Delayed NLNG Train 7 Set to Get Underway

After years of delay, shareholders of the Nigeria Liquefied Natural Gas (NLNG) – the Nigerian National Petroleum Corporation, Shell, Total and Eni, on Wednesday in London, signed the front-end engineering design contract for the much awaited NLNG Train- 7 project, an indication that the company was inching closer to realising its expansion goals of increasing LNG production from 22 Million Tonnes Per Annum (MTPA) to 30 MTPA.

The contract was awarded to B7 JV Consortium and SCD JV Consortium. B7 JV Consortium comprises American company KBR Inc.,Technip of France and Japan Gas Corporation, (the joint venture partners that built the existing six trains) and SCD JV Consortium, made up of Saipem of Italy, Japan’s Chiyoda and Daewoo of South Korea.

Under the fresh contract terms, the consortia will participate in the dual FEED process and produce a basic design engineering package that will determine their Engineering, Procurement and Construction (EPC) pricing, and eventually their bids to construct the train.
The train-7 project has been in gestation for more than a decade.

In 2007, the NLNG had awarded TSKJ consortium made up of Technip, Snamprogetti Netherlands, KBR and JGC Corporation, the contract for the preparation of project specifications and front-end engineering and design (FEED) for a two 8.5 million metric tons per annum NLNGSevenPlus Project.

The contract included additional utilities, product storage and loading facilities. It was anticipated that the train-7 project, scheduled for completion in 2007, would become the largest LNG train in the world.

But this ambitious target could not be achieved as the project was halted after the consortium was mired in bribe-for contract scandal.
Jack Stanley, who led KBR as CEO between 1995 and 2004, had confessed that he paid $182 million in bribes to Nigerian government officials, to win contracts to build the NLNG’s liquefied natural gas facilities on Bonny Island, Nigeria worth more than $6 billion.

Following his guilty plea, KBR and its one-time parent Halliburton had paid $579 million in 2009 to resolve criminal and civil FCPA charges brought by the U.S. Department of Justice under the Foreign Corrupt Practices Act.
In 2010, Technip paid $338 million. And in 2011, JGC paid $218.8 million. The other partner, Snamprogetti, paid $365 million in 2010 to U.S. enforcement agencies for FCPA offenses.

TSKJ consortium built the existing six trains between 1999 and 2007. The consortium was awarded the EPC contract for Trains 1 and 2 and the necessary site infrastructure in December 1995. The first two trains started up in August 1999 and February 2000 respectively. Train 3 with LPG recovery facilities was awarded to TSKJ in March 1999 and was completed in 2002, while Trains 4, 5 and 6, were completed in 2005, 2006 and 2007 respectively.

Sources familiar with the deal explained over the weekend that a fresh FEED contract for the seventh train became necessary given that more than 10 years had elapsed since the studies were carried out by TSKJ consortium and with technology advancement, the NLNG needed to carry out new studies and FEED to come up with the best results.

At the signing ceremony, which witnessed the commemoration of repayment of $5.45 billion shareholders loan for the existing six trains, Managing Director and Chief Executive Officer of the NLNG Limited, Mr. Tony Attah revealed that the company was shopping for about $7billion from the global financial markets to expand its operations.

Attah explained that the loans being sought would cover the cost of construction of Train-7 and investment in the upstream gas sector in Nigeria that will ensure the sustainability of feedgas supply to the existing six trains and the seventh train.
On the Dual FEED strategy, Attah, explained: “Typically, FEED takes about 9-12 months but we have explored another strategy for this project by adopting the Dual FEED Process which awards this crucial part of the Train 7 project to two prospective engineering consortia, instead of one contractor. What this does for us is give us a degree of freedom to start FEED and sometime after, EPC bidding, with both activities overlapping” Attah, who restated the firm’s committed to taking the FID on the project in December this year, confirmed that the company had been making efforts to build the train-7 plant since 2007.

“Let me establish that this is a very historical moment for us, rekindling what is Train-7. We have made efforts to do Train-7 since 2007, essentially, we’ve been at it for almost 10 years, but we believe that this is the moment. As one of my friends will say, the stars are lining up in favour of our company and this project,” said Attah.

He further noted: “The history of the LNG industry in Nigeria is chequered. After about 30 years of trying to get an LNG project going, in 1989 NLNG was incorporated and one FID after the other, 6 trains were built in quick succession, making us the fastest growing LNG company in the world at the time. But we lost steam just after 2007, while the rest of the world went past us with the development of their gas resources and the gain of greater market share. We started our LNG industry 24 months after Qatar, but Qatargas has attained a production capacity of 77 MTPA with additional target of 30% LNG production in the immediate future. I believe it is time to reset the narrative. It is time for gas revolution in Nigeria.

“So, 30 years after the incorporation of NLNG, and 20 years after we exported our first LNG cargo, we are looking to the future and that future for us is Train 7. Activities are lining up for this project. With the continued support of the Federal Government of Nigeria and the Shareholders towards this future, the odds are clearly in our favour.”
Also speaking at the signing ceremony, the NNPC GMD, Maikanti Baru expressed the corporation’s readiness to support the federal government’s aspirations to actualising the train 7 project.

Baru said as a 49 per cent shareholder in the NLNG, the corporation had immensely contributed to the success of the company over the years, supporting equity participation and contribution to shareholders’ loan.
“Through critical interface with relevant government agencies, we have played a pivotal role in the actualisation of Trains 1 to 6. Given the success of T1-T6, the NNPC is therefore fully committed and aligned with the government aspirations to replicate the success of this project. Therefore, our current focus is to kick-start T7,” Baru said.

With the six trains in full operation, the entire complex currently produces 22 million tonnes per annum (mtpa) of liquified natural gas (LNG), and 5 mtpa of natural gas liquids (NGLs) from 3.5 billion (standard) cubic feet of natural gas intake.
Expectedly, the coming on stream of the seventh train will lift the total production capacity of the plant to 30 metric tonnes per annum (mtpa) of LNG and also boost the company’s contribution to the economy of Nigeria.

Attah disclosed last year that the company generated over $90 billion in revenue, and $15 billion to the federal government, and more than $6 billion in taxes since it became taxpaying in 2009. Given its contribution to the economy, an early completion of the project means more money for Nigeria.

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But the award of the train-7 contract to a consortium that was involved in the bribe-for- contract scandal, has unsettled industry watchers, who posited that action ran foul of the present administration’s anti-graft campaign. NLNG is owned by four Shareholders, namely the Federal Government of Nigeria, represented by NNPC (49%), Shell Gas B.V. (25.6%), Total Gaz Electricite Holdings France (15%) and Eni International N.A. N. V. S.àr. l (10.4%).
They noted that many of the decisions about the project will be taken in the next few months. … If the project survives the political hurdles, the chances for its eventual take-off are therefore guaranteed.

Jack Stanley, who led KBR as CEO between 1995 and 2004, had confessed that he paid $182 million in bribes to Nigerian government officials, to win contracts to build the NLNG’s liquefied natural gas facilities on Bonny Island, Nigeria worth more than $6 billion.

Following his guilty plea, KBR and its one-time parent Halliburton had paid $579 million in 2009 to resolve criminal and civil FCPA charges brought by the U.S. Department of Justice under the Foreign Corrupt Practices Act.

In 2010, Technip paid $338 million. And in 2011, JGC paid $218.8 million. The other partner, Snamprogetti, paid $365 million in 2010 to U.S. enforcement agencies for FCPA offenses