Risk and reward for the West African Gas Pipeline project

Dec 28, 2004 01:00 AM

by Hil Anderson

Investors in the West African Gas Pipeline project have given their final approval to the construction of another of the expensive and often-controversial international energy projects that hold the promises of progress and possible disaster for the people of the developing region.
While the predicted benefits of the pipeline are indeed encouraging, major construction projects in the Third World have also developed a sad history of unseemly corruption, brutality and mediocrity that make them targets for lawsuits that are filed in the United States alleging human rights violations.

The rosy vision of the planned 420-mile pipeline is one in which environmentally friendly electricity theoretically will finally be brought to the poor and rural areas of Nigeria and three neighbouring nations. At the same time, the notorious flaring of gas from oilrigs in the Niger Delta will be sharply reduced.
"The West African Gas Pipeline (WAGP) project has long been a key component of our strategy to reduce flaring and to commercialise natural gas resources in Africa," George Kirkland, president of ChevronTexaco Overseas Petroleum, said in a statement after the Christmas Eve final approval of the project by the stakeholders in the West African Gas Pipeline Co. "The implementation of the WAGP project will also lead to a regional natural gas grid that will supply clean and lower cost energy to growing markets, encouraging the economic integration of the region," Kirkland added.

ChevronTexaco is the managing sponsor of the $ 590 mm project that in two years will capture the Delta gas that is currently burned off and then ship it to power plants in Nigeria as well as in Benin, Togo and Ghana.
The anticipated result, according to best-case scenarios, will be cleaner, healthier air in the Delta, expanded access to economical electricity and a source of revenue for the governments of the four nations -- and for ChevronTexaco, of course.

Critics of the project are less enthusiastic and are alarmed that the plan to use the pipeline to move gas that is currently being flared may not be as simple and solid as it sounds.
"The WAGP has been touted by the World Bank, ChevronTexaco and Shell, as a project that will help end gas flaring, but project sponsors have not made any commitments on how much (flaring) reduction citizens in the Niger Delta will see once the WAGP is in operation," the environmental group Friends of the Earth complained earlier before the World Bank approved a $ 125 mm investment guarantee for the project.

Friends of the Earth suspected that a reduction of flaring was not the main goal of the project, and that the WAGP builders could decide to use the pipeline to ship gas from gas wells and continue burning off the more than 200 mm cf of gas the United Nations says is flared every day in Nigeria.
Environmental groups understandably want a firm commitment from the pipeline to exclusively use gas that is currently being flared, which belches untold tons of greenhouse gases and other pollutants into the once-pristine Delta area.

When completed in 2006, the pipeline will have a capacity of 120 mm cfpd, which will increase to an eventual maximum of 450 mm cfpd in about 15 years. At the same time, Nigeria is pursuing increased development of its LNG industry, so it seems logical to assume that oil-well gas might not be enough, and that indeed non-associated gas will be moved on the WAGP.
The amount of gas carried by the pipeline will depend a great deal on the amount of end users that will be available in an area of the world with a large rural population and a widespread use of wood and agricultural waste as cooking fuel. The majority of the gas shipped on the WAGP is slated for power generation, which on paper would provide a significant boon to the environment by offsetting the need for oil-fired plants or new hydroelectric dams on sensitive rivers.

The West African Power Pool formed in 2000 aims to expand and internationalise the power grid in western Africa andalso to increase regional generating capacity.
"It is estimated that $ 600 mm will be spent on the development of new and renovated power facilities in the four states to utilize the gas," the US Energy Information Administration said in a research brief. "It is also possible that the WAGP will be extended to markets in Cote d'Ivoire."

Africa, however, has a long and ignoble history of boondoggles and government ineptitude and corruption powerful enough to derail any public works project -- no matter what the benefits might be to the country's population.
And should the construction of the pipeline lead to environmental damage or displacements and brutalisation of the people who live in the area, it could lead to the filing of a lawsuit under the Foreign Torts Act, such as the one recently settled in California against Los Angeles-based Unocal by alleged victims of brutality by government troops during the construction of a gas pipeline through the jungles of Burma. ChevronTexaco, which is based inthe Bay Area, was sued over alleged human rights violations against Nigerian activists in the Delta in the late 1990s.

Ground was broken just in 2004 on WAGP amid sunny promises that a better day was coming in western Africa. If the project lives up to the billing, it indeed could put the long-suffering region on the road to prosperity.
But if the pipeline simply turns into a money pit that enriches governments and oil companies and tramples the environment and the poor in the process, then ChevronTexaco and the rest of the project's partners can probably expect to spend a good deal of time defending themselves in court.

Source: United Press International
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