NLNG Train 7 Project Threatened as Shareholders Shelve Investment Decision

By Chika Amanze-Nwachuku

There are strong indications that the Nigeria Liquefied Natural Gas (NLNG) Limited’s expansion project may experience further setbacks as shareholders failed to take a Final Investment Decision (FID) on the much publicised $12 billion Train 7 project earlier scheduled for this month without giving a new timeline within which the project would be actualised.

The implication of this is that the management of the company could not proceed with the expansion project, which has been on the drawing board for more than 10 years.

It is also feared that given that there is no  new date being designated for the FID, the company’s aspiration to grow its production capacity to 30 mtpa from 22 metric tonnes per annum of Liquefied Natural Gas (LNG) to make Nigeria the 3rd World largest gas exporter, may not be actualised anytime soon.

The shareholders of the company had fixed December 2018 for the FID on the new eight million tonnes per annum (MTPA) LNG Train-7 plant, with the duo of Minister of State for Petroleum Resources, Dr. Ibe Kachikwu and the Managing Director of NLNG, Tony Attah, emphatically stating that the FID would not be affected by potential vagaries of Nigeria’s 2019 general election.

Kachikwu had stated that Nigeria’s 2019 elections would not interfere with the company’s expansion plan, and that whatever happened at the polls, the FID on Train-7 as well as its construction would go ahead.

“Nigeria LNG is always being insulated from politics, it doesn’t matter who is in government or what election purposes are on. They’ve always been a well-run company, independent, strong shareholders, strong board, strong management, in many ways I think this island is insulated from the shenanigans of party politics and all that. 

“The Train-7 is fantastic but that’s not a good history after nearly 30 years of operation. I think the first meeting I had with the board, I told them Train-7 is no longer going to be an illusion”, Kachikwu said.

Speaking in the same vein, Attah gave a firm assurance that the 2019 general election in Nigeria will not derail the plans for Train-7.

“Essentially we are giving it everything we have. We’ve got the best supports now, the shareholders have approved that we can go for it. We are ready and believe it is time for Train-7”.

However, indications that the NLNG expansion project may remain a mirage first emerged when the FID was not taken after the Board of Directors of NLNG, in 2017 gave an earlier approval for the FID, on the Train 7 project.

Attah, had confirmed the board approval in Abuja, during the send-off and welcome ceremony for out-going General Manager, Human Resources of NLNG, Mr. Peter Odjoji and the newly-appointed General Manager, Mrs. Eucharia Ezeani, respectively.

Aside the Train 7 project, two other major gas projects – Olokola Liquefied Natural Gas (OKLNG), and Brass LNG, conceived almost two decades ago, to increase Nigeria’s share of the global liquefied gas market, have been stalled as their FIDs are yet to be taken despite gulping, billions of dollars.

The OK LNG project was stalled because the multinational oil companies (BG, Shell and Chevron) withdrew from the project. Similarly, the Brass LNG project, which was designed to produce 10 million metric tonnes per annum, was stalled, after some of the partners withdrew from the project.

NLNG shareholders– the Nigerian National Petroleum Corporation, Shell, Total and Eni, had in July signed the front-end engineering design (FEED) contract for the much awaited NLNG Train- 7 project, in line with its goal of increasing LNG production from 22 Million Tonnes Per Annum (MTPA) to 30 MTPA.

The contract, which was sealed in London, 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.

Another indication that the project might encounter hitches emerged when it was discovered after the London signing, that B7 JV Consortium and SCD JV Consortium, the two consortia that clinched the $4.3billion contracts for the FEED of the Train-7 project were the same companies involved in the $182 million bribe-for – contract scandal that rocked the Nigerian oil and gas sector in 2007. This was exclusively reported by THISDAY.

The development had elicited reactions from oil and gas industry stakeholders, who said that “it portends danger to a sector that is already corrupt-ridden.”

But justifying the deal, a spokesman of the NLNG, Mr. Andy Odeh said despite the bribery scandal, the consortia are still carrying on businesses in various countries of the world uninhibited. He said that NLNG was at liberty to engage their services, having obtained regulatory approval from relevant government agencies for the project.

 Odeh said: “The two consortia for the Train-7 FEED – SCDJV and B7JV are joint venture partners that comprise existing legal entities, duly registered and currently carrying on business in various countries of the world uninhibited including Nigeria and are eminently qualified to undertake the required job scope.

“NLNG was therefore at liberty to engage the services of the consortia, having qualified after duly participating in a process that underwent regulatory scrutiny and obtained due approval from all concerned government agencies”, he posited.

B7 JV Consortium comprises American company KBR Inc.,Technip of France and Japan Gas Corporation, and SCD JV Consortium is made up of Saipem of Italy, Japan’s Chiyoda and Daewoo of South Korea.

The US Department of Justice and the Nigerian Government during investigations, discovered that the joint venture team of Technip-Coflexip, Snamprogetti, Halliburton KBR and JGC Corporation, known as TSKJ, KBR Inc.,Technip of France, Japan Gas Corporation, KBR Inc., and Siapem, paid $182million in bribes to Nigerian government officials  to secure the initial $6 billion contracts for the construction of the NLNG’s liquefied natural gas facilities on Bonny Island between 1995 and 2004.

Consequently, consortia collectively paid more than $1.5 billion in fines between 2009 and 2012 to settle criminal and civil FCPA charges brought against them by the U.S. Department of Justice under the Foreign Corrupt Practices Act.  

Jack Stanley, who was KBR CEO between 1995 and 2004, had confessed that he paid the $182 million in bribes to Nigerian government officials, to win four contracts to build the NLNG’s liquefied natural gas facilities on Bonny Island, Nigeria worth more than $6 billion.  Also,  a former KBR manager in the U.K., Wojciech Chodan, pleaded guilty in December 2010 to one count of conspiracy to violate the FCPA.

Following the guilty plea, KBR and Halliburton 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. The DOJ concern stemmed from revelation that some foreign oil companies and their contractors made illegal payments to high government officials in Nigeria to secure ‘juicy’ oil and gas contracts.

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

In 2016, the sixth criminal section of the Italian High Court turned down Saipem’s appeal against the February 2015 sentence of the second criminal section of the Milan Court of Appeal, which concerned offences alleged to have been committed in Nigeria by Snamprogetti Netherlands BV in connection with the activities of the TSKJ Consortium.

The High Court refused Saipem’s appeal against the Appeal Court’s sentence, which had upheld the ruling of the fourth criminal section of the Court of Milan, which in July 2013 ordered the Company to pay €600,000, as well as the confiscation of the deposit of €24,530,580, in connection with offences covered by Italian Legislative Decree 231/2001 for which the Company is alleged to be responsible. This deposit was paid by Snamprogetti Netherlands BV to the Milan Public Prosecutor’s office in February 2011.

TSKJ 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 a facility 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.

At the signing ceremony in London, which witnessed the commemoration of repayment of $5.45 billion shareholders loan for the existing six trains, Attah had revealed that the company was shopping for about $7 billion from the global financial markets to expand its operations.

He 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.

NNPC holds a 49% stake in NLNG, Shell, 25.6%, Total, 15% and Eni, 10.4%.