA 132 33 substation at Gagarawa, Jigawa State, in favour of Messrs Power Control and Appliances Limited in the sum of N154,212,396.05.

“The second one is the award of the contract for the engineering, procurement and construction of 2 by 30 MVA 132 33 substation at Ibiono Ibom, Akwa Ibom State in favour of Messrs YEMEC West Africa Limited in the sum of US$6.2 offshore plus N1.8 billion onshore,” he said.

On his part, the Minister of State for Education, Chukwuemeka Nwajiuba stated, “Today, the Federal Ministry of Education presented two memos. The first one dealt with ratification of convention Nigeria had already acceded to which seeks to regularise the recognition of certificates and diplomats all across Africa.”

The second memo, according to him, dealt with the award of contract for the building of two blocks of social science complexes at Adamawa State University in Mubi for a total sum of N1,103,000,000, which is a TETFUND allocation that emerged from 2017 through 2021.

Meanwhile, Sylva has announced the approval of $1.484 billion for the rehabilitation of Warri and Kaduna refineries.

The minister, who made this disclosure to newsmen at the end of the FEC meeting, also said 15 per cent of the total sum for the rehabilitation of the two refineries in Port Harcourt which was awarded earlier this year had been paid to the construction firm currently working at site.

The minister said the FEC meeting approved the award of contracts for the rehabilitation of Warri and Kaduna refineries to Messers Saipem SPA and Saipem Contracting Limited at the combined total sum of $1.484 billion.

According to him, $897,678,800 would be spent to repair Warri refinery while Kaduna refinery will gulp $586,902,256.

He stressed that the completion of the rehabilitation exercise would be in three phases spread over a 77-month period.

He explained: “The completion of the rehabilitation of Warri and Kaduna refineries is going to be in three phases. First phase will be completed within 21 months, in 23 months phase two will be completed and in 33 months, the full rehabilitation will be completed.”

On Port Harcourt refinery, Sylva noted that the repair work had commenced adding that already the first 15 per cent of the contract sum has been paid to the contractor and the contractor was fully mobilised to site.

“We also discussed in council the need for us to give periodic updates. Soon, we’ll be going to inspect the work in Port Harcourt refinery, and you will all be with us on that visit,” he said.

Meanwhile, the NNPC failed to meet its gross revenue projections in the first six months of 2021, hitting a huge deficit of N1.106 trillion during the period.

Latest data on the operations of the NNPC obtained by THISDAY indicated that against the benchmark of a monthly budget of N414.941 billion, NNPC in the first half of this year did not meet its revenue forecast, the closest figure to the budgeted figure being N320.315 billion in May.

The 44-year-old corporation is currently beset with high operational costs, especially in its drilling activities in addition to the reduction in oil production quota by the Organisation of Petroleum Exporting Countries (OPEC), which has led to the shutting down of some of its assets.

Moreover, payment of fuel subsidy remains a burden the corporation has been shouldering, even though it has said the situation is unsustainable, with under-recovery gulping over N608 billion between February and June this year.

Information on the corporation’s funding performance showed that while gross revenue forecast for the year was put at N4.979 trillion and N2.489 trillion in the first half, it has only be able to meet its financial target to the tune of N1.383 trillion, leaving a shortfall of N1.106 trillion.

In January, out of the calendarised sum of N414.941 billion, the NNPC only struggled to earn a gross revenue of N195.624 billion, same in February when it made a gross revenue of N191.194 billion.

In March, revenue rose to N224.589 billion, while they were N156.366 billion, N320.315 billion and N295, 396 billion respectively in April, May and June.

Some of the capital projects earmarked for the year 2021 have also suffered under-funding, with Brass LNG Gas Supply Project in Bayelsa receiving zero financing for the six months under consideration.

The Brass LNG project designed to produce 10 million metric tonnes per annum of liquefied natural gas, was initially agreed to be built by the NNPC, Chevron, ConocoPhillips and Eni Group, but have seen the exit of ConocoPhillips and Chevron. It has now been in the works for over a decade.

Added to that, national domestic gas development, which had a budget of N40.352 billion for the first six months, only got N20.22 billion, leaving a deficit of N20.130 billion. Also, gas infrastructure development had a shortfall of N15.7 billion, while funding for frontier exploration fell by N12.9 billion during the first six months of the year.

Similarly, the N3.05 billion budgeted for renewable energy for the year, had a shortfall of N789 million as of June, while the Nigeria/ Morocco pipeline with a budget of N1 billion was underfunded by N83 million.

It also showed that fuel landing cost for the 22 vessels that brought the product into the country in June, ranged from between N185 to N209, with the recorded under-recovery for the month being N114.337 billion.

For pipelines’ repair and management cost for June, security and maintenance gulped N3.2 billion, actual facilities’ repairs cost N599.5 million while strategic holding by the NNPC was N677.5 million, totalling N4.530 billion.

However, the NNPC and the Minister of State, Petroleum, Mr Timipre Sylva, had on two separate occasions said they were dealing with the twin issues of high production cost per unit of crude oil, said to be one of the highest in the world as well as low production quota handed down by OPEC.

On the third issue of subsidy, the minister had said negotiations were still ongoing with organised labour.

In the heat of the COVID-19-induced oil market crash last year, the Group Managing Director of the national oil company, Mr. Mele Kyari, had said along with its joint partners, the NNPC was targeting a production cost per unit of $10 per barrel.

Asked in a recent interview if the target had been met, Kyari told journalists that although the corporation had reduced unit cost by 30 per cent, he could not readily give the actual average cost per every barrel pumped at the time, saying that the NNPC had approached its contractors for renegotiation of contracts, which yielded results.

He had also said with the contract renegotiations and discounts, in addition to some optimisation of operating process driven by the National Upstream Cost Optimisation Programme (NUCOP), reduced the cost of production by close to a third.

On low OPEC quota, Sylva during a meeting with the Secretary General of the organisation, Dr. Sanusi Barkindo, last week, noted that Nigeria will be seeking a new reference production figure in addition to the 30,000 barrels Nigerian share of the members’ July agreement of about 400,000 barrels per day.

Deji Elumoye and Emmanuel Addeh in Abuja

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