Nigeria to Take Final Investment Decision on $25bn Gas Pipeline Next Year

The Nigerian National Petroleum Company Limited (NNPC), along with its partners could take a Final Investment Decision (FID) on the $25 billion Nigeria-Morocco gas pipeline in 2023, the national oil company has said.

The 5,600-kilometer (3,840-mile) pipeline is meant to supply the fuel to Europe, with the NNPC and the Office National des Hydrocarbures et des Mines of Morocco, signing a Memorandum of Understanding (MoU) on the deal last month.

It traverses 13 African countries and is aimed at monetising Nigeria’s abundant natural gas resources, diversify the country’s gas export routes and eliminate gas flaring across Nigeria.

The pipeline will originate from Brass Island (Nigeria) and terminate in the North of Morocco, where it will be connected to the existing Maghreb European Pipeline that originates from Algeria (via Morocco), all the way to Spain, according to the sponsors.

In an interview with Bloomberg in Abuja, Group Chief Executive Officer of the NNPC, Mallam Mele Kyari, assured that the project was on course and remains one of the most critical for the company. “We will take a final investment decision next year,” Kyari said.

The 15-nation Economic Community of West African States (ECOWAS) is also a signatory to the MoU.

The project will cost $20-25 billion to build and will be constructed in phases, according to Kyari, who anticipates the first segment would take three years to finish and the others five years.

Nigeria’s gas exports are currently limited to shipments from Nigeria LNG Ltd., a joint venture between NNPC and international energy companies including Shell Plc and Eni SpA.

Nigeria possesses Africa’s largest proven gas reserves at over 200 trillion cubic feet, most of which is untapped, flared or re-injected into oil wells.

While the government says it wants to monetise much more of the resource, for domestic use and export, to replace crude as the country’s key commodity, Kyari stated that quadrupling gas production in the next four years was “very realisable.”

The NNPC has also revived a longstanding proposal for a separate transcontinental gas pipeline that would travel about 4,400 kilometres through the Sahara Desert to Algeria for onward transport to Europe.

“We have seen the opportunity to bring back every gas pipeline project that you can think of,” Kyari said, noting that “It is a matter of who needs it and who’s ready to pay for it.”

The NNPC GCEO also said that the country can add an additional 500,000 barrels a day before the end of November by reopening the Shell-operated Trans-Niger Pipeline and Forcados terminal and introducing new evacuation routes.

The NNPC hired new private security contractors in August to protect the pipelines, some of which are connected to militant leaders that once waged a war against the oil companies before accepting a government amnesty in 2009.

Recently transformed into a fully commercial venture, the NNPC is eyeing expansion in multiple areas. Kyari said he is “creating the largest upstream company in the country and potentially in Africa.”

He noted that the company was also looking to grow its presence in the power sector, both by building new gas-fuelled power plants and buying facilities put up for sale by Nigeria’s privatisation agency.

The company will be “IPO ready” next year, according to Kyari, who added however that it will be up to the government to decide whether and when to list shares.

Meanwhile, Nigeria’s dwindling crude output has forced the state-owned energy company to defer payments to some local petrol suppliers by at least three months, a separate report said.

Nigeria imports all its products, swapping most for crude with international traders including Vitol Group and TotalEnergies SE as well as domestic groups such as Sahara Group Ltd. and Oando Plc.

As the nation’s oil production slumped, NNPC has asked local importers to permit payment delays of at least 90 days, according to Kyari.

The new deals created late last year involve “a longer credit period,” Kyari added.

Nigeria spent N2.7 trillion ($6.2 billion) on petrol subsidies from January to July to keep the pump price among the lowest in the world, according to NNPC data.

The NNPC’s GCEO expressed confidence that a rebound in Nigeria’s crude production will allow the company to cover its deferred payment obligations.

He noted that he expects the country to add 500,000 barrels a day to its output by the end of November, mainly by restarting activities on the Shell Plc-operated Forcados export terminal and Trans-Niger pipeline.

If that happens, “we will meet all the deliveries and still have surplus crude production for cash,” Kyari said, pointing out that “They know we can pay. Otherwise they wouldn’t supply.”

The new contracts operate alongside the original “direct sale, direct purchase” deals, under which NNPC is expected to provide crude before traders deliver the fuel.

Those local firms accepting deferred payments receive an additional premium per ton of gasoline, according to people familiar with the arrangements.

While the original deals still account for the biggest source of Nigeria’s gasoline, the new contracts represented almost a third of the deliveries in the first seven months of the year. Since December, ad hoc purchases by the state-owned firm have accounted for 13 per cent of total volumes.

NNPC imports about 1.3 million tons of gasoline per month, against which it commits about 320,000 barrels a day of crude to the swaps, according to company data. However, Nigeria’s fuel imports were more than 50 per cent higher in both March and April.

The government has blamed the steady decline in crude production since early 2020 on massive levels of theft on the pipelines that crisscross the Niger Delta. That has shut down wells and deterred investment, it says.

Emmanuel Addeh

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