on the LNG project (17% interest being purchased)

 

Falling natural gas prices at the global market due to the discovery of Shale gas around the world has threatened the implementation of three Liquefied Natural Gas (LNG) projects.

NOGintelligence gathered that shareholders in three major LNG projects have failed to reach Final Investment Decision (FID) on the projects, which have been in the drawing board for several years because of a drop in gas prices at the international market.

The projects include the Brass LNG in Brass Island of Bayelsa State; Olokola LNG sited between Ogun and Ondo States and the Train 7 at Bonny Island of Rivers State.

The Brass LNG has consumed a pre-FID expenditure of $1billion, demonstrating the faith of the various investors in the project but the FID for the two-train, 10 million metric tonnes per year (mmt/y) project is yet to be signed.

NOGintelligence gathered that the shareholders are concerned that the investment may no longer guarantee adequate returns on investment as Shale gas has become a game changer in the global energy dynamics.

Market results indicate that with the discovery of Shale gas in some countries, the Henry Hub reference price of gas has dropped to less than $3 per million British Thermal Unit (mbtu), from $7 within one year.

A source familiar with the LNG projects confirmed that when the projects were initiated several years ago, the price of gas was over $15mbtu before the current drop.

(NNPC) holds 30 per cent equity in the Brass LNG project, while Bayelsa State government has 10 per cent, with LNG Japan and Itochu Corporation, controlling four per cent and three per cent, respectively.

A joint venture between indigenous company Sahara and France-based Sempra Energy holds two per cent.

American oil group, ConocoPhillips, French firm,Total and Italian company Eni also hold 17 per cent stake. Total acquired Chevron’s stake after the American oil major pulled out of the project at the height of militancy in the Delta in 2006.  The project is further threatened by the indications by one of the project’s promoters, ConocoPhillips, that it will sell its assets.