Delivering Buhari’s Next Level Agenda: NNPC Begins A Landmark AKK Gas Project.
- Posted By Vitalis_Obidiaghaa | On September-28-2020 12:43:58
- By Vitalis Uchenna Obidiaghaa
Tuesday, the 30th of June 2020 has become a memorable day in the history of the Nigerian nation, especially within the second tenure of Buhari’s Presidency. The reason is because it was on this historic day that Mr. President flaged-off the construction of the 614km Ajaokuta-Kaduna-Kano Gas Pipeline (AKK Project), a project that would go down in history of the oil and gas sector of the Nigerian economy as a daring move by the leadership of the NNPC to reposition the economic landscape of the nation, especially as Mr President is striving to diversify the Nigerian economy in response to current realities of the global economy.
Speaking during the official flag-off of the AKK Project, President Muhammadu Buhari stated that “today marks an important chapter in the history of our great nation. It marks the day when our domestic natural gas pipeline networks from Obiafu in Rivers State, Escravos in Delta State and Lekki in Lagos State, are being connected through Kaduna to Kano states thereby further enhancing national energy security”.
The above statement by Mr President resonates with many industry stakeholders, especially those who are aware of the strategic role the AKK Project would play in the Nigerian economy particularly in boosting the domestic utilisation of gas in Nigeria. The project which would originate from Ajaokuta, in Kogi State and traverse Abuja (FCT), Niger, Kaduna and terminate at Kano, is expected to be completed within a 24-month timeline. The project is a section of the Trans-Nigeria Gas Pipeline (TNGP) with capacity to transport about 2.2 billion cubic feet of gas per day. The AKK is ultimately designed to complement other major domestic gas transmission systems namely: the Western System, that is, the existing 36-inch Escravos-Lagos Pipeline I and II with 2.2 billion cubic feet per day capacity and the on-going East-West connection via the OB3 pipeline featuring 2.4 billion cubic feet per day capacity.
Conceptualized as an integral part of the Nigerian Gas Master Plan (NGMC), a gas infrastructure blueprint, which was approved by the Federal Executive Council in 2008, the AKK has received serious attention of the Buhari Administration leading to the award of the Engineering Procurement and Construction Contract (EPC) of the project by the Federal Executive Council in 2017. Within the last 12 months the project has received extra boost from the current NNPC leadership led by Mallam Mele Kyari, which deftly removed the impediments that have stalled the project over the years leading to the flag-off ceremony by Mr. President.
Some of the major economic benefits of the AKK pipeline include the unlocking of 2.2 billion cubic feet of gas to the domestic market, supporting the addition of 3,600 megawatts of power to the national grid and revitalization of the textile industries which alone boasts of over 3 million jobs in the nation. The AKK project would also support the development of Petrochemicals, fertilizer, methanol and other gas-based industries thereby generating employment opportunities and facilitating Balanced Economic Growth.
The NNPC explained that the Right of Way for the proposed AKK gas pipeline would run parallel to the existing Nigerian Pipelines and Storage Company’s 16 inch-crude oil and 12 inch- product pipelines wherever possible. The pipeline would be fed from the existing domestic Infrastructure with a capacity of over 1.5 billion cubic feet per day and is being expanded by Escravos-Lagos Pipeline System II (ELPS II) and Obiafu-Obrikom-Oben (OB3) gas pipeline (under construction) that will double the capacity to over 3 billion cubic gas per day.
Taking off at this critical time when Mr. President is striving hard against the effects of COVID-19, to deliver his campaign promises to Nigerians, President Muhammadu Buhari noted that “the delivery of the 614 km Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline project is part of his Administration’s Next Level Agenda for sustainable development and economic prosperity of Nigeria. He noted that harnessing and commercializing the nation’s vast gas reserves was an enabler for rapid economic development and diversification of the economy’’, saying that ‘’this remained as a cardinal objective of his administration’s drive towards ensuring a stable, sustainable and more prosperous future for the citizenry’’.
Connecting the project to his campaign promises, he stated that “We promised the nation that we will expand the key critical gas infrastructure in the country to promote the use of gas in the domestic market. These include the Escravos to Lagos Pipeline System - 2 (ELPS-2), Obiafu – Obrikom - Oben (OB3) pipeline and the AKK. I therefore direct the NNPC to ensure that these critical projects are completed on time, within budget and specification”. Mr President is optimistic that when completed, the project would provide gas for generation of power and feedstock for gas-based industries, and also facilitate the revival of moribund industries and the development of new ones along transit towns in Kogi State, Abuja (FCT), Niger State, Kaduna State and Kano State.
Mr President’s optimism is never superficial. It is founded on the understanding that this project will create numerous direct and indirect employment opportunities while fostering the development and utilization of local skills and manpower, technology transfer and promotion of local manufacturing. He commended the NNPC and other stakeholders for bracing the odds of the prevailing COVID-19 pandemic to kick-start the construction phase of the project. President Buhari also noted that the lessons learnt from the Novel Corona Virus (COVID-19) pandemic further underscored the drive of his Administration for export substitution initiatives and projects that will promote local manufacturing.
