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A Special International Report
Prepared by
The Washington Times
Advertising Department - Published on September 30, 1999
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Sponsors (1) Federal Ministry of Finance
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Nigeria’s gas: A lifeline for industry
The $400-million pipeline project will supply trillions of cubic feet of natural gas produced in Nigeria’s Western Delta along the coast to regional power plants and industry throughout West Africa. With this largest collaborative infrastructural effort between the four countries, Lansana Kouyate, general secretary of the Economic Community of West African States (ECOWAS), said the entire West-African subregion will derive many benefits from the smooth take-off of the project.
"One of the most exciting aspects of this project," said Dick Matzke, a director of Chevron and president of Chevron Overseas Petroleum at the signing in Cotonou, Benin, "is that it ties together people, economies and nations to benefit the huge region of sub-Saharan Africa. It is our hope that the vision of unprecedented economic growth and enhanced stability resulting from the benefits created by this project can be realized."
The joint venture agreement established a consortium of six energy resource companies to develop the West Africa Gas Pipeline, outlined the corporate structure of the joint venture, and established a program to expedite the technical and commercial activities required to complete pipeline development by 2002.
On August 11 the ECOWAS governments of Benin, Ghana, Nigeria, and Togo signed a Memorandum of Understanding to proceed development planning of the gas pipeline project. Five days later, a joint venture agreement was signed establishing a consortium of six energy resource companies, with Chevron at the helm as project manager.
Among the participants who witnessed the signing of the memorandum were ministers of energy from the four African nations, Lansana Kouyate and Calvin Humphrey, U.S. Assistant Secretary of Energy.
The project calls for the Nigerian Gas Company, Ghana National Petroleum, Societe Beninoise de Gaz, Societe Togolaise de Gaz and the main operators of the project – Shell Production Development Company of Nigeria and Chevron Nigeria – to build a 620-mile offshore line capable of initially shipping 120 million cubic feet of Nigerian gas per day for sale in the power-starved countries of Togo, Benin and Ghana.
The picture in Ghana has become particularly bleak as receding water levels in the Volta Lake, which feeds one of the region's largest hydro-electric dams at Akasombo, have caused severe power shortages. Togo and Benin, both dependent in part on power from Akasombo, have also suffered as a result.
"The signing of the joint venture agreement is the first step required of the consortium under [the] accord with the governments," said, Chairman and Managing Director of Chevron Nigeria, George Kirkland. "Chevron is immediately mobilizing the people required to fast-track this vital project."
Building an Industry
According to partners in the project, the pipeline will start with a capacity to ship around 120 million standard cubic feet of Nigerian gas per day, with that figure expected to double or triple as new industrial development takes hold and regional demand grows. The project marks a turning point in Nigeria’s nascent gas industry. According to a study commissioned by Dames and Moore Group in March the gas market in West Africa is projected to grow four to six fold over the next 20 years as the demand for electricity and natural gas fuel increases. Construction of the pipeline is expected to be completed in 2002.
Plans for the pipeline began over four years ago when Nigeria, Benin, Ghana and Togo entered into an agreement for the supply and transmission of natural gas. It has been held up ever since over political uncertainties and questions about its economic viability. But with the support of the World Bank, the countries came up with a shared vision of the project.
They decided the pipeline would be a cooperative regional undertaking by all four governments in coordination with ECOWAS. It would be developed and operated according to internationally recognized and accepted commercial standards, and be a system transporting gas to shippers on an open access, non-discriminatory basis. It was also agreed that the project be led by a steering committee made up of the energy ministers from each country and that, following a feasibility study, the committee appoint a project developer.
According to studies, the project will attract some $1.8 billion in total capital investments to the region, including $400 million to build the pipeline, $600 million from power plants and $800 million in secondary industries such as minerals processing. The project is also expected to generate between 10,000 and 20,000 primary sector jobs as added power supplies come on line and stimulate the industry. With the multiplier effect, industrial growth would create up to three times that number of sustainable secondary jobs.
A Better Environment
In addition to the perceived economic benefits, the real gains may be environmental. The same study concluded that greenhouse gas emissions in Nigeria would fall by 78 million tons over a twenty-year period as gas flaring is reduced. Nigerian now burns off about 2 billion cubic feet of gas per day, which constitutes roughly 75 percent of the country’s total gas output, and is a major source of carbon dioxide and methane emissions in the region.
By replacing crude oil with gas in the power plants of Benin, Ghana and Togo, an additional 22 million tons of greenhouse emissions are expected to be eliminated in those countries over the same period. Chris Miller, manager for the consortium of companies working on the pipeline said recently the project will serve as a “greater enabler … taking gas that is available in Nigeria right now that is being flared and putting it to productive use by moving it” to emerging markets.
Nigeria has an estimated 104.7 trillion cubic feet (tcf) of proven natural gas reserves, the tenth largest in the world. By some estimates reserves may be even higher, at 300 tcf. Most past oil and gas projects were between Nigeria and the West, but this will be the first time Nigeria will supply gas to her neighbors.
"The WAGP project dovetails perfectly with Chevron's phased development of its
Escravos Gas Project, and embodies our commitment to commercialize the vast natural gas resources of Nigeria," Kirkland said.
According to ECOWAS, to ensure the economic viability of the WAGP project, experts are currently looking into ways of achieving rapid build-up of gas sales, especially capturing industrial markets at an early stage, in addition to the foundation power customers. Chevron has already succeeded in signing the pipeline’s first client, a twenty-year commitment from a Ghanaian power plant run by Virginia based KMR Power.
“The next steps will be to secure contracts for power supply companies in the region,” a Chevron spokesman said. “We will be working very hard over the next several months to secure these.” Success of the project is expected to be a magnet for future projects and investment as well as a catalyst for ECOWAS integration efforts.
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Table of Contents (1) It's a new dawn over Nigeria |
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Over the last century, Nigeria’s natural resources have fueled the growth of America’s economy by supplying hundreds of thousands of gallons of oil. The West African Gas Pipeline Project (WAGP), signed Aug. 11 by Togo, Benin, Ghana and Nigeria, is the opportunity to link West African development with West Africans.