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Olokola LNG.

Shortly before leaving office after eight years as president in May 2007, Olusegun Obasanjo performed a ground-breaking ceremony for the commencement of the Olokoka LNG project (OK-LNG). He then said Nigeria would earn about $10 bn a year from LNG by 2011. He also signed the agreement of the Olokola Free Trade Zone (OKFTZ) in Olokola in the south-western coastal state of Ogun, meaning OK-LNG enjoyed a free zone status as in the case of the other LNG ventures in Nigeria.

Obasanjo, who hand-picked Umaru Yar'Adua to succeed him as president, said OK-LNG was part of his commitment to ensuring sustainable economic growth in the country. OK-LNG was planned to have four trains with a capacity of 22m t/y by 2013, with the first two trains (11m t/y) to be on stream in 2011. In the second phase the complex should also produce about 300,000 b/d of LPG and condensate. Ultimately, the complex was to have the capacity of 33m t/y of LNG.

NNPC then had 40% in OK-LNG, Chevron held 19.50%, Shell had another 19.50%, and BG Group held 14.25%, while the remaining 6.75% was for strategic investors. Obasanjo then said Nigeria will supply natural gas to Equatorial Guinea, having its own LNG export venture.

On July 29, 2009, however, BG Group said it was reducing funding of its share of OK-LNG and switching investment to develop newly acquired assets in Australia. BG Group then said OK-LNG project's construction was being delayed amid surging costs and government plans to divert gas to the domestic market. So, it said, BG's focus had shifted.

Obasanjo in May 2007 said that, by 2014, Nigeria should have major LNG export terminals at three key points along the Nigerian coast spread from east to west. The then president said Nigeria's Gas Master Plan was initiated with maximised revenue fund to enable a multiplier effect for natural gas in the domestic economy and preserve energy security for the country.

Besides the foreign exchange to be realised from OK-LNG in 2012, Obasanjo said the communities around the project and Ogun and Ondo States in general were to benefit immensely from this. It was then said that over 10,000 direct and indirect jobs would be created for Nigerians for a period of four years. Already, the communities around the project then were witnessing development owing to the location of the OK-LNG plant. This had led to rehabilitation of the Ode-Omi jetty, which had been abandoned for years, with a 13 km road in the Olokola area also being upgraded. Banks and telecom firms had converged on this area to benefit from the project's effects. A pioneer camp being built there was then generating a lot of interest with various contractors and suppliers positioning themselves to get a part of the action.

OK-LNG and related pipeline projects were then estimated to cost about $10 bn. At the ground-breaking ceremony Ogun Governor Gbenga Daniel said: "With this project, we are convinced that a lot of benefits would be enjoyed by our people as well as investors who came into the Free Trade Zone".

Gas supply to OK-LNG was to initially come from Shell and Chevron operated JVs. About 1,000 MCF/d of gas would be required for each train. Another 500 MCF/d would be needed for internal energy consumption. The BG group had the option to participate in the supply of gas to the third and fourth trains.

In March 2007, NNPC awarded the EPC contract for the plant to Technip of France. The project was to include connecting the LNG plant to oil and natural gas reserves in the Niger Delta through a network of pipelines. But now there is a question mark over this and the other LNG projects.
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Publication:APS Review Gas Market Trends
Date:Aug 17, 2009
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