NNPCL: Shaming Detractors with Near Completion of $2.5bn AKK Gas Pipeline Project

Ifeanyi Onuba

On Monday, the leadership of the Nigerian National Petroleum Company Limited, led by the Group Chief Executive Officer, Mele Kyari took a tour to Ahoko, a community in Kogi State to inspect the pace of work at the Ajaokuta-Kaduna-Kano gas pipeline project.

The trip was significant as it came barely five days after a national newspaper, had reported that financiers of the AKK pipeline project have pulled out of the project, citing alleged 570 per cent inflated contract sum, far above global threshold.

The newspaper had claimed in the report that the project had been stalled, as there was no funding to cover cost of the second and third legs from Abuja to Kaduna and Kaduna to Kano due to funding constraints.

Considering the critical importance of the project to the federal government’s gas masterplan initiative and not minding that same Monday was a public holiday declared by the government to celebrate the Eid-Mubarak, Kyari led top officials of the NNPCL to inspect the pace of work at the project site.

The current administration under the leadership of President Muhammadu Buhari has made it a priority to ensure that revenue from oil and gas resources are utilized to support the emergence and growth of other non-oil sectors of the economy.

The NNPC as an integrated energy company is enabling Nigeria’s economic diversification through domestic gas footprint expansion projects by the delivery of the Trans-Nigeria Pipeline Project (TNGP) which includes the Escravos to Lagos Pipeline System (ELPS & ELPS II), the Obiafu,-Obrikom-Oben (OB3) gas pipeline and the Ajaokuta-Kaduna-Kano gas pipeline.

The AKK Gas Pipeline and Stations Project is a flagship project that will further deepen the integration of the Northern region of the country with the Niger Delta, Eastern and Western regions of the Country.

The Scope of Work for the Project includes the construction of a 40″ × 614KM linear section from Ajaokuta in Kogi State traversing the Federal Capital Territory, Niger and Kaduna States and terminating in Kano as well as 24″ × 15KM Spur Line to Abuja Terminal Gas Station. It also includes the construction of Four Terminal Gas Stations, 22 Block Valve Stations, Intermediate Pigging Stations with other ancillary facilities.

The Pipeline has the capacity to transport Two Billion Standard Cubic Feet of Natural Gas Per Day to Three proposed Independent Power Plants in Abuja, Kaduna, Kano, and other Gas-Based Industries as well as other identified and proposed commercial off-takers along the entire pipeline route.

The project has the potential of greatly improving the nation’s power generation capacity and the economy as a whole through industrialization as well as other economic uses.

Since the flag-off of the project by the President in June 2020, the NNPC has recorded significant feats and the inspection visit was one of the moves to showcase the progress so far made in the implementation of the project. Based on the inspection tour, it was revealed that overall engineering design for the linear section of the two segments of the project stands at 93.48 per cent, while the overall procurement for the linear section for the two segments is at 88 per cent.

Similarly, 94 per cent of the total line pipes have been manufactured and 90 per cent already in-country. It is instrumental to state that construction activities on both segments are ongoing, while the contractors have completed 400km of the linear section/mainline welding, representing 68 per cent of Right of Way from Ajaokuta in Kogi state to Kano.

Also, on-going are several special constructions like Direct Pipe Installation (DPI) across the River Niger in Kogi state and other Horizontal Directional Drilling (HDD) across River Robo, Pai and Shika River in Zaria, Kaduna State.

Similarly, several back-end activities have commenced including field joint coating, trenching and lowering, temporary cathodic protection and talks of pre-commissioning of some sections have equally commenced.

In terms of the project financing, the procurement process was supervised by Iinfrastructure Concession Regulatory Commission and endorsed by the Bureau for Public Procurement having complied with all regulatory requirements before the approval by the Federal Executive Council at the sum of $2.8bn in 2018.

The current management of the NNPC further renegotiated the project cost downwards to $2.5bn in 2019 with the attendant savings of $300m, which culminated to a final approval by Federal Executive Council.

Despite this significant savings, detractors of the project have found a way to draw unfounded comparison with other projects definitely not of the same scope, terrain, line pipe specification, welding technology, weather conditions and more importantly the impact of security risks and country risk premiums on Nigerian projects of this magnitude.

As regards the project financing, discussions on financing commenced in 2018 with the Bank of China as the Mandated Lead Arranger, leading a consortium of interested Chinese banks. All the banks secured credit approvals from their various boards to proceed with the deal, which led to the sign-off of the term sheet for the facility with the Bank of China.

Following the execution of the Term Sheet, SINOSURE, the Chinese Government insurance agency in charge of international financing went through their review cycle and endorsed the facility to their Chinese Government body for approval. Concurrent with the financing deal, the NNPC commenced pre-funding the project, which led to the flag-off of the construction by the President on 30th June 2020.

