$1.8 billion. 620-mile line may end flaring
Leslie BellforeA new pipeline to feed Nigerian natural gas to power plants in three neighboring countries could result in $1.8 billion in investment and up to 20,000 new direct jobs to West Africa. "Few projects in the international energy industry offer as much potential for shared benefits as the West African Gas Pipeline project," says Chris Miller, Project Manager. "(Chevron and partners) believe that if we start now, this pipeline can be completed in about three years for a shared investment of about $400 million from private and public investors."
The project involves the construction of a 620-mile offshore line capable of shipping up to180 MMcf/d of Nigerian gas for sale to power plants and other major gas users in Ghana, Togo, and Benin.
"We call the West African Gas Pipeline the long-term regional catalyst," Miller says, linking trillions of cubic feet proven gas reserves to what is hoped to sustain expansion of the economies of the sub-region - the kind of expansion that the government of Ghana talks about in its Vision 2020 plan. This pipeline project will generate benefits not just in 2020, but also in 2001, the year that gas will start flowing," Miller says.
A Dames & Moore study commissioned by Chevron suggests that between 10,000 and 20,000 primary sector jobs will be created as the new power supplies stimulate the growth of new industry. In addition, this industrial growth would create up to three times that number of secondary jobs. The study further identifies about $1.8 billion in total capital investment for the region, consisting of $400 million for the pipeline, another $600 million for the power plants, and $800 million in new industries, including mineral processing.
The line would bring gas to the VMR/CMS 300-megawatt facility at Takoradi, Ghana, and possibly to a KMR Power 220-megawatt facility near Accra, Ghana. The plants would run on crude oil until the gas arrives.
Reduce flaringMiller says the pipeline is one of the more significant opportunities to help put out the flares in Nigeria, which currently burn off about 2 bcf/d of gas, roughly 75% of the country's total gas output. "We can reduce the waste of valuable resources and generate new revenues for the supplier country. In the three consuming countries, we can supplement hydropower and replace large amounts of fuel, oil, kerosene, and wood.
There is more to be gained than fuel-cost savings, according to Miller. "As the world community looks for ways to mitigate global climate change, putting out Nigeria's flares becomes all the more important." Emissions of carbon dioxide and methane, two greenhouse gases would be reduced, making the project an example of the "clean development mechanism" (CDM) concept.
The proposed West African Gas Pipeline project calls for Chevron and its partners to build a 620-mile offshore line capable of initally shipping 180 million cubic feet of Nigerian gas per day for sale to users in Ghana, Togo, and Benin.Miller, in a speech entitled, "Three Short Steps to Long-term Energy," offers a plan to put this pipeline project on the fast-track to a start-up within three years.
- Step one, already underway, includes a complete study on the project, prepared by an independent consultant, costing $2 million. "We fully expect the study to prove the commercial appeal of the project for everyone involved. And we anticipate that it will also result in the formal adoption of what we call the Private Sector Consortium as the official project developer." The consortium would likely include: Chevron, Shell, GNPC, NNPC, SoBeGaz, and SoToGaz. "We're optimistic that the governments of Benin, Nigeria, Ghana, and Togo will help us to fast track the project," Miller said.
- Step two is the pre-development program, expected to take most of 1999. It will involve about $20 million in various costs, including environmental impact assessments and the early engineering and survey work. Step two also requires the four countries to negotiate and sign a concession agreement for the project. "Here's where a lot of the work will come," Miller says. "We have to negotiate reasonable fiscal and tax terms for the project to be included in the laws and regulations of each country."
- Step three involves the final engineering, procurement, and construction, all of which will span 2000 and well into 2001. "Three short years, three steps to new, long-term energy," Miller said. Power plants supported by this project can generate more than electricity; they will generate opportunity.
Attract industryWorld Bank President James Wolfensohn said, "We have to face facts. Africa needs to set itself up to attract private investment, and that means a clean regulatory environment, a judicial system that works, property rights, corporate law, and predictability in both taxes and in relationships with governments."
Miller asks what better way to pursue these priorities than by making a success of the West African Gas Pipeline, the independent power plant and the industries they will support. "If we can build and manage a $400 million infrastructure project, we will create a magnet for other projects to follow."
Africa needs projects that build infrastructure, the muscle and bone of a modern economy, to help move things and connect things, according to Miller. Roads and railroads do this, as does telecommunications. But pipelines do this as well. Some pipelines gather oil for export, connecting West Africa to the outside world.
"But the West Africa Gas Pipeline is different, and just as important, because it will connect West Africa to West Africa. With global investment passing Africa by, day after month after year, the need for this pipeline - sooner, not later - is all the more compelling," said Miller.
Copyright 1999 Oil & Gas Journal. All Rights Reserved.