NLNG Train 7: Better late than never

 The Nigeria Liquefied Natural Gas (NLNG) Limited has been a frontline global gas supplier. However, its inability to get Train 7 off the ground has been a major concern, especially to global stakeholders that rely on LNG from Nigeria. In this report, OLATUNDE DODONDAWA examines the possibility of signing the Final Investment Decision (FID) in last quarter of 2018. Excerpts:

Introduction

IN November 1995, a Final Decision (FID) was signed  by the shareholders to build a liquefied natural gas plant in Finima, Bonny Island in Rivers State. This was followed in December 1995 by the award of a turnkey Engineering, Procurement and Construction (EPC) contract to a consortium of engineering firms comprising Technip, Snamprogetti, M.V. Kellog and Japan Gas Corporation (TSKJ) for the Plant (consisting of two trains – Trains 1 and 2, called the Base Project), the Gas Transmission System (GTS) and the Residential Area.

Construction at the plant site commenced in February 1996 and on August 12, 1999, Train 2 was ready for start-up. Production of LNG commenced on September 15. Train 1 subsequently came on stream on February 27, 2000. The second phase of development, called Expansion Project, commenced with a Final Investment Decision (FID) in February 1999 to develop Train 3 and the plant’s condensate stabilisation system. Train 3 was completed and came into operation in November 2002. The next phase of development called the NLNGPlus project, comprising Trains 4 and 5, commenced in March 2002. Train 4 came on stream in November 2005 and Train 5 was started up in February 2006.

NLNG Six project, consisting of Train 6 and additional condensate processing and LPG storage facilities commenced in 2004. Train 6 became operational in December 2007. With six trains currently operational, the entire complex is capable of producing 22 Million Tonnes Per Annum (MTPA) of LNG, and 5 MTPA of NGLs (LPG and Condensate) from 3.5 Billion (standard) cubic feet per day (Bcf/d) of natural gas intake.

The plant has rapidly and successfully made the transition from a construction project to a stable production operation with relentless focus on operational excellence, de-bottlenecking and regular Turn-Around Maintenance (TAM) of the assets whilst imbibing proven techniques and processes to maximise production, and manage human interferences and impacts. All these activities are underpinned by a Health, Safety, Security & Environment (HSSE) culture that continually seeks improvements in the safety and sustainable utilisation of our assets.  Additional projects are in development to extend and rejuvenate the assets beyond their original design life.

Why Train 7 project was delayed

The NLNG is jointly owned by the Federal Government and three other International Oil Companies (IOCs). The Federal Government through the Nigerian National Petroleum Corporation (NNPC) owns 49 per cent stake (49 per cent), Shell (25.6 per cent) Total (15 per cent) and Eni (10.4 per cent).

In 2007 when Train 6 was expected to commence operation, the NLNG awarded the contract for project specifications and FEED for a two 8.5 million metric tons per annum NLNGSevenPlus Project, to TSKJ consortium. TSKJ consortium was made up of Technip, Snamprogetti Netherlands, KBR and JGC Corporation.

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The contract included additional utilities, product storage and loading facilities. It was anticipated that the train 7 project, scheduled for completion in 2007, would become the largest LNG train in the world.

However, it was reported that the project stalled after the consortium was mired in bribe-for contract scandal. Jack Stanley, who led KBR as CEO between 1995 and 2004, had confessed that he paid $182 million in bribes to Nigerian government officials, to win contracts to build the NLNG’s liquefied natural gas facilities on Bonny Island, Nigeria worth more than $6 billion.

Following his guilty plea, KBR and its one-time parent Halliburton had paid $579 million in 2009 to resolve criminal and civil FCPA charges brought by the U.S. Department of Justice under the Foreign Corrupt Practices Act.

In 2010, Technip paid $338 million. And in 2011, JGC paid $218.8 million. The other partner, Snamprogetti, paid $365 million in 2010 to U.S. enforcement agencies for FCPA offenses.