Speaking on the funding, Kyari told reporters that so far, the NNPC has funded over $1.1bn on the project and to date none of the project activities are abandoned as reported. He reassured all stakeholders that NNPC has a line of sight to the delivery of the project on schedule.

The NNPC Boss said that work has not stopped as a result of funding constraint since the project commenced.

He said being a critical infrastructure project for the Nigerian energy sector, the NNPC has been meeting all its funding obligation to the contractors.

He said, “First of all we are here to thank our crew, our contractors, our staff who are doing everything possible to deliver this project and we are most grateful to them and we appreciate the great work they are doing. For the benefit of the Nigerian public, this is one of the most massive projects that we’ll run in the company, it is of immense proportion of value to our country and to the socio-economic growth of our country.

“We know that this is a must deliver project. This project has not stopped for one day. We have continued to fund it despite the fact that we do not have third-party financing for the project. We have so far spent over $1.1bn on this project from our cash flow. We are a very different company today. We are a commercial company. We have inter-company laws within our company now. This company can fund this project, so we do not need any support on this project to deliver this project now.

“As we speak now, we don’t owe a dollar to our contractors today. We paid all their invoices, there are over 30 sites that are active today in this project, and we are very hopeful that we will deliver this project.”

He commiserated with the families of workers that have died as a result of the security challenges at the project site and added that the government is committed to ensuring that it does all it can to provide more security personnel at the project site to guarantee the timely delivery of the gas project.

Responding to a question if the project was actually stalled as a result of funding challenges, Kyari explained that such has never happened.

He said the NNPC has what it takes to fund the project till completion, noting that no amount is currently being owed based on the quantum of jobs delivered by the contractor

He added, “Yes, there are challenges like security issues. We have lost men, and we are so sorry to their families. We will continue to share their grieve. But despite this, we have gotten massive support from our government security agencies; the Nigerian army, the Department of State Security Service and all other government agencies to make sure that our workers work firmly and we are also able to continue this project uninterrupted. I’m most grateful to this team, and we assure Nigerians that this project will be different and be delivered.

“This is a very massive project. We are delivering them in phases. First of all, the line welding has been completed by 70 percent. There are many other components of this project and once you are able to complete the welding and put certain basic selection, you can actually flow casting to these lines and as other part of the project is continuous to be delivered.”

On the implications of the gas project for Nigeria ‘s gas supplies, the NNPC Boss added that it would boost electricity generation to the power sector and increase power to industries.

He added, “What this means for Nigeria’s gas supply is that these lines will flow 2 billion SCF of gas. What this means is that you are delivering 2 billion SCF of gas every day to these lines, power industry, powering gas plants, creating gas-based industries and this is the ultimate objective.

“By the third quarter of this year, we will complete the entire welding of this work and what it means is that we can actually energize these lines by the end of the third quarter of this year.”

On how many megawatts of electricity will the gas project deliver, he said, “It depends of the capacity of the power plants that will be installed on the pipeline. Our plan is to have 1300 megawatts power plants in Abuja, Kaduna, and in Kano.

“As we speak now, we are facing that so that we deliver them as quickly as possible and by God’s grace very soon, we are going to face the construction of the Kaduna-Abuja power plant in earnest and of course it is a speculative thing but gradually we will build up to that capacity. There is a financing partnership with core investors on this.”

When asked what his response will be to those who do not believe in the NNPC’s ability to deliver the project in a timely manner, Kyari replied, “What I will say is that we will shame them. This project will be delivered; we are not scared of their comments. We will deliver this project and the criticism is just typical of our country’s typical reaction when things are going well.”

Also speaking at the inspection site, the Project Manager, Steve Nnorom hailed the NNPC management for ensuring that all the resources needed for the speedy delivery of the project is provided.

He added that just last week, through the NNPC’s intervention, over 40 military personnel were deployed to beef up security at the project site.

When asked if the contractor is being owed, he said the NNPC is meeting up with all its obligation to the project and that no amount is currently outstanding for the job delivered.

Giving a tour of the site, Project Manager, Oilserv Limited Pipelines and Facilities, Steve Nnorom disclosed that the company had done about 222 kilometres welding work with about 27km remaining for completion.

“We have completed about 73 per cent of our mainline wielding works. We have done 222 kilometres, we have about 27 km of welding work to complete. Our target is that all works will be going on at different spreads. We are progressing gradually. We have terrain challenges especially for the location we are in now, there’s a steep. The NNPC is paying all our bills and we are not being owed, ”he added.

The NNPC Limited remains highly committed towards the delivery of strategic National infrastructure projects through responsive project delivery, active collaboration with Government Security Agencies and Communities as well as deployment of Technology in the form of Human and Technical Intelligence for Surveillance along the entire Right of Way to enable the country realise the aspiration of timely delivering the AKK Project for the benefit of all Nigerians.

Onuba, a journalist and Chartered Accountant, wrote in from Abuja