Nigeria delays natural-gas export plans; Decision may give Cameroon edge to become first West African exporter of gas
Douala, Cameroon — Nigeria won't enter the world's natural gas exporting club until the 1990s.
That's the result of a decision earlier this month by Nigeria and its foreign partners to disown the consortium responsible for building what would have been the world's largest liquefied-natural-gas plant. This means the ambitious project will be delayed by at least five years from the original expected completion time, according to oil industry sources in West Africa.
At the same time, two foreign partners -- Phillips Petroleum and British Petroleum -- have withdrawn from the Bonny liquid natural gas (LNG) plant project. The remaining foreign members -- AGIP, ELF, and Shell Oil -- have refused to absorb higher costs needed to keep the project moving. These two factors underscore the growing concern among private members of the consortium over the project's escalating cost. What makes the situation harder to bear is that gas experts are predicting an ample supply of energy into the next decade.
In fact, while the liquidation procedures for Bonny LNG Inc. were only announced Feb. 5 in Lagos, rumors of problems within the group had been rife since last fall, when Phillips abruptly told the government it was abandoning the project. Though Phillips said the decision resulted from strictly in-company judgments, sources close to the project last October confided that continuing delays in the Bonny project and lack of government support for it played a major part in the company's bailout.
Sources within Bonny LNG said that since the middle of 1981 ''all physical work'' on the plant -- including engineering, site preparation, and relocation of villagers -- had been stopped. The plan was not to resume work until the government had made a commitment in writing to the foreign partners.
Despite the setback to its ambitious gas development plans, the Nigerian government made it clear at the time of the announcement dissolving Bonny LNG that it planned to proceed with another gas project. The new plant would be smaller and wouldn't be worked on until liquidation of Bonny LNG was finished.
''They (government officials) said they will appoint independent consultants to recommend the best project,'' a source at Bonny LNG's offices in Lagos said by phone shortly after the announcement. He added that the next project ''would be open to any interested oil company.''
Nevertheless, the resulting delay in developing Nigeria's huge gas reserves may pose problems for any project slated to come on stream in the 1990s, according to oil industry sources in West Africa. With the recently concluded gas agreement between Algeria and France and the controversial pipeline deal that will bring massive supplies of Soviet gas to Europe later this decade, the need for West African gas in Europe is less than pressing. According to experts, the Continent is considered Nigeria's only real market.
''You look at projections for energy supplies into the 1990s and you look at projected consumption, and with the Algerian and Soviet deals, there's not that much missing,'' said a United States oil company executive in the region. ''The market (for gas) will always be there, but the question is at what price,'' he added.
Complicating Nigeria's situation are plans by other West African countries, particularly Cameroon and Congo, to exploit recently discovered gas reserves. Though Nigeria's Bonny project, conceived some eight or nine years ago, was well ahead of both neighbors in terms of marketing and preliminary studies, the decision to abandon the project could make Cameroon a gas exporter first.
''There's just not enough room for two plants in West Africa,'' said an executive with a major US firm operating in both countries. ''Its got to be one or the other.''
Thus, he pointed out, while Nigeria's commitment to exploit the reserves may be firm, foreign firms that make decisions based on a return of profit -- and above all banks that must finance the multibillion-dollar venture -- may balk at the economic prospects.
''The Russian and Algerian deals have already dropped pricing for gas in Europe from 90 percent of parity (with oil prices for the same energy content) to 75 percent,'' the executive said unhappily.
The irony of the Nigerian situation is that by all accounts, its gas reserves are enormous, dwarfing even the combined resources of Cameroon and Congo. ''At a meeting here last month, they set Nigeria's gas reserves at 75 to 90 trillion cubic feet,'' said a Bonny LNG source last fall. ''It's more like 200 to 300 trillion cubic feet,'' he said.
Even with a gas plant of only half the capacity of the 1.6 billion cubic feet a day proposed for the Bonny plant, the latter estimate would provide the country with exports for 600 years. Most gas plants are considered feasible if reserves are adequate for 20 years of production.