Shell, Chevron Unaware of NNPC’s Plan to Extend $1bn Gas Pipeline to Cote d’Ivoire

Gas-Pipeline
  • Shell, Chevron Unaware of NNPC’s Plan to Extend $1bn Gas Pipeline to Cote d’Ivoire

Shell and Chevron, which are major shareholders in the Chevron-run West African Gas Pipeline Company Limited (WAGPCo), owners of the $1 billion West African Gas Pipeline, are not yet aware of the plan by the Nigerian National Petroleum Corporation (NNPC) to extend the 678-kilometre pipeline to Cote D’Ivoire, investigation has revealed.

Also, investigation gathered at the weekend from the Managing Director of WAGPCo, Mr. Walter Perez that the existing pipeline, which runs from Nigeria to Togo is currently underutilised with only 70 million standard cubic feet per day of gas (mmscf/d) available in the 150mmscf/d capacity pipeline.

Perez, however, noted that the 70 mmscf of gas available daily is enough to service end users in Ghana, Togo and Benin Republic.

N-Gas, which is a separate company, also jointly-owned by Shell, Chevron and the NNPC, buys gas from oil companies in Nigeria and transport the it to its customers in Benin, Togo and Ghana, through the pipeline, operated by WAGPCo.

With headquarters in Accra, WAPCo is owned by Chevron West African Gas Pipeline Ltd (36.9 per cent); NNPC (24.9 per cent); Shell Overseas Holdings Limited (17.9 per cent); Takoradi Power Company Limited (16.3 per cent), Societe Togolaise de Gaz (two per cent) and Societe BenGaz S.A. (two per cent).

The pipeline is connected to Escravos-Lagos pipeline from Itoki area of Ogun State and goes through Agido near Badagry in Lagos, passing through 33 Nigerian communities and thereafter goes offshore to the three countries.

Despite the inadequate gas supply to the existing pipeline, which has left the $1bn facility virtually empty, the Group Managing Director of NNPC, Dr. Maikanti Baru, represented by the corporation’s Chief Operating Officer in charge of Gas and Power, Mr. Saidu Mohammed, had told a delegation led by the Deputy Director, Production, Ministry of Petroleum of Cote d’Ivoire, Mr. Patrick Marshal, in Abuja early this month, that Nigeria would extend gas supplies from Escravos to Cote d’Ivoire through the pipeline.

The commitment to extend the pipeline is also coming at a time many power generating plants in Nigeria are idle as a result of insufficient gas to generate electricity.

However, Chevron and Shell, which are also major shareholders in the project, are not part of the plans to extend the pipeline.

A Shell official who spoke on condition of anonymity, said at the weekend that extending the pipeline was not a priority of the company as “project economics would not justify such investment in the face of the prevailing gas supply challenges in Nigeria”

“Where is the gas that will feed the pipeline? The agreement initiated by ECOWAS is that N-Gas should be allocated a space in the pipeline to take up to 200 million standard cubic feet of gas per day to its customers. But at the best of times, the gas supply has never exceeded 120 mmscf/d. So, what are the fundamentals driving the proposed extension?” he queried.

A Chevron source, who also spoke on the matter, disclosed that NNPC, Shell and Chevron, which are the owners of N-Gas, had paid in excess of $15 million as compensation to Ghana’s Volta River Authority (VRA), for failure to meet their contractual obligations on gas supply to the Ghana’s electricity producing company as specified in a 20-year contract.

According to him, the contract provides that if N-Gas does not supply the gas, it pays compensation to enable VRA buys crude oil to augment the gas shortfall.

“They have defaulted on several occasions and paid compensation in excess of $15 million. If the shareholders are paying compensation because they default in providing gas, how could they talk of extending the pipeline to supply gas to additional areas when there is no gas to feel the space in the existing pipeline and supply current customers? I think NNPC was making political statement,” he explained.

Investigation gathered that WAGPCo’s nameplate capacity is to transport 475mmscf of gas per day but only less than 130 mmscf/d of gas was available at the best of times, thus leaving the facility to be sub-optimally utilised.

Perez said at the weekend that the pipeline has the capacity to move 150 mmscf of gas to customers daily at the moment but is currently transporting only70 mmscf/d because that is what the customers require.

“We can move over 150mmscf per day today but we are operating at 70 mmscf/d currently. Today, they (customers) require 70 mmscf/d and that is why we are moving 70 mmscf/d. What they call for is 70 mmscf/d and that is why we are moving 70 mmscf/d but we are working to increase it to higher levels but today, that is what they are calling for,” he explained.

