Insecurity threatens $1bn W-Africa Gas Project

by | August 23, 2017 1:05 am

The rising and waning spate of attacks by militant groups on gas infrastructure in the Niger Delta is threatening investments along the corridor of the $1billion West Africa Gas Pipeline (WAGP) just as it has led to a reduction in the volume of gas to feed the pipeline.

The pipeline, which supplies the West African market, particularly Ghana, Benin and Togo with about 120 million standard cubic feet of gas (mscf) per day, can currently only supply about 30 million mscf to the market, as a result of acts of vandalism.

Consequently, potential investors who are itching to take advantage of the infrastructure to set up industries around it are scared of the prospect of insufficient gas supply arising from sabotage, when such industries would have been completed.

The Escravos-Lagos gas pipeline, which feeds the WAGP also suffers the same fate in terms of attracting investors who could leverage on its gas supply to set up small scale industries within the Nigerian sector of the project.

Some industry operators who have been following developments around the West Africa Gas Pipeline (WAGP) said industries such as fertiliser companies, agro allied industries and small and medium scale ventures as well as embedded power plants, could thrive on the back of steady gas supply from the pipelines .

Ghana, Togo and Benin Republic, which are major markets targeted by this project for improved power generation, are experiencing serious power supply challenges, now taking a toll on their respective economies.

The West African Gas Pipeline has yet to recover from the impact of militant strikes on oil and gas facilities in the Niger-Delta, as gas flowing into it has been significantly curtailed.

Walter Perez, managing director, West African Gas Pipeline Company (WAPCo) said the company’s operation was severely affected by the militancy in the Niger Delta and that the continued shutdown of the Trans Forcados Pipeline had affected gas supply to the pipeline.

Commenting on the debt owed by Ghana for the supply of gas through the pipelines, Perez said, “We are delivering gas now because we put arrangements in place for Ghana to prepay for the deliveries that they receive, and so that is working. We have every expectation that this will continue to work. There is a new government in Ghana, and so we are working with that government to understand what the situation is, as we develop plans to retire the debt that they have accumulated.”

Nigeria last year saw a resurgence of militant attacks in the Niger Delta, which caused the nation’s production to plummet to a near 30-year low and disrupted gas supply to power plants.

The project consists of a 678 km gas pipeline which extends from the existing Escravos-Lagos gas pipeline at the Alagbado “Tee” to a new compressor station in Ajido near Lagos Beach and from there, follows the coastline some 15 km offshore to the Takoradi power plant in west Ghana. It also includes lateral connections from the offshore line to onshore gas-receiving stations in Cotonou in Benin Republic, Lomé in Togo and Tema in Ghana.

The Nigerian National Petroleum Corporation (NNPC), owns a 24.9 percent stake in the sub-regional project, making it the second largest shareholder, after Chevron West Africa Gas Pipeline Limited, which owns 36.9 per cent shares.

Analysts are of the view that until the Federal Government of Nigeria take decisive action to effectively tackle the menace of pipeline vandalism, the project will continue to crawl and not attract the desired investments.

The analysts further observe that even though the project is under a contract which has a lifespan, except the Federal Government of Nigeria takes the required action, the company might not be able to renew the contract when it lapses.

Ayodele Oni, an energy expert and partner with Bloomfield Law Limited, speaking to BusinessDay, said the WAGP is a good initiative by ECOWAS, especially when we consider the lack of interconnectivity of gas networks in West Africa.

Oni however observed the WAGP has been hampered by many issues. Chief among them is Nigeria’s inability to meet her gas supply obligations repeatedly, and has been fined for it.

There are also doubts as to whether the current framework is thoroughly beneficial to Nigeria, considering that the domestic electricity sector has suffered gas supply issues, and the domestic and foreign export prices exceed the price which other West African countries are willing to pay for gas supply. Pipeline vandalism in the Niger Delta can also not be ignored.

He posits that the project has not led to increasing energy trade between West African countries, which was one of the strategic objectives.

“Part of the issue is that energy policy in the region is more along the lines of unilateral action by individual states, rather than the multilateral approach suggested by the institution of the WAGP (and its sister project, the West African Power Pool). As such, it can be argued that the project has failed to meet its raison d’etre”. He said.

Oni further said the WAGP has the potential to turn Nigeria into a regional hub for gas supply. That would however require additional investment and collaboration between the different ECOWAS countries, to put it into effect. As the country with the most to make from a successful WAGP, the onus is on Nigeria to take the steps to leverage on a potentially large energy market.