Nigeria Awards Pipeline Work, Omits Middle
Nigeria this week awarded contracts for two sections of its ambitious 614km AKK gas pipeline, but without awarding the job to build its middle section.
The strategic pipeline project would carry gas into northern Nigeria for the first time, reducing its reliance on more pollutive oil. The government has set a highly challenging target of 2020 for its completion, and has included an experienced Chinese contractor on part of the project. But details of its financing have not been fully disclosed.
The Ajaokuta-Kaduna-Kano (AKK) project, expected to cost over $2.8bn, was cleared for development in December 2017. State producer Nigerian National Petroleum Corporation (NNPC) announced April 8 it had awarded two of the three long-distance construction contracts and that the entire project should be completed within 24 months. But it remains unclear when the middle section (Lot 2) will be awarded.
The southernmost section (Lot 1) was awarded to the Nigerian consortium of OilServe/Oando and has a contract value of about $855mn. It extends from Ajaokuta to the Abuja Terminal Gas Station, and consists of a 200km pipe section.
The northernmost section (Lot 3), extending 221km, was awarded to a consortium of Abuja-based Brentex with China Petroleum Pipeline Bureau (CPPB) for a contract value of about $1.2bn. A subsidiary of the state-owned producer China National Petroleum Corporation, CPPB builds many of China's oil and gas pipelines and has experience as a contractor in India, Thailand, plus Caspian and African countries.
However when contacted by NGW this week, NNPC said it could not disclose any information regarding the Lot 2 contractor, saying it had yet to decide on the matter. That contract – worth some $835mn – is for a route stretching 193km from the Nigerian capital Abuja northwards to Kaduna. All three sections, or lots, will have pipe of 40-inch diameter.
Contracts will be executed using contractor financing agreements to be repaid over a 15-year period, said NNPC sources without elaborating.
Currently there is not enough gas production, or infrastructure, in southern Nigeria to serve fully the needs of existing gas-fired power generation capacity built in that region, on top of Nigeria's LNG exports.
Over a decade ago, NNPC with its Algerian state counterpart Sonatrach planned to extend gas infrastructure through northern Nigeria and across the Sahara to Algeria. That 4,128km, 30bn m3/yr 'Trans-Sahara Gas Pipeline' venture eyed the possibility of gas exports to Europe. But, without any part of it having been laid, the price tag had tripled to $21bn by 2010 - a point when the decline in European gas demand marked the pipe's death knell. Islamist insurgency on parts of the uneconomic route would have made construction unsafe; this remains a concern now for parts of AKK’s planned northern route.