NLNG’s bold step in $12bn plant expansion plan

NLNG has taken a bold and major step towards actualizing its dream of its plant expansion plan by signing the engineering design contracts with to B7 JV Consortium and SCD JV Consortium. The consortia, B7 JV Consortium comprising American company KBR Inc., Technip of France and Japan Gas Corporation and SCD JV Consortium, made up of Saipem of Italy, Japan’s Chiyoda and Daewoo of South Korea, will participate in the Dual FEED Process and produce a Basic Design Engineering Package that will determine their EPC pricing, and eventually their bids to construct the train.

Speaking on the Dual FEED strategy, the Managing Director and Chief Executive Officer of NLNG, Tony Attah, said: “The Front End Engineering Design is the most crucial part in the build-up to the actualisation of Train 7, after some delay and lost opportunities to reinforce Nigeria’s position prominently on the global energy map.

Today’s event goes to show that Train 7 is alive. “Typically, FEED takes about nine to 12 months but we have explored another strategy for this project by adopting the Dual FEED Process which awards this crucial part of the Train 7 project to two prospective engineering consortia, instead of one contractor. What this does for us is give us a degree of freedom to start FEED and sometime after, EPC Bidding, with both activities overlapping. We remain committed to taking FID as soon as these processes are complete.

“The history of the LNG industry in Nigeria is chequered. After about 30 years of trying to get an LNG project going, in 1989 NLNG was incorporated and one FID after the other, six trains were built in quick succession, making us the fastest growing LNG company in the world at the time. But we lost steam just after 2007, while the rest of the world went past us with the development of their gas resources and the gain of greater market share. We started our LNG industry 24 months after Qatar, but Qatargas has attained a production capacity of 77 MTPA with additional target of 30 per cent LNG production in the immediate future. I believe it is time to reset the narrative. It is time for gas revolution in Nigeria.

“So, 30 years after the incorporation of NLNG, and 20 years after we exported our first LNG cargo, we are looking to the future and that future for us is Train 7. Activities are lining up for this project.

With the continued support of the Federal Government of Nigeria and the Shareholders towards this future, the odds are clearly in our favour.”

FG committed to actualizing Train 7 project

Minister of State for Petroleum Resources, Dr Ibe Kachikwu, during his visit to NLNG site in Bonny Island recently, reiterated Federal Government’s commitment to Train 7 and beyond. According to him, “we say every time to people that they should look at the Nigeria LNG model. The model has stood the test of time. It has worked, it is efficient, non-interventionist and very transparent. To all of you who are leaders here, you need a lot of praise and support for the consistency to which you have delivered. I challenge you to look at this and grow from the 30 MTPA you are talking of now to about 40 MTPA over the next 30 years. Although your market today is focussed on externalisation, you will soon see government policies drive you towards internalisation very rapidly.”

On her part, Minister of Finance, Kemi Adeosun, stated that “It is very important to note that the government has done many things that signal its commitment to sustaining this investment in the NLNG and being part of its success story. The NLNG facility has been generating huge revenue in taxes and dividends to the government. We have seen the old Trains 1 to 6, and the space for the incoming Train 7 which has the potential of creating 10,000 jobs in the next nine months. The jobs to be created will be sustainable for the next five to six years and this is extremely exciting because the multiplier effects will be huge. The Federal Government had made fiscal changes to enhance the competitive position of the NLNG by removing the disparity in VAT in tax treatment between imported and local Liquefied Petroleum Gas.

“That will give an additional market share to NLNG-produced LPG, and of course it is a major objective that the management has campaigned for and the Federal Executive Council has approved it. So, we expect greater market share to the NLNG; of course, that has knock-on effects, it stops people from using firewood to cook, it stops deforestation.”

Conclusion

After completion, Train 7 will add eight million metric tonnes to current 22.3 million metric tons per annum (Mtpa). Nigeria will be producing over 30Mtpa and thus expand its market share further by possibly overtaking Malaysia and become the third largest LNG producer in the world. Qatar is the world largest LNG producer with 14 Trains and 77million Mtpa output, Australia is second with 55.6Mtpa, Malaysia is third with nine trains and 26.9Mtpa, Nigeria is fourth with six trains and 20.3Mtpa. Others are Indonesia with 18.7Mtpa, Algeria with 12.3Mtpa, U.S with 12.2Mtpa and Russia has 11.5Mtpa.