ChevronTexaco gets March 2006 deadline for Olokola LNG Project

May 09, 2005 02:00 AM

The Nigerian National Petroleum Corporation (NNPC) has handed a March 2006 deadline for the ChevronTexaco Consortium to make the Final Investment Decision (FID) on the $ 7 bn Olokola LNG Project.
ChevronTexaco in partnership with the British Gas Group (BG), may lose the title to the project director if it failed to make the FID by the date. Already, Anglo/Dutch group Shell, has been put on standby to make its financial commitment on the LNG project by September 2006, and could assume the position of project leader.

NNPC and the Chevron/BG consortium first launched studies into the new LNG plant known as OK LNG to be sited at Olokola, a boundary town between Ogun and Ondo states. However, following he efforts among oil producing companies to meet the Federal Government's deadline on zero gas flare, Shell also proposed to build an LNG plant in the same area.
Shell, Nigeria's biggest crude oil producer, is already a major player in the Nigeria LNG Bonny project, holding 25.4 % equity in theproject.

The NNPC subsequently decided to merge the two projects together. NNPC Group Managing Director, Engr. Funsho Kupolokun, told that the corporation expects ChevronTexaco to take the final investment decision by March next year.
"If they (ChevronTexaco) miss their chance another partner will automatically take the position as project operator," Kupolokun said.

ChevronTexaco had earlier announced that progress on the OK LNG project would depend on availability of market for the product.
"Any future decisions to move forward with Olokola LNG will depend on the results of the feasibility study" said Chevron, adding that the study will consider available gas supply, marine/LNG loading concepts, available LNG technology options, LNG market options, project economics, and the social and environmental impact of the potential project.

Integration of the Chevron/BG and Shell projects raised the cost of the first phase of the entire OK LNG project to $ 7 bn from $ 4 bn. Output has also gone up to20 mm tons from the initial target of 10 mm tons from four trains. Following independent studies, both ChevronTexaco/BG and Shell separately proposed to NNPC the development of their respective Greenfield LNG projects in Olokola area.
According to Kupolokun, the two independent projects were merged into one in view of their proposed timing and location. While Chevron proposed first shipment date of 2009, Shell is targeting 2010.

The parties have established a model for the joint execution, which emphasises:
-- Joint ownership of all facilities except for individual trains with different ownerships;
-- Single technology;
-- Single Operator;
-- EPC contracting strategy and timing is driven by individual train owners with either a common EPC contractor or separate EPC contractors;
-- A common facilities company owned power plant, and will have to buy gas and sell electricity and other services to each individual train.
-- Individual train owners buy and sell their own LNG.

The parties also agreed to establish one operating company to be known as "OKLNG OpCo", which will operate the common facilities and all the trains.
Kupolokun said that the OK LNG project represents one of the key projects to commercialise a total of 14.72 bn cfpd of Nigeria's gas by 2011. By that year, the Federal Government, he said, would be generating as much as $ 12 bn from gas sales.
"This will no doubt contribute immensely to the economic development of the country."

Source: This Day
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