Lack of commercial viability has stalled the $4 billion South-North gas pipeline which is designed to take-off from Calabar through Ajaokuta and terminate in Kano.

The proposed pipeline is supposed to be part of the Trans-Sahara gas pipeline, the purpose of which is to flow gas to Europe from Niger Delta.
Oil and gas industry sources told BusinessDay that there are no off-takers for the gas which would pass through the 1,500 kilometres pipeline, even if it was constructed.

Our sources said the construction of such a facility must be based on need and with a price that is sustainable for the continuous streaming of the volume of gas that would be required to be flowed.

The volume of gas available, he explained, must be enough to support the investment on the gas.

Further investigations revealed that the price of gas from that pipeline would be between $5 and $6 per 1,000 standard cubic feet (SCF/D). But no investor is ready to risk putting down money for such a project yet.

David Ige, executive director, gas and power, Nigerian National Petroleum Corporation (NNPC), reacting to the delay of the project during a recent workshop entitled ‘Gas to power: opportunities and challenges’, organised by Details Commercial Solicitors, said government is working hard on the project, adding that it would require government support for a robust take-off.

“The government is embarking upon a framework that would make the project take-off without hitches”, he said.

Also commenting on the opportunities and challenges facing the sector, Taiwo Okeowo, deputy managing director, and head, investment banking division at FBN Capital, gave an insight into considerations necessary to make the various gas –power related projects bankable.

Okeowo said there were fundamental considerations for any large project. The banks, he said, would want to ascertain the existence of a ready market, competitive product pricing, as well as a safe, cost effective and efficient mode of delivery.

These considerations, he added, would ensure that the lenders could recoup their investment.

Tolu Osinibi, executive director at FCMB Capital Markets, supported Okeowo’s position. Osinibi observed that the current structure of Nigerian Gas Company (NGC) needs to be reformed. He further said the questions raised by the FBN boss had thrown up some issues regarding pricing and the structure of NGC.

Also, he said the public funding model that has worked in great deal to finance gas projects in other countries has not succeeded here. “The public funding model works in many jurisdictions, though unfortunately it has not worked in Nigeria”.

He expressed the view that government may need to appoint a private operator for the NGC, an entity with sufficient track record.

He felt that private public partnership (PPP) made sense as a solution, once the transaction documentation could be standardised.

We do not need your gas.
It is cheaper for Kano to get her gas from Niger.