By the Editorial Board of the Africa Oil+Gas Report
If there is truly far more substantial natural gas reserves encountered in Kolmani-2 than was found in Kolmani-1, then there is a clear basis for a valourisation project targeted at gas supply to the commercial city of Kano, the ultimate terminus of the Ajaokuta-Abuja-Kaduna-Kano pipeline, AKK.
The Anglo Dutch major Shell reported 33Billion cubic feet of gas in one zone for the Kolmani-1 discovery in 1999.
NNPC has not provided any volumetric figures for the Kolmani River-2, the appraisal well it just drilled, but its statement about the probe is quite upbeat and the company did indicate that hydrocarbon was found in several levels.
It also says that Kolmani 2 is the first of a multi-well drilling campaign.
Should Kolmani be found to hold even just 500Bcf of gas, NNPC should be ready to commence a natural gas supply study project to ferry those molecules from Bauchi to Kaduna and Kano and therefore discard the $2.8Billion, 614 km project.
Some have suggested that discarding the expensive AKK pipeline would be too wrongheaded, considering that the project is already on course.
But the least the company can do for Nigeria’s sake is start evaluating the modification of the AKK project, now that there is clearer line of sight to hydrocabons in Nigeria’s geographic and political north.
NNPC has reported it had completed negotiations with Chinese Financiers to loan it the money for the AKK project, which will pump gas from the Niger Delta to the North of the country. But paying for that project has been a point of debate.
“What NNPC has done is to look at the entire receivables from gas flows from the existing pipelines today and used that to pledge in terms of the tariff”, says Emeka Okwuosa, Chief Executive of Oilserv, one of the contractors for the project.
So, even though the AKK is being called contractor financed, the state hydrocarbon company is essentially funding it and that has implications for the treasury.
We do know that pumping hydrocarbon from any point to another in pipelines managed by the NNPC or its subsidiaries is always riddled with inefficiency. And no one has said that the AKK was going to be managed by any entity other than this highly unaccountable state hydrocarbon company.
The Escravos Lagos Pipeline System is frequently sabotaged. A looping of the line (running a parallel line in order to double the throughput), has been under construction for seven years. The cost overruns ensuing from this kind of poor project management and what it does to the national treasury receipts never show up even in the most detailed reports of the Nigeria Extractive Industry Transparency Initiative (NEITI).
If we find natural gas in the north, should we not simply structure a north- north gas project to feed power plants and industries in the north and do away with expensive, long distance pipelines, the payment for which we are not entirely certain?