While thanking the Government of the Peoples Republic of China, the Bank of China and SINOSURE, the two Engineering Procurement Construction (EPC) Contractors - Brentex/China Petroleum Pipeline Bureau-CPP Consortium and Oilserve/China First Highway Engineering ``Company-CFHEC Consortium - for their support and commitment to deliver the project, Mr. President called on the Governors of Kogi, Niger, Kaduna and Kano States, as well as the Minister of the Federal Capital Territory, to provide the enabling environment and support for the project.
Earlier in his welcome address, the Group Managing Director of the NNPC, Mallam Mele Kyari, remarked that the event would not have been possible without the full and unflinching support of His Excellency, President Muhammadu Buhari, who has made it a priority to ensure that revenues from oil and gas resources are utilized to support the emergence and growth of other non-oil sectors of the economy. He said that the NNPC was transitioning towards becoming an Integrated Energy Company to support Mr. President’s economic diversification efforts. One of such efforts is the expansion of the corporation’s domestic gas footprint with the delivery of the Trans-Nigeria Pipeline Project which includes the Escravos to Lagos Pipeline System (ELPS) 2, the Obiafu-Obrikom-Oben (OB3) gas pipeline and the Ajaokuta-Kaduna-Kano (AKK) gas pipeline.
He explained that the EPC contract for the 614 km AKK gas pipeline project was awarded at a total contract sum of US $2.592 billion to Messrs. Oilserve Plc/China First Highway Engineering Company (Oilserve/CFHEC Consortium) for the first segment covering 303 km and Messrs. Brentex Petroleum Services/China Petroleum Pipeline Bureau (Brentex/CPP Consortium) for the second segment covering 311 km under a debt-equity financing model with loan from Bank of China and SINOSURE, to be repaid through the pipeline transmission tariff and supported by a sovereign guarantee.
The NNPC GMD noted that all the required conditions precedent for closing the debt financing have been provided and the process of obtaining internal approvals by the Lenders is in progress to enable financing to close by August 2020. He disclosed that as part of the agreement, NNPC is utilizing the equity contribution to commence execution of the project to recover lost time and put the project back on track. Kyari expressed confidence in the ability of the EPC contractors to deliver the project on time, within budget and specifications, noting that upon completion, the project would enable the injection of 2.2bscf/d of gas into the domestic market and facilitate additional power generation capacity of 3,600MW.
In his remarks, Governor of Kogi State, Alhaji Yahaya Bello, who expressed gratitude to God for witnessing the flag-off of the construction phase of the project, said his administration has sponsored many youths in the state to acquire skills in welding and urged the contractors to gainfully engage them. On his part, Governor of Kaduna State, Mallam Nasir el-Rufai, thanked the NNPC, Ministry of Petroleum Resources, and other stakeholders for ensuring the flag-off of the project, stressing that there was high hope because of the enormous benefits the project would bring to the state and the nation.
Some commentators have however challenged the viability of the project, contending that there is not much gas development in the domestic market going on in Nigeria’s industrial axis, let alone in the Northern part of the country due to protracted security challenges. But Mr Emeka Okwuosa, the MD of Oilserve, one of the major contractors handling the project has this to say; ‘’people can condemn and raise dust when they don’t have information about this project. But, I can bet that this project is a major positive move for Nigeria’s development because it will not only drive the economy, reduce unemployment and some of the challenging issues we have in the North East today which are mostly related to lack of prospective work to do by young people”.
He went historical to correct that error of thought. “Many years ago,” he said, “when Escravos-Lagos Pipeline System (ELPS) was being conceived, the offtake that we had in Lagos and in the whole West at that point in time did not justify having more than a 12’’ pipeline. It was a discussion of ‘’What do we do?” The management of NNPC in its wisdom decided to build a 36’’ pipeline. As of 10 years ago, that capacity was already filled up because the logic of gas is availability. If I know that gas is readily available, it encourages me to set up my business to utilize gas. You cannot set up your industry hoping that they will bring gas, the gas has to precede setting up of the industry.
Today, we are building a loop around ELPS to double the capacity, another 36” pipeline is being built side by side the previous one to double its capacity because that has been used up entirely. Now, if you relate that to the AKK Project, if things were done properly by previous administrations, the AKK should have been built and commissioned 15 years ago because the development of the Northern part of Nigeria requires gas for its industrial base. I did my NYSC partly in the Southern part of Kaduna with the Nigerian Breweries. At that time, they had industries all over the place, including textile industries, but today, when you go there, they are all dead. Part of the reason is the high cost of energy. It is inefficient to be bringing LPFO and diesel from the south to power those industries’’.
When you consider the fact that there are also strong anchor projects like the power plants that are being set up in Abuja, Kaduna and Kano, each with more than 1000 MW capacities in addition to all the defunct industries that will come up including the fertilizer plants, then one would better appreciate the significant impact the AKK project would have in that section of the country especially as stakeholders are striving to fashion out an economic strategy that would help reposition the North East from the effects of security challenges it has faced over a decade now.