The Nigerian LNG project originally began in March 1985. A framework of Agreement was signed in November of that year between the NNPC, Shell Gas BV, Cleag Bermuda (ELF) and Agip International BV, with Shell as the technical partner, because of its vast international experience. Equity structure of the project is as follows: NNPC (49%), Shell (25.6%), Elf (15%), Agip (10.4%).
Scope of the Project: The Nigerian LNG project consists of the construction and operation of a new 5.7 million metric tonne per annum capacity liquefied natural gas plant. The project will include a two-train liquefaction plant producing about 7.23 billion cubic meter of LNG per annum, a 218 km gas pipeline system linking the plant to the gas fields at Soku, Obiafu/Obrikom, Ibewa/Obiagi, Idu and Ubeta, all located in the Eastern Niger Delta, associated utilities, storage/loading facilities and other infrastructure, six ocean going cryogenic vessels; and residential quarters for NLNG project staff.
Total project cost is estimated at 3.8 billion US Dollars, of which 0.5 billion US Dollars has already been spent on the acquisition of four LNG ships and pre-implementation expenses. The EPC contract was awarded to the contractor-consortium of TSKJ -Technip, Snamprogetti, Kellog and JGC in December 1995. An indigenous company- National Engineering and Technical Company Limited (NETCO) has been appointed as a subcontractor. It is expected to provide engineering support services to the main contractor-TSKJ in the area of detailed engineering. NETCO is a 60/40 joint venture between the NNPC and BECHTEL of the US. All the LNG will be sold through firm 22.5 year sale agreements which include specific take or pay clauses. Delivery prices escalate from an agreed base value according to indexation formulas linking alternative energy values and other factors in the European gas market. The major share of the production volume (48.95%) has been contracted to ENEL, the Italian state electricity company, while the remaining volume has been sold to the following gas companies:Enargas of Spain (22.38), Gaz de France (6.99%), Botas (12.99%), leaving about 9.09% of uncommitted volume.
LNG Shipping Arrangement: The Bonny Gas Transport Limited (BGT), a subsidiary of the Nigerian LNG, was incorporated in Bermuda in 1979 and charged with the shipping service for the project. All the four ships owned by the BGT are registered in Bermuda. The management of the LNG vessels has been contracted to Shell International Trading and Shipping Company Limited (STASCO). Six out of the seven ships required with cargo capacities in the range of 122,000-133,000 cubic meters have been acquired. These include two vessels, Lake Charles and Louisiana, on time charter from Lachmar, a division of Pan Ocean of the US.
NLNG project Gas Supply Arrangement: The project feedgas will be supplied from designated gas fields of joint ventures based on a June 26, 1992 agreement with the Nigerian LNG Limited. A request for additional feedgas, to meet an estimated 30% LNG production volume increase arising from the adoption of APCI’s liquefaction process technology, has been made to the gas suppliers. The feed gas required for the project is about 26.6 million standard cubic meters per stream day at maximum plant operation.
The Nigerian LNG Project and Environmental Issues: The various environmental impact assessments undertaken for the LNG project since 1989 have been in conformity to relevant regulatory framework in Nigeria and the borrowing requirements of the IFC which previously has a 2% stake in the project. The regulations are in the Federal Environmental Protection Agency (FEPA) Decree #58, of 1988, the National Guidelines and Standards for Environmental Pollution Control in Nigeria (1991) and the Environmental Impact Assessment (EIA) Decree 86 of 1992. At the end of 1995, certification of impact assessment was granted to the LNG project by FEPA. Other gas-based projects are in the process of obtaining obtaining necessary certification. There is a concern about the incidence of environmental degradation in the Niger Delta, a region of about 70,000 square kilometres that is considered the largest wetlands in West Africa and a complex eco-system. Partly as a result of heightening environmental concern, most operators in this region are standing up to recognise their responsibility.