Oilserv: Force Majeure on NLNG’s 22MTPA Processing Plant Big Blow to Nigeria’s Economy

*Says flood also impacted delivery of $2.5bn AKK pipeline project  

*NLNG backtracks, says Bonny plant not shut down completely

Peter Uzoho

The Chairman of Oilserv Group and Chief contractor of the $2.5 billion Ajaokuta-Kaduna-Kano (AKK) gas pipeline, Dr. Emeka Okwuosa has described the force majeure declared by the Nigeria Liquefied Natural Gas (NLNG) Limited on its 22 million tons per annum (MTPA) processing plant due to flooding as a big blow for Nigeria’s economy.

Okwuosa also lamented the impact of the massive flooding, which has devastated many parts of the country, on the execution of the $2.5 billion AKK project, saying the incident has disrupted the movement of pipelines and trucks to the project site.
This is coming as the NLNG has backtracked on its earlier statement on the force majeure, saying its Bonny plant was still in operation but was working at limited capacity.

Okwuosa, who spoke to journalists on the sidelines of the just-concluded energy summit organised by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), maintained that the shutdown of NLNG’s operation due to the flood would impact the country negatively.

“Definitely, it’s a big blow. First of all, from the point of view of national economy, it’s a big blow because Nigeria needs all it can get to be able to run its economy and, you may wish to know that a big chunk of our revenue comes from the export of oil as well as gas. Now, to look at what has just happened with NLNG declaring force majeure. Obviously, the massive flooding has been in the news in the past couple of weeks.

“We are impacted as a company also. We are building the Ajaokuta-Kaduna-Kano pipeline, the first section of it which starts from Kogi (Ajaokuta) to the boundary of Kaduna State and I can tell you, in the past two weeks, we’ve not been able to move our pipes, we’ve not been able to move our trucks. It’s very impactful,” the Oilserv chairman said.

He explained that when flood of such magnitude occurs, it would definitely impact oil and gas production because the facilities would be affected.
According to him, a major part of the gas that feeds NLNG comes from Associated-gas, which is gas produced along with crude oil, adding that when there are constraints in oil production, it affects gas production.

“That’s also why we are having less volumes going to NLNG right now because of the fact that oil production is affected. Quite a large chunk of production is shut in at the moment by many producers and I know clearly that NLNG must be struggling. So it’s very impactful,” Okwuosa noted.
He said current measures being taken by the Nigerian National Petroleum Company Limited (NNPCL) and other stakeholders including the security agencies to tackle the alarming oil theft and vandalism was a step in the direction.

Believing that those actions by the stakeholders would make a difference, Okwuosa stressed the need to bring back Nigeria production up and try to at least meet the daily quota granted by the Organisation of Petroleum Exporting Countries (OPEC).

He said it made no sense that Nigeria would not be able to take advantage of the current high oil price, a situation he said was not the best for the country.
“NNPC is moving in the right direction. But if I may add, I would say that definitely, what is important is to go to the root cause of this issue. It is important to be sure what is causing it. Who are the players in this issue? And then, how do we go about dealing with it.

“The issue of getting the security agencies involved is a no brainer. Definitely, you cannot enforce without interfacing very well with security agencies, whether it is the Army, or the Police, Civil Defence, of course the Navy. And I can say clearly therefore, we need to the root of it,” he stated.

The other measure to be explored in fighting oil theft, according to him, was total engagement with of the host communities.
“It’s also important that the producers are huddled together with NNPC Limited, huddled together with the Upstream Regulation Commission and be able to come up with clear steps that you can say are sustainable because it’s not just about solving the problem for today, it is about solving it permanently. It is important that we address it like this,” Okwuosa added.
Meanwhile, the NLNG has backtracked on its earlier statement on the force majeure, saying its Bonny plant was still in operation but was working at limited capacity.

The General Manager, External Relations and Sustainable Development, NLNG, Mr. Andy Odeh, said in a statement yesterday that its plant was in operation though at a limited capacity, due to reduced gas supply from some of its upstream gas suppliers.
“None of NLNG’s assets on Bonny Island or in any of its host communities are impacted by the flood. The Force Majeure is as a consequence of a similar notice by Upstream Gas Suppliers due to the impact of flood in their production facilities.

“NLNG is working with all critical stakeholders on mitigating the impact on product deliveries.  
NLNG continues to monitor the situation with Upstream Gas Suppliers and is evaluating the impact of the flood on its business,” Odey said.
Odey had in a statement on Monday said all of the company’s upstream gas suppliers had declared force majeure, forcing it to make the declaration as well.
He had added that the notice by the gas suppliers was a result of high floodwater levels in their operational areas, leading to a shut-in of gas production which has caused significant disruption of gas supply to NLNG.