Perez also cited pipeline vandalism, debt and availability of alternative energy supplies to the company’s customers as some of the challenges facing the company.

“The industry has been challenged with vandalism but the good news is that the volumes of gas have come back and we are quite please with that,” he said.

“The challenge for us is that when the gas supply is not available, our customers have to find alternative supplies of energy. That is a real challenge for us. When the pipeline was built, there was gas only in Nigeria and very affordable but today, people have access to LNG and are also developing their own resources. So, when our pipeline is not available, it makes our customers to go out and look for alternatives. For us, it is important that when the gas is available, we can move it. Today, like I said, the customers are calling for a certain amount and we are providing them,” Perez explained.

“Debt is an issue that we are working to resolve. We see a window of opportunities coming in the next couple of months. So, we are working with the people involved to settle their accounts with WAGPCo,” he added.

Investigation revealed that due to the non-utilisation of the pipeline by N-Gas, sub-regional ministers, otherwise referred to as the Committee of Ministers of the West African Countries had planned to amend the International Project Agreement (IPA) to enable other entities to use the pipeline.

Meanwhile, the NNPC has disclosed that it will drastically cut down by 80 per cent, the amount of Nigerian crude oil it gives to third-party traders to export on its behalf for Nigeria from 2018.

It said from the end of 2018, its reformed trading subsidiary – the NNPC Trading Limited, would market 80 per cent of Nigerian crude in the international market, leaving the remaining 20 per cent for third-party traders.

Usually, the corporation uses tenured oil lifting contract with third-party traders to sell volumes of Nigeria’s share of oil produced in its Joint Venture (JV) and Production Sharing Contract (PSC) with International Oil Companies (IOCs) operating in the country.

For instance, it shortlisted 39 firms comprising 18 Nigerian-owned oil companies; 11 international trading houses; five foreign refineries; three foreign National Oil Companies (NOCs) and two of its trading subsidiaries, to lift and export about 700,000 barrels per day (bpd) of crude oil in the 2017 lifting term contract.

However, in an interview obtained yesterday from the latest edition of a refurbished in-house quarterly magazine of the NNPC, the Managing Director of NNPC Trading Limited, Ibrahim Waya, disclosed that from 2018, the corporation would be marketing most of its crude oil with minimal volumes to third-party traders.

Waya, explained that the plan was in line with the merger of NNPC’s four trading subsidiaries – Duke Oil; Hyson Carlson; Nigermed; and NAK Oil, into a single unit, and training of young oil traders at the Princeton College of Petroleum Studies, Oxford England, to undertake the task.

“We have a vision, we want to be somewhere and when we look at what we are doing today, compared to where we were yesterday, we know that we are on a threshold of history,” said Waya in the interview.

However, the NNPC has invited the Economic and Financial Crimes Commission (EFCC), and Department of State Security (DSS) to deal with the lingering acts of fraudulent crude oil sales contract.

In a statement from its Group General Manager, Public Affairs, Ndu Ughamadu, it noted that the fraudulent activities of crude oil scammers was on the rise, and provided insights into the mode of operations of the perpetrators.

Quoting its Group General Manager, Crude Oil Marketing Division (COMD), Mr. Mele Kyari, the statement said the scammers were fond using hotel rooms to perpetrate their acts, adding that NNPC does not sell crude oil from hotel rooms.

Kyari, said the scammers usually lure their unsuspecting victims with higher discount offers on cargoes, and crude allocation.

He noted that: “Some of them even go to the extent of luring their victims to hotels to transact these fraudulent crude oil contracts. The entire public should know that NNPC doesn’t do business of crude oil marketing from hotel rooms.”

According to him, there was only one way of buying crude oil from the NNPC which was through advertisement for the selection of customers who were screened for compliance with NNPC’s expectations and standards.

“There are very high standards we have set and if you don’t meet them, you cannot be our customer. And once you become our customer, we sign a single annual contract with you,” Kyari added, while stating that the crude contracts were typically 30,000 to 32,000bpd which accumulate into a standard cargo size of 950,000bpd per month, but not two to three million bpd contracts as peddled by the scammers.

He also said for the crude oil sale processes to be completed, the customer had to show that he had the capability to sell the cargo to the market and that the NNPC could get its money back.

Stating that 98 per cent of all the documents used by the scammers were fake, Kyari explained that the processes employed by the corporation had not leaked so far.

He said in line with the government’s anti-corruption crusade and NNPC’s commitment to transparency and accountability, the COMD had been collaborating with the Nigerian Police Force (NPF); DSS; and EFCC to checkmate the fraudsters, and that the collaboration was yielding results.

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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